High-income consumers plan fewer gifts and more travel, reducing 2022 holiday retail sales | Tech US News


During the critical November-December holiday season, the National Retail Federation expects retail receipts to reach $942.6 million to $960.4 million, up 6% to 8% year-over-year past This estimate excludes spending at car dealerships, gas stations and restaurants.

The macro estimate includes all retail expenses for gifts and other holiday-related purchases, plus everything else.

Delving into holiday-related purchases alone, the NRF survey by Prosper Insights & Analytics found that consumers plan to spend an average of $833 on gifts and non-gift holiday items such as decorations and food. He also reported that the figure is “in line with the average of the last ten years”.

Averages being what they are, a look at last year’s planned spending reveals that consumers were more optimistic in 2021. Last year they expected to spend $879 on gifts and non-gift holiday items, so this year’s planned spending represents an overall drop of 5%.

Predicting that lower-income consumers may be pulling back on spending on holiday-related discretionary purchases in favor of essentials during this period of high inflation, the NRF explained that higher-income consumers will more than make up for any shortfall.

Calling it stratification, NRF CEO Matthew Shay said “households with higher incomes plan to spend significantly more, on average, on holiday gifts and seasonal items.”

However, studies by Deloitte and IBM challenge this assumption. Their research suggests that higher-income, more financially secure consumers expect to buy fewer gifts this year while spending significantly more on travel.

Together, these trends could rob retailers of some expected holiday benefits and place them in the experience bucket.

Says Deloitte

Deloitte has been surveying consumers about their holiday plans for nearly 40 years and finds a similar expected decline of 5% overall in gifts and other non-gift holiday purchases.

However, the Deloitte study also includes planned spending on experiences, including entertainment and socializing at restaurants, concert tickets and travel close to home. Those experiences represent a 7% gain.

Overall, planned consumer spending related to vacations, including experiences, is flat from last year at about $1,460 over both years. The Deloitte survey sampled responses from 4,600 US consumers.

Budgets are being cut among high-income consumers

Looking more closely at households with higher incomes (+$100,000), Deloitte sees their planned spending falling 7% overall, from $2,624 last year to $2,438 this year, with the average spending related to retail 11%, from $1,424 to $1,607. 2021.

“The higher income group is falling back in categories like electronics and home, places where they went during Covid,” said Stephen Rogers, executive director of Deloitte’s Consumer Industry Center.

“When it comes to gifts, they’re taking away everything but gift cards. And they’re showing a 23% drop in non-gift holiday shopping. They already have as many Christmas lights and ornaments as they need,” he continued.

Lower the number of gifts

Another worrying sign is that consumers will buy fewer gifts this year, down from 16 gifts last year to nine this year overall. High-income consumers show a similar drop, from 19 gifts last year to 11 this year.

While high-income consumers are cutting back on individual gifts in favor of higher-value gift cards, their spending won’t show up on merchants’ books until the gift card is presented for purchases.

“In an inflationary period where everyone is thinking about the value of money, giving a $50 gift card is a way to demonstrate the value of money, or conversely, it could be a way to pass on inflationary money ” he shared.

Everything below except gift cards

Overall, when Deloitte breaks down total holiday spending by product category, it doesn’t look pretty. Each of the eight categories included has a decrease, except for gift cards, by 7%.

For example, spending on pets is down 28%, health/wellness and home/kitchen are down 19%, and electronics and clothing/accessories are down 14% each. Expected spending on food and beverages is reduced by just 8% and toys by 5%.

“We have lived through extraordinary times in the last two years, with inflation at a 40-year high. Everyone is zigzagging with what the world has been giving them,” he continued.

It’s anyone’s guess whether high-income consumers will roll in for the holidays to prop up retailers’ year-end numbers, but Deloitte’s dive into high-income consumer expectations doesn’t bode well.

IBM says

IBM’s “2022 Holiday Shopping and Travel Report” offers another perspective on how higher-income consumers are approaching the holiday season. It also includes insight into travel-related spending beyond Deloitte’s narrower look at experiences within 75 miles of home. Overall, IBM sees travel budgets up 49% year over year.

