Elections, hurricane damage and more: Here are four factors that will shape holiday shoppers' purchases

Elections, hurricane damage and more: Here are four factors that will shape holiday shoppers’ purchases

Posted by Admin October 19, 2024 Shopping

A Macy’s store is seen at Herald Square on December 11, 2023 in New York City.

Michael M. Santiago | Getty Images

Inflation may have cooled, but retailers are still staring down a holiday season with plenty of uncertainty.

Several hard-to-predict factors will influence consumers’ spending, as they deck the halls and look for the perfect gifts. Volatile weather, election distraction and a deal-hunting mindset may shape the season. And fewer days between Thanksgiving and Christmas than last year will put shoppers on the clock.

Yet there’s reason for optimism for retailers: Shoppers are feeling more upbeat and plan to spend more compared with last holiday season, according to an annual survey by consulting firm Deloitte and a separate forecast by the National Retail Federation.

Holiday spending in November and December is expected to increase by 2.5% to 3.5% compared with 2023 and range between $979.5 billion and $989 billion, according to the National Retail Federation. That’s a more modest increase than the 3.9% year-over-year jump from the 2022 to 2023 holiday season, when spending totaled $955.6 billion. The NRF’s figure excludes automobile dealers, gasoline stations and restaurants.

Shoppers expect to spend an average of $1,778 on the holidays this year, 8% more than last holiday season, according to consulting firm Deloitte’s survey. The survey, which included about 4,000 consumers and was conducted in late August and early September, attributed that spending increase to a more favorable economic outlook, a perception among respondents that prices would be higher and more willingness to spend among higher-earning households with an annual income of between $100,000 and $199,000.

Low unemployment, a return to more typical inflation levels and a recent Federal Reserve interest rate cut are lifting consumers’ spirits, said Stephen Rogers, managing director of Deloitte’s Consumer Industry Center.

“People are still in a better frame of mind, despite the political chatter,” he said. “When they look at their bank account and think about what their financial situation is, they feel better.”

People shop (L) ahead of Black Friday at a Walmart Supercenter on November 14, 2023 in Burbank, California.

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Deal-hunting mentality

Weeks before trick-or-treating, shoppers got a taste of their first holiday deals.

Those early offers set the stage for a season when shoppers are expected to seek out more ways to stretch the budget after costs of living climbed for years.

Nearly 80% of shoppers surveyed by Deloitte said they would participate in deals events in October and November, up from 61% last year.

“Our deal seeking muscle has been really exercised the past two years and we are just going to continue to exercise it,” Rogers said.

NRF CEO Matt Shay echoed that prediction. On a call with reporters this week, he said the retail trade group expects a more promotional environment this holiday season, with deals across more brands and categories than a year ago.

Another potential challenge for retailers? Catering to customers who are more focused on decorations and experiences than gifts. Consumers plan to spend 16% more year over year on experiences, but spend 3% less on gifts compared with the year-ago holiday period, according to Deloitte’s survey. Non-gift purchases, including spending on decor and party apparel, is also expected to jump 9% year over year.

The firm’s survey found that spending in retail categories would remain relatively flat with an average of $1,043 in 2024 compared with $1,020 in 2023. Consumers across income groups reported value-seeking habits, including less self-gifting, more trading down to affordable retailers and more seeking out private labels or “dupes” of pricier items.

That shift could hurt retailers that sell goods, unless they come up with compelling ways to tie their merchandise to experiences, such as suggesting hiking gear, Rogers said.

For Home Depot, which sells a wide range of holiday decor including Santa-themed throw pillows and a giant animated reindeer for yards, the high demand for decor could be an opportunity. Yet the home improvement retailer said it’s prepared for consumers to seek value, too.

This holiday season, Home Depot bought more low-priced artificial Christmas trees, such as a prelit tree that sells for $49, said Lance Allen, senior merchant of decorative holiday for the home improvement retailer.

Signs showing support for both Democratic presidential candidate Vice President Kamala Harris and Republican presidential candidate former President Donald Trump sit along a rural highway on September 26, 2024 near Traverse City, Michigan.

Scott Olson | Getty Images News | Getty Images

Election uncertainty

As Americans await results of the presidential election, will they also shop for the holidays?

That’s a question on the minds of retailers and consumer brands, including Walmart and SharkNinja, that are hoping shoppers will browse and buy rather than become glued to the news. The election is on Nov. 5, and it could take days for a winner to be called if the race between Vice President Kamala Harris and former President Donald Trump ends up as close as polls suggest.

