December 2, 2022 By Krystina Morgan
With the busiest buying season of the year in full swing, we hope you are feeling the holiday spirit from your head to your mistle-toes. Even though things may look a little different this year in terms of what consumers are buying and how much money they are spending, studies are showing that retail spending numbers are still up.
Slow Holiday Sales Growth
“October’s 1.3% retail sales growth reflects the rebound in consumer spending after flat sales in September,” Claire Tassin, Retail and Ecommerce Analyst at Morning Consult, said. “Online retail, up 1.2%, continues to perform alongside home furnishings and DIY stores, up 1.1% each. This shift tracks with a slight downward trend in the share of consumers concerned about inflation across key categories.”
S&P Global Ratings also forecasts soft holiday sales growth this year, expecting a 4.5% seasonal increase, which is in line with the average rate of the past 20 years. They note that consumers will be allocating more of their budgets to essentials such as food and gas, and retailers will need to use promotions and discounts to clear excess inventory that accumulated as port congestion eased earlier in the year. Weak volumes and persistent cost inflation will likely stress the credit quality of retailers most exposed to holiday shopping, along with their suppliers of discretionary items such as durables, household products, and apparel.
“The holiday shopping season is traditionally the most important sales period for the retail sector,” Sarah Wyeth, Credit Analyst at S&P Global Ratings, said. “The season typically presents opportunities for retailers to benefit from consumers’ eagerness to bring extra cheer — and gifts — to in-person celebrations, but this season will be uniquely challenging due to several factors, including weakening consumer discretionary spending, persistent inflation, inventory overhang leading to higher levels of discounting, and the post-pandemic shift back to experiences.”
Stand Out From Your Competitors
This year’s findings are proof of a pattern that has been tracked for quite some time now: inflation is continuing to impact spending, and consumers are slightly pulling back just as we dive into the holiday shopping season. Do not let this discourage you, as shoppers are clearly still on the hunt for gifts for their loved ones — this simply means that indie retailers need to step up their marketing and promotions in order to differentiate themselves from the competition.