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Tag: National Retail Federation

  • High-Income Consumers Plan Fewer Gifts And More Travel, Cutting Into Retail Holiday 2022 Sales

    High-Income Consumers Plan Fewer Gifts And More Travel, Cutting Into Retail Holiday 2022 Sales

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    Throughout the critical holiday season of November and December, the National Retail Federation predicts retail takings will total between $942.6 to $960.4 billion, a 6% to 8% increase over last year. This estimate excludes spending at automobile dealers, gasoline stations and restaurants.

    The macro estimate includes all retail expenditures for gifts and other holiday-related purchases, plus everything else.

    Digging just into holiday-related purchases, the NRF survey conducted by Prosper Insights & Analytics found consumers plan to spend $833 on average for gifts and non-gift holiday items such as decorations and food. It also reported that figure is “in line with the average for the last ten years.”

    Averages being what they may, a look at last year’s predicted spend finds consumers were more bullish in 2021. Last year they expected to spend $879 on gifts and non-gift holiday items, so this year’s expected expenditure represents a 5% drop overall.

    Predicting that lower-income consumers may be pulling back from spending on discretionary holiday-related purchases in favor of essentials during this period of high inflation, the NRF explained higher-income consumers will more than make up for any shortfall.

    Calling it stratification, NRF CEO Matthew Shay said “higher income households plan to spend significantly more, on average, on holiday gifts and seasonal items.”

    However, studies from Deloitte and IBM challenge this assumption. Their research suggests that higher income and more financially-secure consumers expect to buy fewer gifts this year while spending significantly more to travel.

    Taken together, these trends could take some hoped-for holiday gains away from retailers and put them into the experiences bucket.

    Deloitte Says

    Deloitte has been surveying consumers about their holiday plans for nearly 40 years and finds a similar expected decline of 5% overall on gifts and other non-gift holiday purchases.

    However, Deloitte’s study also includes planned expenditures on experiences, including entertainment and socializing in restaurants, concert tickets and close-to-home travel. Those experiences represent a 7% gain.

    Overall, consumers’ planned holiday-related spending, including experiences, is flat from last year, at about $1,460 in both years. The Deloitte survey sampled responses from 4,600 U.S. consumers.

    Budgets Cut Among High-Income Consumers

    Looking more closely at the higher-income households ($100k+ income), Deloitte finds their planned spending will drop 7% overall, from $2,624 last year to $2,438 this, with the average retail-related spending off 11%, from $1,424 versus $1,607 in 2021.

    “The higher-income group is pulling back in categories like electronics and home, places where they spent during Covid,” said Stephen Rogers executive director of Deloitte’s Consumer Industry Center.

    “When it comes to gifts, they are pulling back in everything but gift cards. And they are showing a 23% decline in non-gift holiday purchases. They’ve already got as many Christmas lights and decorations as they need,” he continued.

    Drop In Number Of Gifts

    Another troubling sign is that consumers will purchase fewer gifts this year, down from 16 gifts last year to nine this year overall. High-income consumers show a similar drop, from 19 gifts last year to 11 this year.

    Even if high-income consumers cut back on individual gifts in favor of larger-value gift cards, their expenditures won’t show up on retailers’ books until the gift card is presented for purchases.

    “In an inflationary period where everybody’s thinking about the value of money, giving a gift card worth $50 is a way to demonstrate the value of money, or conversely, it could be a way to pass the inflationary buck on,” he shared.

    Everything Down But Gift Cards

    Overall, when Deloitte breaks down total holiday spending by product category, it doesn’t look pretty. Every one of the eight categories included shows a drop, except gift cards, up 7%.

    For example, spending on pets is down 28%, health/wellness and home/kitchen are off 19%, and electronics and clothing/accessories are down 14% each. Expected spending on food and beverage is off by only 8% and toys are down 5%.

    “We’ve lived through some extraordinary times the last couple of years, with inflation at a 40-year high. Everybody’s zigging and zagging with what the world’s been giving them,” he continued.

    Whether the high-income consumers will zig into the holidays to prop up retailers’ end-of-year numbers is anybody’s guess, but Deloitte’s dive into the high-income consumer expectations doesn’t bode well.

    IBM Says

    IBM’s “2022 Holiday Shopping and Travel Report” provides another perspective on how the higher-income consumers are approaching the holiday season. It also includes a view of travel-related expenditures beyond Deloitte’s more limited look at experiences within 75 miles from home. Overall, IBM finds travel budgets are up 49% year-over-year.

