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Recent Holiday Seasons have one thing in common: they begin earlier and earlier, as merchants are anxious to push merchandise off the shelves, and shoppers want to use their holiday time more effectively.
But this year’s Holiday Season is different from last year in several respects. One is that merchants have too much rather than too few inventories and are eager to get rid of them. Two, Covid-19 concerns are fading, and shoppers are heading to brick-and-mortar retailers again. And three, shoppers are beginning to feel the pain of inflation, which makes it harder to afford discretionary items.
These differences are evident in the recent financial reports of Walmart and Target. Walmart had a strong quarter, as its product offering mainly fell in the necessities category, with inelastic consumer demand.
“Their inventory progress and action in grocery played a significant, positive role this quarter,” said Wes Gottesman, Market Advisor at TradeZing, in an email to International Business Times. “For households earning less than $100K/year, Walmart is a quality staple nationwide, especially during an inflationary economy.”
By contrast, Target had a weak quarter, as its product portfolio falls more in the discretionary category with elastic demand.
“Discretionary spending may not be in the cards for consumers bound to a budget in an inflationary economy,” said Gottesman.
Trey Loughran, CEO of Purchasing Power, sees cautious spending with promotions & discounts as a critical feature of this year’s Holiday Season.
“I think American consumers will be more cautious in spending – particularly around non-critical goods,” he told IBT.
Moreover, Loughran believes milestone holiday discount days are becoming less critical.
“Last year, supply chain issues drove the widening of the holiday shopping season,” he said. “This year, it’s about consumers needing to stretch their budgets. As a result, retailers are adjusting by discounting earlier, and the traditional core shopping days are becoming less important and less of a milestone than they have been in the past.”
And he sees fewer and less expensive gift buying, as inflation and consumer debt hamper consumer budgets.
“With prices up, consumers have less disposable income,” he said. “And that hurts consumers at lower income levels because they have less disposable income. After all, they’re paying for necessities – food and rent. We also see credit tightening up quite a bit, and credit card balances and interest rates are at 20-year highs.”
Brett Rose, CEO of United National Consumers Suppliers (UNCS), sees consumers shopping with retailers with a more significant breadth of categories and regular-priced goods, like Ross, Marshalls, 5 Below, and Dollar Tree. They continue to be successful due to the breadth of the assortment, agility, and heavy discounts.
“Times are challenging for many Americans,” he told IBT. “Every penny counts. Consumers are smart and educated – especially with the devices in our hands that allow us to see what things are selling for {everywhere} in seconds. Just a simple sale does not fool them. Off-price gives them the ability to save every day on big brands.”
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