Shoppers entered last year’s holiday season anxious over major supply chain delays and corresponding product shortages. While retailers have solved most of these disruptions during the past year, new threats of global recession and inflation paint a bleak picture.
Despite the talk of shrinking growth and rising prices, research from McKinsey, the National Retail Federation (NRF), and Fourth’s own customer analytics reveal a more complicated picture of resilient consumers still willing to purchase.
Given these factors, the holiday shopping season in 2022 looks different from previous years. Retailers must be aware of the following trends to best forecast for upcoming demand.
#1 Consumers Are Shopping Early
Chaotic Black Friday scenes will remain a revered American tradition, but holiday shoppers no longer wait for Thanksgiving to start purchasing presents. McKinsey reports 56 percent of consumers have already begun crossing items off their gift lists. These early birds listed their top reasons.
- Hoping to get ahead of anticipated price increases – 52%
- FOMO on specific items and deals – 51%
- Avoid the bottlenecked shipping times of November and December – 42%
Perhaps most telling – 39% of early shoppers listed a desire to spread their purchases across different credit card billing cycles, a reflection of prevalent economic uncertainty.
The NRF points out the Federal Reserve drastically raising interest rates resulted in much higher costs to carry credit card debt or make major purchases such as a home or car. Consumers are thus looking to avoid saddling December credit card statements with the bulk of their holiday purchases.
#2 Economic Realities Haven’t Curbed Spending
That same NRF story notes only 38% of Blue Chip economists believe the Fed can balance inflation reduction with economic growth, but 95% say even in the event of recession, it would likely be short-term. The industry association also forecasts the 2022 winter holidays will see a 5.3% year-over-year dip in spending.
Fourth’s own data from our retail customers falls in line with this outlook of slowed growth. October U.S. retail sales fell 4.3% compared to October 2021, and sales dropped 10.7% from just the month prior.
One reason the wheels haven’t fallen off — American households have added more than $4 trillion in wealth since 2019, and shoppers are ready to spend some of this cash. McKinsey notes the number of consumers who say they’re “eager” for the holiday shopping season in 2022 is up 21% points compared to 2021, with 66 percent of Gen Z in this category.
Additionally, 39% of shoppers say they intend to spend big on purchases for themselves or others. Young shoppers lead the way again, with Gen Z (62%) and Millennials (51%) feeling jolly about spending this year, compared to just 17% of Baby Boomers. Keep in mind, income plays a role – 45% of those making more than $100K a year fall in this category, yet only 35% of those making fewer than $50K do.
#3 Managers Are Dealing With Lower Headcounts
Fourth has found the national labor shortage continues to strain the retail industry. Our data shows organizations are still struggling to hire and therefore less able to meet consumer demand. Compared to September, retailers have cut headcount 11.3%, indicating industry-wide downsizing to fit economic projections despite the approaching holidays.
That’s in-line with how the NRF sees the industry. Their most recent economic outlook estimates retailers will hire anywhere from 450,000 to 600,000 seasonal workers over the holiday shopping season in 2022, down from over 670,000 last year. The NRF reports over 800,000 jobs remain unfilled across the sector.
#4 The Best Deals Win
Consumers see deal hunting as one avenue to overcoming inflation. McKinsey found over 70% of shoppers expect higher prices in upcoming months, and 27% expect they’ll spend more on essential goods this year, cutting into holiday budgets. When that happens:
- 44% will only shop using promotions such as coupons, discounts, and sales
- 43% will go elsewhere to find the same item at the cheapest price
- 28% will switch to a cheaper brand entirely
These percentages strongly reflect how and where buyers plan to shop. The NRF notes plans to shop at discount stores are up 4% compared to 2021, and plans to shop at thrift stores are up 3 percent. To ensure you don’t lose foot traffic to low-price competitors, retailers should consider four strategies.
- Longer promotions. Shoppers are active earlier in the season and shopping for longer periods of time. Offer sales and discounts more frequently and for longer periods of time to keep customers interested.
- Know your customers. What are your primary customers interested in, how engaged are they, and what are their budgets? Go beyond basic demographics to better understand how you need to market and where to deploy resources.
- Offer flexibility. Since consumers seek the best deals possible, leaning into promotions alone may not do enough to move the needle. Additional services such as in-store pickup, price matching, and limiting sales exclusions tend to encourage purchases.
- Staff up to meet demand. Ensure shopper experiences result in purchases and encourage repeat business. Understaffing prevents both, so ensure managers have enough staff to meet customer demand.
The 2022 holiday shopping season offers opportunities for retailers to tap into an enthusiastic consumer base. Fourth’s demand forecasting solutions give actionable insights based on the historic and current factors needed to address shifting demand, which managers then use to optimize shift scheduling – maximizing throughput and minimizing labor spend.
Learn more about Fourth retail solutions at https://www.fourth.com/retail/.
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