    And instead of segmenting its global survey sample of 12,000 adults by income alone, it factors in income along with debts expenses, contributions to savings and overall financial situation to identify four different consumer groups in order:

    • Insulated 41% who’ve maintained the status quo with a modest decline in debt, but all other things being equal.
    • Strained 31% with declining incomes and dwindling saving along with rising debt.
    • Secure 18% whose finances are on the upswing with increased income, more contributions to savings and investments.
    • Frugal 11% are financially conservative with decreased savings and investments, but they’ve adjusted spending to keep debt in line.

    The Secure segment are most comparable to Deloitte’s high-income segment and where they are really going to pick up the pace is travel.

    Globally, the Secure expect to more than double their holiday travel spending with the U.S. Secure planning to spend upwards of $22,000 on holiday travel alone.

    Recognizing that people tend to spend both before and during travel in retail, IBM’s Karl Haller said their overall holiday budgets would get a 20% boost, but some of that spending was likely to have been pulled forward out of November and December in preparation for their journeys.

    The Secure consumers are raring to return to normal holiday festivities, but Haller observed that the other three consumer segments – Insulated, Strained and Frugal – have contingency plans.

    “The Secure are going to spend regardless, but everybody else has a backup plan. Depending on the economic outlook, how bad inflation is, how much prices rise or if new lockdowns are imposed, the rest are going to pull back in some places to make room in others,” Haller observed.

    “It amounts to a relatively small group of Secure people driving a lot of spending.”

    Cautiously Optimistic

    Both Deloitte’s Rogers and IBM”s Haller put a positive spin on their data for the upcoming holidays. At the same time, they recognize reading the tea leaves this year is particularly challenging, especially where the affluent are concerned and how much weight the NRF places on them for positive holiday retail results.

    In Deloitte’s survey, only the higher-income segment expected to pull back holiday spending, while the lower and middle-income consumers signaled an uptick, but not enough to move the needle beyond the survey average of $1,460 from last year.

    “We are seeing a bit of that dichotomy between the lower and high-income consumers this year,” Rogers said. “The high-income group may be paying closer attention to the economy and other macro indicators. If they looked at their retirement portfolios recently, they are not feeling good.”

    Haller said all the noise in the media surrounding inflation and the economy is making it hard to get an accurate fix on how the consumers will perform, especially as two-thirds of the consumers said they are most worried about financial issues.

    “I never believe the dollar amounts in predictions, like NRF puts out spending amounts down to the cents. That is false precision,” he maintained. “To me, a better view is gained by looking at consumers’ attitudes, intentions and their mood going into the holidays.”

    “If most people say they are going to cut back, it’s probably going to be a bad holiday regardless. If people say they are going to spend, it has a shot at being a good holiday. But there is still so much going on and so much uncertainty.”

    Inflation Casting A Pall On Consumer Sentiment

    A traditional Likert rating scale may provide the best view of how people will approach their holiday spending, and that is muddied by inflation.

    Deloitte finds 52% of consumers expect to spend about the same this year as last. But given the high inflation rate, they will either be forced to cut back on the number of items purchased or buy more promotionally priced items to keep level.

    Slightly more, 26%, plan to spend less this year than expect to spend more, 22%. But both the increased and decreased spending groups cite inflation as the primary factor influencing their choice.

    Of those who expect to spend more, just over half cited higher costs as the primary factor. In other words, they don’t necessarily want to spend more but expect to because things will cost more this year.

    For those who plan to spend less, two-thirds said higher costs are the reason. Their financial situation is forcing a cutback.

    One thing is for sure: people crave a return to normalcy this holiday season. Further, the resiliency of U.S. consumers is something retailers count on. And what people say they are going to do on surveys isn’t necessarily what they actually do.

    But this season, retailers will need to lean into the higher-income, financially secure consumers to pull them through, and whether those capable of spending more will carry retailers over the finish line is up in the air.

    See also: Retailers Expect A ‘Ho-Ho-Hum’ Holiday 2022

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    Pamela N. Danziger, Senior Contributor

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  • Retailers Should Expect A ‘Ho-Ho-Hum’ Holiday 2022

    Retailers Should Expect A ‘Ho-Ho-Hum’ Holiday 2022

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    The National Retail Federation just released its Holiday 2022 forecast predicting that November and December retail sales will advance between 6% to 8%. This comes on the heels of a 13.5% increase last year. Its forecast excludes automobile dealers, gasoline stations and restaurants.

    Recognizing that last year broke all historical records, NRF president and CEO Matthew Shay called out the average 4.9% increase seen over the past decade to declare, “Consumers remain resilient and continue to engage in commerce.”

