Inflation is the top concern of holiday shoppers this year, and high prices are causing consumers to recalculate how much they can spend on gifts, and who they will buy gifts for, according to a holiday forecast released today by professional services firm KPMG.
Eighty-five percent of consumers surveyed for the KPMG report described themselves as somewhat, moderately, or extremely concerned about inflation.
Consumers said they expect to spend more this holiday season than last year, but that they were likely to purchase gifts for fewer people, and to shift their spending to less-expensive gift categories and budget-friendly stores.
“The consumer has moved behaviorally in how they’re reacting to inflation,” said Matt Kramer, KPMG Consumer and Retail National Sector Leader. “Now it’s about affordability and value for the consumer. They’re clearly pivoting categories to more essentials,” he said.
“Grocery, automotive, personal care, and prescriptions are the essential staples they know that they’re going to have to spend more on, and that contracts their remaining budget for non-essentials,” Kramer said.
“This holiday season,” Kramer said, “it is important retailers respond to this shift by offering options that fit the price points that budget-conscious consumers are seeking.”
“Retailers are facing a tough holiday season because of high inventory levels and elevated supply chain costs,” Kramer said. The option of “just being promotional and having significant markdowns is really not there if they want to preserve at least some of their margins,” he said.
“It doesn’t all have to be about markdowns and pricing. It can also be about having an exceptional customer experience,” Kramer said. “Some of these consumers are coming back to the stores for the first time. If they have a great experience — that’s going to determine how frequently they come back,” he said.
“One surprise in the survey,” Kramer said, “was the enthusiasm consumers are showing for in-store shopping. Customers are loving getting back into stores.”
KPMG expects that much of the additional holiday spending this year will occur in physical stores, while online spending will be relatively flat. “People want the social aspects of physically being able to see, to touch and feel, for certain categories,” Kramer said.
Other findings from the report are:
- Consumers said they plan to spend an average of $1,072 on the holidays this year, or 6% more than last year.
- Gift cards, gift certificates, and apparel items are the top gift items consumers expect to buy.
- More shoppers — 40% versus 32% — are planning to wait until November to start their shopping this year, as shopping is expected to stretch out longer into December as consumers wait for the best deals.
This article was written by Joan Verdon from Forbes and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to [email protected].
