Shoppers ascend and descend an escalator at the Willow Grove Park Mall in Willow Grove, Pennsylvania, on November 14, 2020.
Mark Makela | Portal
Getting buyers to spend this holiday season won’t be easy.
The National Retail Federation said on Thursday it expects holiday sales in November and December to rise between 6% and 8% year-on-year — a decline when the impact of inflation is factored in. The sales forecast excludes spending at car dealerships, gas stations and restaurants.
Inflation rose 8.2% year-on-year in September, according to the Bureau of Labor Statistics consumer price index. That’s a high of nearly four decades. For its part, the NRF pointed to the personal consumption price index, up 5.1% year-on-year, as a more accurate comparison.
The trade group’s outlook points to a more challenging holiday ahead for retailers. A year ago, consumers shopped earlier and spent more to secure gifts as stores struggled to keep shelves stocked due to shipping delays. This year, however, big retailers like Walmart and Nike are awash in extra inventory. Consumers are spending less on items like clothing and electronics as they pay more for groceries and services like dining out and travel.
NRF executive director Matt Shay said on a call that Americans are still eager to spend this holiday season, however have become more cautious about their purchases as food and energy bills soar. In some cases, he said, they resort to savings accounts and turn to their credit cards to help cushion expenses.
“Some of that will impact gift-giving and how they meet their other expenses during the holiday season,” he said.
There are still factors in retailers’ favour, said Jack Kleinhenz, chief economist for the National Retail Federation. Consumers have built up savings during the pandemic and the job market is strong, which may make them feel safe enough to keep spending.
Trips take more money, but he said they’ll likely bring food or gifts when they make those trips — and possibly opt for new outfits, too.
According to NRF, consumers plan to spend an average of $832.84 on gifts and holiday items like decorations and groceries. That’s about the same as the last 10 years, but the amount can buy fewer goods due to inflation.
Hiring is expected to be more modest, with retailers hiring an estimated 450,000 to 600,000 seasonal workers. That’s less than the 669,800 seasonal recruitments in 2021.
Other industry observers are also forecasting a cautious Christmas season. For example, consulting firm Bain & Co. is forecasting year-over-year growth of up to 7.5%, or just 1% to 3% when inflation is factored in. AlixPartners is forecasting a 4% to 7% increase, which represents a decline when inflation is factored in.
The outlook comes after two years of exceptional demand during the key holiday shopping season due to the pandemic. In 2020, holiday sales grew 8.2% year over year to $777.3 billion, according to NRF, as consumers cheered up with gifts during the pandemic. Last year, holiday sales grew 13.5% from 2020 to a total of $889.3 billion.
This year’s projected increase would see spending range from $942.6 billion to $960.4 billion.
This growth compares to an average increase of 4.9% over the past 10 years, with the last two years contributing significantly to these gains.