    NRF chief economist Jack Kleinhenz added:

    “NRF’s holiday forecast takes a number of factors into consideration, but the overall outlook is generally positive as consumer fundamentals continue to support economic activity. Despite record levels of inflation, rising interest rates and low levels of confidence, consumers have been steadfast in their spending and remain in the driver’s seat.”

    I’m no economist, but I can add and subtract. If inflation is running at an annual rate of about 8%, that effectively balances out any gains NRF is forecasting. And if retail can just hold onto the 13.5% increase it realized last year, that would be a win.

    As the nation’s leading retail trade association, it needs to put the most positive spin possible on its forecast. We can’t fault the NRF for that.

    But it’s convenient how it used the decade’s average 4.9% holiday growth to compare this year’s forecast favorably. Inflation wasn’t a factor over that period when it most certainly is this year.

    Net/Net: retailers are in a precarious position looking at the last two months of the year. If they haven’t done their numbers so far this year and kept ahead of inflation, it is doubtful that the next two months will make up for the shortfall.

    NRF’s Glass-Half Full View

    In a nearly hourlong press briefing, Shay and Kleinhenz took reporters through the forecast’s underlying assumptions, with Kleinheiz qualifying the presentation, “This holiday season is anything but typical.”

    Full disclosure: I wasn’t invited to the briefing, but listened to the recording.

    Spending Stratified By Income

    At the household level, its survey shows consumers will spend $832 on average for gifts, decorations, food and other holiday-related purchases, which is in line with the average over the past ten years. But factoring in inflation, that could represent nearly a $70 decline in holiday-related spending.

    The NRF also expects higher-income households to make up for losses by middle and lower-income households, with Shay noting higher-income households will spend “significantly more” on discretionary holiday-related purchases.

    By contrast, lower-income households are “feeling more pressure when it comes to inflation as they’ve had to use more of their monthly income to meet expenses associated with housing, rent, energy and food costs. They are focusing on necessities.”

    Noting that “behavior and spending at higher levels continue to be robust,” Shay remained optimistic.

    “Consumers and households at slightly lower levels, even in the face of the challenges, remain durable and resilient…quite impressive,” he said.

    Break The Piggy Bank Or Charge It?

    When the household budget can’t stretch for holiday extravagancies, Shay said consumers will “supplement spending with savings and credit to provide a cushion and result in a positive holiday season.”

    That is, if their savings are still there. The Bureau of Economic Analysis shows that the personal savings rate as a percent of disposable income dropped by more than half from last November and December, when it was over 7%. It stands at 3.1% in September, the most recent NIPA Table 2.6 reports.

    And putting holiday purchases on credit is no cushion at all. Consumer debt has reached record highs, according to the most recent Federal Research Consumer Credit report.

    Further, credit card debt is now level with pre-pandemic December 2019. Balances are up 9% from this January and 23% higher than at its pandemic low in April 2021, according to the Wall Street Journal.

    Which Inflation?

    On the question of inflation, economist Kleinhenz pooh-poohed the Consumer Price Index (CPI) out of the Bureau of Labor Statistics in favor of the personal consumption expenditures price index (PCE) from the Bureau of Economic Analysis.

    “Everybody’s talking about inflation. It’s not a simple thing to talk about or measure,” he said. “We already noted the CPI was above 8%, but the Feds’ preferred measure is the personal consumption price index. I like that index because you [can] take out foods, motor vehicles, and gasoline and [we find] retail price [increases] for the most part have been between 4% to 5%.”

    Economists and the intelligencia may read the PCE, but most Americans haven’t gotten the memo.

    They hear about the CPI in the news, not the PCE. A quick Google
    GOOG
     News search found some 700k hits on “CPI inflation 2022” compared with just over 51k swapping in PCE. And consumers can’t conveniently breakout their spending by category, but have to pay it all when it comes due.

    Even when pressed by MarketWatch reporter Bill Peters about the effect of higher prices on retail sales, Kleinhenz doubled down on the PCE.

    “A portion of our increase is going to come from higher prices, but not the strangling price raises that are occurring in motor vehicles, gasoline and energy as we go forward this holiday season.”

    The problem is consumers are going to have to pay for other necessities that have incurred the greatest price increases, leaving less money to go to retailers.

    Consumer Confidence Is Eroding

    While people can argue about which inflation index is better – the CPI or PCE – the only opinion that matters is the consumers. For that, we have to look at other indices entirely, like the Consumer Confidence Index.

    “Consumer confidence retreated in October, after advancing in August and September,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “Consumers’ expectations regarding the short-term outlook remained dismal.”

