Smith Brain Trust / November 10, 2022

For Retailers, the Holiday Shopping Season Looks Lackluster

For Retailers, the Holiday Shopping Season Looks Lackluster

Continuing a trend that has been building for the past several years, retailers started their Black Friday holiday promotions well before the traditional post-Thanksgiving shopping day this year. Amazon introduced a Prime Early Access Sale in mid-October, and Target and Walmart have been offering Black Friday deals since the weeks leading up to Halloween. But even with a long shopping season, retailers don’t have high hopes for bright sales numbers this year.

Retailers are expecting a lackluster holiday shopping season this year in terms of spending and sales, with inflation and consumer preferences to blame.

“We know the inflation rates, we know the interest rates. Consumer confidence is falling,” says Jie Zhang, professor of marketing and the Harvey Sanders Fellow of Retail Management at the University of Maryland’s Robert H. Smith School of Business. “To make things worse for retailers, there has been a big shift of consumer spending patterns since earlier this year. Spending on goods has been cut back significantly from the previous year, while spending on travel and services is way up.”

Unlike the previous two holiday shopping seasons, retailers and consumers don’t have to worry about shortages from supply chain issues this year, says Zhang.

“I think many retailers are scaling back. They haven’t stocked up big time because some of them are still burned from the extra inventory they had to carry over in the spring.

In fact, some of this season’s sales will likely be holdover inventory from a glut many retailers found themselves with this past spring, she says. Retailers will likely use holiday sales to clear out any extra inventory they’ve had stashed away without drawing suspicion.

“Everybody offers some kind of deal during the holiday shopping season,” Zhang says. “This year, retailers that still have too much extra inventory have a chance to get rid of it without raising any red flags.”

Retailers usually start making holiday inventory orders in early summer and this time, they likely didn’t over-order. At that time, inflation and gas prices were already weighing heavily on people’s wallets.

Plus, there are few hot new items on everyone’s wish list this year.

“Many households are on tight budgets to start with. If there aren’t those really hot must-have products to generate the buzz for people who do have the disposable income, that will also temper the holiday shopping season,” she says.

“Many retailers are just going to do what they have to this holiday season, but they won’t have high hopes and they haven’t placed huge orders for inventory. Overall, it’s probably just going to be pretty mediocre, like last year.”

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