Sales Dip as Retailers Countdown to Christmas

Consumers worry about high Inflation and are gradually cutting back on their holiday spending. People are being more selective about what they buy and plan to spend less on gifts.

The Bureau of Labor Statistics indicates pricesrose 7.1 percent annually in November, down from 7.7% in October. Economists expected sales would continue to rise during the holiday season. Unfortunately for retailers, shoppers bought slightly less in November, and sales declined 0.6 percent. This drop was significantly higher than the .01 percent forecast and marks the most significant sales decline this year. The drop in spending was felt across the board—sales for building materials and garden centers were down 2.3 percent. 

Sales are Up and Down
At the start of the season, retailers prepared for robust sales. Stores offered a variety of steep discounts weeks in advance of Black Friday and Cyber Monday. Consumers responded by getting a jump on gift buying. To stretch their budgets, shoppers made purchases over time rather than piling on during the most popular sale days. Despite the mixed reviews for November, Black Friday’s in-store foot traffic broke records, according to NRF. Cyber Monday may be the biggest day of online sales in U.S. history. Yet, quarterly earnings reflect continued supply chain challenges. Faced with fluctuating sales numbers, inflation challenges, and retail theft, retailers have a lot of complex issues to manage.

Early Shopping Slows Sales MomentumAdditionally, rising Inflation has made shoppers wary, and their excitement for buying is diminishing over time. An Eli Broad College of Business survey asked consumers about their spending habits. 

• 80 percent of respondents are either extremely concerned, very concerned, or moderately concerned about rising prices
• 87 percent are concerned enough to change their holiday spending behavior

When consumers sense a recession is around the corner, they worry about their jobs and become strategic about how they spend money. Some shoppers look for the best deals and prioritize wants versus needs. 

• 54 percent of respondents are extremely or “very much” worried about Inflation
• 25 percent of respondents are moderately concerned about Inflation

Shoppers Plan to Spend Less
According to the survey, consumers plan to spend about $700 this holiday season, significantly less than the $880 spent during the past three seasons. Roughly 70 percent of respondents will pay the same amount or slightly less than last year. Like their customers, retailers are dealing with diminished dollar buying power. 

What Influences Buying Decisions
House brands are becoming more appealing because shoppers consider private labels a better value. They are less connected to national brands and luxury labels since they can cost significantly more than comparable merchandise. When asked about factors influencing their buying decisions, more than 90 percent of respondents mentioned price, half said free shipping, and others said value and discounts are essential.

• 90.1 percent price
• 56.8 percent, free shipping
• 55.3 percent value
• 54.9 percent, amount of the discount

With Christmas less than a week away, retailers hope sales will increase. The fourth quarter is a critical time for retailers since every sale counts.