    Like a drop in barometric pressure signals a storm is brewing, the Expectations Index is reading below 80, “ a level associated with recession — suggesting recession risks appear to be rising,” she reported and continued:

    “Notably, concerns about inflation—which had been receding since July—picked up again, with both gas and food prices serving as main drivers. Looking ahead, inflationary pressures will continue to pose strong headwinds to consumer confidence and spending, which could result in a challenging holiday season for retailers.

    “And, given inventories are already in place, if demand falls short, it may result in steep discounting which would reduce retailers’ profit margins.”

    On one measure, we all can agree. “We know consumers continue to be emotionally invested in the holidays,” Shay said.

    But how that emotional investment will express itself in retail over the next two months is up for debate.

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    Pamela N. Danziger, Senior Contributor

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  • Cassandra Peterson Says Halloween Growth Has Been A Key Component In Elvira’s Success

    Cassandra Peterson Says Halloween Growth Has Been A Key Component In Elvira’s Success

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    According to the National Retail Federation (NRF), Halloween enthusiasm is back to pre-pandemic levels with related spending expected to reach $10.6 billion. Cassandra Peterson, the woman behind Elvira, the decades-long ghoulish cult favorite, isn’t surprised. For Peterson, the Elvira phenomenon has been a 24/7 business that has resulted in a multimillion dollar empire of projects and products. These days, you can find the fictional Mistress of the Dark featured on television programming, Vegas slot machines, purses, baby onesies, and pet bowls. With over 1000 licensed products, she’s everywhere.

    This year, the NRF projects that $3.6 billion dollars will be spent on Halloween costumes with $1.7 billion for adult costumes. Of those dressing up, 1.7 million adults report that they plan to dress as a vampire. More than a few will likely channel the “vampiress” Elvira.

    Elvira and Halloween

    Originally conceived as a year-round horror hostess television personality in the ‘80s, Elvira’s connection to Halloween culture has pumped the brand beyond Peterson’s wildest expectations.

    “The holiday is a key component. Being associated with a national holiday that’s actually going worldwide…is just a miracle…I didn’t start out as being associated with Halloween. But Halloween is growing right along with me and the character. It started out as very much a kid’s holiday, you know, trick or treating, and it’s all fun. And as I started, and I can’t take all the credit, that’s for sure, but I think it’s built built built into more of an adult holiday, still a great kids’ holiday too. But as Halloween expands, so does Elvira and it’s just a fantastic thing…It’s just been bigger and bigger,” says Peterson.

    Real Life and Elvira

    The paperback edition of the pop culture icon’s memoir Yours Cruelly, Elvira: Memoirs of the Mistress of the Dark released this month comes one year after the hard cover publication that included Peterson’s relationship reveal that introduced fans to the fact that she has been in a longterm romantic partnership with a woman.

    For Peterson, the last year has been enlightening and lightening thanks in part to the memoir which addressed her difficult relationship with her mother and her supportive relationship with her assistant Teresa “T” Wierson.

    “I’m kind of happy to get a lot of the stuff about her (her mother) off my chest. And I’m happy to stop hiding who I really am and what relationship I’m in. When you’re younger, you’re worried about that stuff. You’re worried about it affecting your work, your income, your personal relationships. But it’s finally all out there. And I’m like, ‘Yay, I feel like I am 100 pounds lighter.’”

    Did the disclosure that actor Cassandra Peterson was in a gay relationship affect the Elvira brand that had long been associated with a vampy female character that seems to be rather obsessed with men?

    Peterson notes that there was an initial shift of sorts, but it wasn’t a negative one. With respect to social media, she witnessed a dip and then a bigger surge in Instagram followers. “I lost 11,000 then gained 60,000 in the first weekend,” says Peterson.

    She claims the book and her revelations have had a positive impact on the Elvira franchise. “I’m gonna do knock on wood right now. So far, everything that I’ve done has been wonderful. None of my licensees, which I have over 300 of them, none of them have, you know, reneged on my contracts. None of them have said, ‘Oh, gee, we can’t do this with you.’ It’s all been positive. I’m so happy. I mean, maybe I’m just one of the lucky few, I don’t know. But it’s been a positive experience. And all the things I worried about, have not come true.”

    Peterson’s schedule continues to be packed with appearances and fans wanting a glimpse of the woman behind the Halloween icon. Like them, she’d love to see Yours Cruelly, Elvira becomes a biopic.

    Elvis and Elvira

    Fun fact: Her role in helping turn Halloween into a multigenerational holiday wouldn’t have happened without Elvis Presley. Peterson was a 17-year-old show girl in Las Vegas when the cast of her show was invited to a party in Elvis’ suite. She spent the evening talking with the superstar who told her she had a nice voice and then offered some advice.