SharkNinja CEO Mark Barrocas described the election as the “biggest unknown” that will shape the holiday season.

“It may be a blip and it may be nothing, and it may disrupt things for a few weeks if the news cycle is all-consuming,” he said. “Christmas is going to come and there will be a holiday season. It’s just a matter of how many distractions there are.”

He said the election and the news cycle around it may also influence how consumers feel about the economy.

Walmart’s internal research suggests “an uptick in positivity” as its shoppers enjoy the fall and get ready for Halloween, said Jen Acerra, vice president of customer insights and strategy at Walmart.

“The one thing that is still out there and moving is what’s going to happen with the election, and what happens with the election will really determine if this is something that stays positive or not,” she said.

Already, some companies have blamed the election for taking a bite out of their sales. Amazon chalked up a weak forecast in August to election distraction that would dampen demand for online shopping, a comment some mocked as an excuse.

Delta Air Lines‘ CEO, Ed Bastian, said in a CNBC interview this month that the company expects lower demand before and after the election to hit the carrier’s revenue.

“Consumers will, I think, take a little bit of pause in making investment decisions, whether it’s discretionary or other things,” he said. “I think you’re going to hear other industries talking about that as well.”

After Hurricane Milton hit Florida, the city of Clearwater was flooded. Search and rescue operations are ongoing in the area.

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Hurricane damage and winter temperatures

For retailers, cooler and wintery weather is always on the Christmas wish list.

Weather can tip shoppers into the holiday spirit and get them in the mood to buy thicker sweaters, coats and gifts, said Evan Gold, executive vice president for Planalytics, a Philadelphia-based company that advises retailers on weather-related inventory planning.

“There’s no external factor that influences consumers’ purchases as directly, frequently and immediately as the weather,” he said.

This year, the early fall got off to a rockier start. The now unofficial kickoff to the holiday shopping season marked by October sales events coincided with unseasonably warm temperatures in San Francisco and other parts of the country, and severe hurricanes that battered North Carolina and Florida. That makes shoppers less likely to want to buy sweaters, coats and artificial trees.

Yet the weather this year should eventually help retailers, Gold said, since November and December temperatures are expected to be colder than a year ago. He said the shift in weather, such as a dusting of snow or a cold snap, can help signal shoppers to get ready for the season.

Many families will just be trying to rebuild from hurricane damage rather than buying holiday gifts, which could redirect money to furniture, clothes or home repairs, Jack Kleinhenz, the NRF’s chief economist, said on a call with reporters.

“It’ll be just an adjustment in their budget in what they’ll be spending for, but it’s really too early to know the full impact on retail,” he said.

Home Depot expects that, too. It pulled holiday product out of 124 of its big-box stores to make room for items that hard-hit areas need, such as shingles and drywall, Allen said. Instead, he said, it plans to sell a more limited assortment in those stores of items such as wreaths and its top-selling trees.

“They’re trying to rebuild and recover their houses,” he said. “So obviously, they’re not going to go buy a nine-foot reindeer and put that out there.”

A shorter holiday season

Thanks to the calendar, the holiday rush may be on overdrive.

Shoppers will have five fewer days between Thanksgiving and Christmas this year compared with last year — which could dampen spending or potentially motivate time-pressured shoppers to seek out rush shipping, curbside pickup or other quicker options to get gifts.

The pressure will be on retailers to make the most of each day and to deliver on convenience, as shoppers race to get what they need and expect items to arrive within a few hours or at minimum, within a few days, said the NRF’s Shay.

“A shorter period does have consequences and implications and one of those, of course, is that the shipping season will be shorter,” he said.

On a recent store tour, Kohl’s Chief Marketing Officer Christie Raymond said the retailer expects it will have to work harder to woo customers, especially lower- and middle-income shoppers, who have felt pinched by the cumulative effect of inflation and crunched for time.

“We think they’re feeling more squeezed than last year,” Raymond said. And, she added, shoppers have also said they are “feeling time-squeezed.”

To appeal to those consumers, Kohl’s wants to have more of what they need, Chief Merchandising and Digital Officer Nick Jones said.

The retailer has bulked up its offering of gift items, added more party dresses and started to sell a wider range of decorations, including Christmas trees, lawn ornaments and wrapping paper.

“We want to be a holiday destination,” he said. “We haven’t got the food, but we’ve got everything else.”