And instead of segmenting the overall survey sample of 12,000 adults by income alone, it considers income along with debt spending, savings contributions and overall financial status to identify four distinct consumer groups in order:

  • isolated 41% maintained the status quo with a modest decline in debt, but all other things being equal.
  • strained 31% with declining income and reduced savings along with increasing debt.
  • for sure 18% whose finances are on the rise with increased income, more contributions to savings and investments.
  • frugal 11% are financially conservative with reduced savings and investments, but have adjusted spending to keep debt in line.

The Secure segment is more comparable to Deloitte’s high income segment and where they are really going to pick up the pace is travel.

Globally, Secure expects to double its spending on vacation travel with US Secure planning to spend more than $22,000 on vacation travel alone.

Acknowledging that people tend to spend both before and during travel at retail, IBM’s Karl Haller said their overall holiday budgets would see a 20% increase, but some of that spending is likely to be pulled back in November and December in preparation for your travels.

Secure consumers are eager to get back to normal holiday festivities, but Haller noted that the other three consumer segments — Isolated, Stressed and Frugal — have contingency plans.

“The Secure will spend regardless, but everyone else has a backup plan. Depending on the economic outlook, how bad inflation is, how much prices go up or if new lockdowns are imposed, the rest will step back in places to make room in others,” Haller observed.

“It’s a relatively small group of safe people that carries a lot of expense.”

Cautiously optimistic

Both Deloitte’s Rogers and IBM’s Haller put a positive spin on their data for the upcoming holiday season. At the same time, they acknowledge that reading the tea leaves this year is particularly challenging, especially when it comes to the wealthy and how much weight the NRF places on them for positive holiday retail results.

In the Deloitte survey, only the highest-income segment expected holiday spending to pull back, while middle- and lower-income consumers reported an increase, but not enough to move the needle past the survey average of $1,460 in last year.

“We’re seeing a little bit of that dichotomy between lower and higher income consumers this year,” Rogers said. “The high income group may be paying more attention to the economy and other macro indicators. If they’ve looked at their retirement portfolios recently, they don’t feel good.”

Haller said all the media noise surrounding inflation and the economy is making it difficult to get an accurate answer on consumer performance, especially since two-thirds of consumers said they are most worried about financial problems.

“I never believe dollar amounts in forecasts, as NRF publishes spending amounts down to the pennies. That’s bogus accuracy,” he said. “For me, I get better insight by looking at consumer attitudes, intentions and mood for the holidays.”

“If most people say they’re going to cut back, it’s probably going to be a bad holiday regardless. If people say they’re going to spend, it has a chance to be a good holiday. But there’s still so much going on and so much uncertainty.”

Inflation affects consumer sentiment

A traditional Likert rating scale may provide the best insight into how people will approach holiday spending, and that’s clouded by inflation.

Deloitte finds that 52% of consumers expect to spend about the same this year as last year. But given the high rate of inflation, either they will be forced to reduce the number of items purchased or buy more items with promotional prices to maintain the level.

Slightly more, 26%, plan to spend less this year than expect to spend more, 22%. But both the increased and decreased spending groups cite inflation as the main factor influencing their choice.

Of those who expect to spend more, just over half cited higher costs as the main factor. In other words, they don’t necessarily want to spend more, but they expect because things will cost more this year.

For those planning to spend less, two-thirds said higher costs are the reason. Your financial situation is forcing a cut.

One thing’s for sure: people are looking forward to getting back to normal this holiday season. Also, the resilience of American consumers is something marketers are counting on. And what people say they’re going to do in surveys isn’t necessarily what they actually do.

But this season, retailers will have to lean on higher-income, financially secure consumers to get them through, and it’s up in the air whether those able to spend more will carry retailers across the finish line.

See also: Marketers Expect a “Ho-Ho-Hum” Holiday 2022


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