The approaching steps of Thanksgiving, the Black Friday and Cyber Monday bring us the start of the last shopping season this year – begins with Thanksgiving Day and lasts till Christmas and New Year’s Eve.
However, retailers find it more difficult to understand consumers’ thoughts and preferences in order to better serve them because of the effects of the ongoing pandemic and the poor economic climate, which tend to change consumers’ enthusiasm.
According to Forbes, around 85% of consumers expressed concern about their holiday shopping this year, due to the continuing inflation and the challenging economic situation. When it comes to holiday shopping, fewer people will prioritize gifts than before, and prefer to buy groceries, daily essentials, life necessities, and home improvement items. It appears that there will be an increase in products with more necessities and more affordable prices with the boom in all product categories. “Whether the products are affordable and of great value is going to be the most important element for holiday consumers, and they tend to pay more attention to the real essentials,” according to Matt Kramer, KPMG Consumer and Retail National Sector leader who talked about consumers’ behaviors that reflect their reactions to inflation.
“People are getting more cautious of holiday shopping season, and they are increasingly inclined to buy practical things instead of gifts,” said Natalie Warb, the financial expert of CouponBirds in her latest research. She also said, “At least one-third of the consumers are going to change their plans for holiday shopping this year by turning to more things that are really useful instead of gifts that only mean to be given,” But Natalie also added, “If you are buying something both useful and can be as a gift too, that will be more wonderful!”
Is this going to be a trend that lasts for a really long time or is it just a one-time thing? People have their own expectations about this. However, some economic experts made less optimistic forecasts. Sourced from a report of Capital Economics research and consultancy group by Andrew Hunter, he said, “With the deteriorating global economy likely to weigh heavily on exports soon, and with the drag on the domestic demand from soaring interest rates still spreading,” he suspected, “the economy is about to start to slow down. It’s just a matter of time.”
He is not the only one that has a pessimistic prediction, the associate dean of Kelley academic programs of the Indiana Business Research Center Phil T. Powell said, “When the ‘transitory’ inflation of 2021 turned into a persistent state, the Federal Reserve belatedly started to raise interest rates, throwing the economy’s recovery off course – making its outcome the most uncertain future in 50 years”.
The changing thoughts of consumers brings a huge challenge to retailers. According to the report of MSN, nearly 80% of those who took the survey said they are either moderately, very, or extremely concerned about the price increase, and 87% said their holiday spending would change as a result, perhaps by buying fewer gifts for their families or friends or buying less expensive goods. In comparison to the previous three holiday shopping season when they spent approximately $880 for each, consumers said they plan to spend about $700 on average this season.
A third of the respondents said they would spend “slightly” or “much” less than the shopping season in 2021, while only 35% said they would spend “about the same”. From the standpoint of the retailers, “about the same” also means consumers will spend less because of inflation and last year’s dollars don’t go as far as they used to. The remaining respondents stated that they intended to spend slightly or significantly more than they did last year.
There are also some respondents stating that they would rather buy secondary used gifts than new ones, or choose to make their own gifts instead. Recent years have seen a boom in the secondhand market, and many consumers see this as a way to avoid inflation’s impacts.
In a latest released survey and some retail sales data of consumers’ shopping strategy by Washington Posts, compared to 2021, consumers are being more strategic – hunting for promotions, balancing the prices, and trading down – as well as cutting back the purchase of a lot of products, which are mainly unnecessary gifts.
Jonathan Sharp, the marketing director in the retail and consumer department of the consulting firm Alvarez & Marsal expressed that everyone is going through a difficult time, “…at the moment, though, there is a fact that the consumer is making it really tough for retailers to make this consumer spending profitable.” Though, he added, “there is still some potential resilience that we can always expect.” And in the meanwhile when the retailers are struggling to do as much as they can to provide consumers what they want by cutting down the prices as well as earlier sales and promotions, the margins of the retailers are being eroded.” he said.
Although inflation does affect the shopping environment this year a lot and it’s going to be a tough end of the year, the industrial experts still make optimistic predictions for the future not so far away. “Nobody will choose to spend their holidays in a gloomy and frustrating way,” Jonathan said, “It will always be important for consumers to have a great, nice holiday. They want to buy delicious food and nice gifts for the holidays. As the atmosphere of the holiday still exists, people will always be prepared to spend.”