TL;DR (4-Minute Read)
- This holiday, 11.5% of Americans plan to sit this Christmas season out without spending money on gift cards, presents, and other items for entertainment, the greatest percentage of Americans in recent years.
- The COVID-19 pandemic has played a huge role in keeping Americans from purchasing gifts and holiday expenses as the holiday season goes on.
- To fight the potential inventory shortages, retailers are offering products for lower prices for those shoppers who are buying on a budget and looking to spread out the selling season this year by holding deals on items earlier.
- Inflation has also been a serious problem that is being addressed. When prices of necessities like gas, food, and clothes have increased as well, Americans steer away from buying presents for their families.
The holiday season is here and estimates in previous years have shown that the average American family spends around $998 on gifts and holiday expenses. This holiday, 11.5% of Americans plan to sit this season out, refraining from spending money on gift cards, presents, and other items for entertainment which is the most the U.S. has had in recent years. U.S. online holiday spending is expected to grow at its slowest pace in the last eight years, as higher prices, product shortages, supply chain problems, and lingering pandemic-related unpredictabilities jeopardize the shopping season. Karthik Easwar, an associate professor at Georgetown University’s McDonough School of Business who specializes in consumer psychology, says that the pandemic’s economic impact has been stark and even. Even though the total spending of shoppers has only gone down by a little, big spenders from larger-income families have been shown to mitigate those from lower-income families not spending as much. “We all experienced the pandemic, but some experiences were very different for different parts of our society — especially our workforce,” said Easwar. “We are seeing the effects of that, still.”
Many factors contribute to this recent trend in decreased spending. As stated before, the COVID-19 pandemic has taken its toll on the economy. After combating virus restrictions on stores for most of last year, retailers are dealing with plenty of consequences of the pandemic such as the clogging of the global supply chains which have prevented many storeowners from getting their merchandise on the shelves. The lack of clarity around what items could run out of stock, and when, makes it difficult to determine how consumers will spend their money, says Adobe Digital Insights lead analyst Vivek Pandya. Adobe Analytics forecast an average 10% growth or $207 billion in online sales in November and December compared to the 33% jump in 2020 when more Americans were shopping online rather than traveling to stores during the pandemic. To add on, a global shortage of semiconductor chips has made it tedious to find the latest model smartphone, gaming console, and other technology-related gadgets and appliances, retail experts say. “It’s anything that has the chips in them,” says Glenn O’Donnell, research director for Forrester Research, noting that phones, smart appliances, even toys with Bluetooth connectivity will be harder to find. “If it walks and talks, you’re probably going to see some shortages on those things.”
To fight the potential inventory shortages, retailers are offering products for lower prices for those shoppers who are buying on a budget and looking to lengthen the selling season this year by holding deals on items earlier. Last week, Walmart CEO Doug McMillon and Target CEO Brian Cornell both stated that they would maintain low prices even if they decreased their profits. “That’s our purpose,” Walmart CEO Doug McMillon said in an interview with CNBC’s “Squawk on the Street.” “We save people money and help them live a better life. Those are the words that came out of [Walmart founder] Sam Walton’s mouth. He loved to fight inflation. So do we.” Inflation has driven the price of pantry staples and household items as customers are looking for value in their products. Inflation has also been a serious problem that is being addressed.
A separate Deloitte survey found that of the 70% of Americans who had already kicked off their holiday shopping by late October, 54% said they were seeing higher prices on the shelves compared to last year and about one-third of consumers said they increased their holiday budgets from what they had planned in September. When prices of necessities like gas, food, and clothes have increased as well, Americans steer away from buying presents for their families. Consumer confidence hit a 10-year low in November, according to the University of Michigan Consumer Sentiment Index, as inflation climbed to its highest levels since the early 1990s. Even though shoppers are still spending, many are being more cautious about what they buy. Code Tenderloin, a nonprofit group serving the homeless in San Francisco, said it has $7,000 worth of gift cards to hand out to those who need financial assistance over the holidays. The organizations received many requests for food and clothing as well as requests to assist with housing, as more requests will likely come as the holiday season goes on. “The people who had already been struggling before the pandemic right are really struggling now,” said Donna Hilliard, executive director at Code Tenderloin. “And everyone that has spent their stimulus is coming in now. Now that the rent moratorium is gone, folks are freaking out.”