Resources | Market Trends | October 28, 2022

Holiday Shopping and Inflation: 5 Ways the Season Will Look Different

The pressures of inflation are pushing retailers and consumers to adapt for the 2022 season.

boxes on a conveyor belt in a storage warehouse

The pressures of inflation are pushing retailers and consumers to adapt for the 2022 season.

Holiday shopping and inflation are coming together to make this year’s end-of-year celebrations look a little different from past years. 

On the positive side, some growth is still on the table. KPMG is forecasting holiday retail will grow by 4.2%, down from the 14.1% recorded in 2021, with traffic increasing for online and brick-and-mortar stores. The average shopper plans to spend roughly the same as last year, if not a little more. 

Unfortunately, inflation is putting increased pressure on consumers’ spending, forcing retailers and shoppers alike to adapt with a longer sales season, earlier promotions and a shift in how money is being spent.  

According to a Deloitte survey, shoppers say they plan to buy fewer gifts — nine this year compared with 16 last year. And they’re likely to spend more on experiences and less on non-gift items.

In this post, we’ll take a look at some of the most important adaptations and how they could impact the holiday shopping season.  

Consumers are hurting, but most plan to soldier on

The results from the National Retail Federation’s late September survey show that US shoppers are feeling the pinch from holiday shopping and inflation. Even so, the survey found, consumers still plan to celebrate with presents and parties. 

  • 43% of respondents said they aren’t making enough to buy gifts and holiday goods in 2022. 

  • But 62% said that it’s important to have gifts and get-togethers, so they’ll find a way to pay for the celebrations.

  • So they’re planning to use savings (40%), use credit cards (32%) or “buy now, pay later” services (32%), or even sell assets (22%) to fund the holidays.  

A survey from Bankrate.com found that 84% of shoppers have plans to stretch their dollars by: 

  • Looking for sales, coupons and discounts — 41%

  • Purchasing fewer things — 40%

  • Buying cheaper brands — 21%

  • Applying credit card rewards — 17%

  • Making gifts — 14%

  • Obtaining used or secondhand items — 11%

The holiday shopping season actually started weeks ago

Many retailers have launched their holiday deals earlier than normal in order to compete for shoppers’ dollars. According to Deloitte’s Holiday Retail Survey, about 60% of retail executives said their companies would start promotions about one to two weeks earlier this year. 

Retailers are able to do that because they front-loaded so much of their inventory orders and shipping to earlier in the year. (Not all of that may be intentional. Some retailers, expecting bigger demand, were left with larger amounts of inventory, which may now be dated.)  

It’s a big change from 2021. Last year, 80% of retail executives surveyed by KPMG said they were worried about inventory shortages. This year, 59% were forecasting minimal shortages; 30% said there will be no shortages.

And many shoppers think an early start is a good idea. About half of those surveyed by Bankrate.com said they’ll begin their holiday shopping before Halloween. Roughly 11% started before August was over.

Many retailers launched holiday deals earlier than normal to compete for shoppers’ dollars.

Not everybody agrees, though. According to PwC’s Holiday Outlook 2022, about 74% of survey respondents are waiting to see the best deals before they start buying. The biggest group (41%) thinks that won’t happen until Thanksgiving, Black Friday or Cyber Monday. 

In spite of inflation, shoppers still plan to spend about the same this year

Financially, times are difficult for many American households — according to the Deloitte survey, 37% said their finances are worse this year, and a significant percentage (41%) expect the economy to get worse next year.

Despite that, most still plan to shop for gifts, though they may get less for their money. The average Christmas budget, based on Deloitte’s survey, will be approximately $1,455 this year, which is roughly what was spent in 2021.  

That lines up closely with a similar survey from PwC, which had the projected spend at $1,430 per consumer. Or breaking it down by category:

  • Gifts: $754 (52.7%)

  • Travel: $452 (31.6%)

  • Entertainment: $224 (15.7%)

Do Black Friday, Cyber Monday and other shopping holidays still matter? Yes, but …

(Adobe Analytics is also forecasting that retailers will bring back major discounts of 10% to 32% during Cyber Week.) 

Different income brackets may have a different kind of holiday

According to Deloitte, the lowest income group — households making less than $50,000 — plan to spend significantly more on the holidays this year: 25% more on gifts, 16% more on non-gift purchases and 34% more on experiences.  

Among high-income households, some of the biggest cuts will come in spending on electronics and related accessories.

The middle-income group, meanwhile, is planning to spend 3% more overall, with experiences receiving 15% more in spending. The middle-income group says they’ll spend 6% less on gifts and 6% more on gift cards and certificates. 

One thing to note: PwC’s survey conflicts with these findings. Its survey found that high-income households — which it defined as making more than $120,000 per year — will spend 15% more this holiday (about $2,759) while lower-income households pull back. 

The bottom line about holiday shopping and inflation

The 2022 holiday shopping season will look a little different as inflation pushes prices higher. Retailers are adapting by lengthening the retail season and offering promotions earlier. And consumers are making shifts in how they spend — like reducing the number of gifts and non-holiday expenses — so they can enjoy a relatively normal season.

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