    “He said, ‘Go out and get some vocal lessons. And get the hell out of Vegas ‘cause it’s no place for a 17-year-old girl.’ And I was like, ‘What? What? This is my dream come true.’ He’s going, ‘No, no, no, it’s not your dream come true. You have many more dreams in front of you. And you need to really start working on yourself. And furthering your career.’ I always tell people, I was the youngest show girl in Vegas. And if it wasn’t for meeting Elvis, I would now be the oldest showgirl in Vegas. But he changed the entire trajectory of my career and my life.”

    Peterson got singing lessons the next day, scored a song in her show and soon moved to Europe where she became lead vocalist for an Italian rock band and the rest is history—chronicled in her memoir.

    The Future Elvira

    The actor and business woman who has retired her dancing shoes from her long-running annual show at Knotts Scary Farm, still seems like she’s far from giving Elvira a rest. Has she thought about what happens if she ever hangs up the black dress and high hair?

    “Oh, yeah, I think about it all the time. But I truly believe that I have built a brand that is—finally, took me 40 years, but that the brand is solid enough that it will be forever associated with Halloween. And that even if I’m not appearing as Elvira, even if I’m not alive anymore, I think the brand will continue. I mean, I think it’s become enough like Santa Claus, for example, who really, you know, isn’t around to backup his image. I think that Elvira will continue with me or without me. So I feel pretty confident about that at this point. It’s like buying Marilyn Monroe memorabilia, Elvis Presley stuff, you know, they’re not around, and they’re doing better than they were when they were alive.”

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    Nancy Berk, Contributor

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  • Small businesses brace for cautious holiday shoppers

    Small businesses brace for cautious holiday shoppers

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    NEW YORK (AP) — Small businesses are stocking the shelves early this holiday season and waiting to see how many gifts inflation-weary shoppers feel like giving.

    Holiday shopping was relatively strong during the past two years as shoppers flocked online to spend, aided by pandemic stimulus dollars. Sales in November and December have been averaging roughly 20% of annual retail sales, according to National Retail Federation, making the holiday season critical for many retailers.

    This year, small businesses are bracing for a more muted season, as some Americans spend more cautiously. AlixPartners, the global consulting firm, forecasts that holiday sales will rise between 4% to 7%, far below last year’s growth of 16%. With inflation running above 8%, retailers would see a decrease in real sales.

    To prepare, owners say they’re ordering inventory earlier to avoid the supply-chain snags that frustrated them the past two holiday seasons and to draw in early birds. They’re stepping up discounts as much as they can in the face of their own higher costs. And owners also hope more people will shop in stores and holiday markets after doing more of their shopping online during the pandemic.

    Max Rhodes, CEO of Faire, an online marketplace used by small businesses to sell their wares wholesale as well as buy goods for retail shops, said he’s seeing earlier ordering from merchants who for two years had trouble getting enough holiday inventory stocked in time for Christmas. Stores faced shortages of everything from holiday décor to gift items as COVID-19 lockdowns forced factories to shut, costs rose and fewer shipping containers and truckers were available — all causing delivery snarls.

    A study for the Council of Supply Chain Management Professionals by global consulting firm Kearney found U.S. business logistics costs surged 22.4% in 2021 to $1.85 trillion.

    “There’s a bit of a hangover from that, a bit of fear,” Rhodes said. While it’s too early for sales data, the term “Christmas” was the most searched for term on the site in mid-September. That’s two weeks earlier than last year, and eight weeks earlier than 2020, Rhodes said.

    “The one thing we’re certain of is it’s not going to be predictable … We really don’t know what to expect and our retailers feel the same way,” Rhodes said .

    Mat Pond operates The Epicurean Trader in San Francisco, including four brick-and-mortar stores, an online shop and a corporate gift basket business. In past years, he started building inventory in November, but this year he’s already stocking up on items such as gourmet food, chocolate, wine and giftware. He’s seeing corporations order holiday gift baskets earlier as well.

    “Everyone’s planning ahead,” Pond said. “I think everybody’s learning from the past two years.”

    While the pandemic’s economic impact has subsided somewhat, consumers are now being tag-teamed by high inflation and rising interest rates. Overall, spending has held up, although some Americans have been forced to pull back on discretionary items. Any decline can be meaningful because consumer spending makes up 70% of economic activity.

    Hannah Nash, the owner of the online jeweler Lucy Nash, expects sales of her earrings, bracelets and other jewelry to slow after two years of strong growth. The main culprit: inflation.

    “There is less money going around to the average person and we expect their living expenses to impact how much they can spend on holiday shopping,” Nash said.

    Nash also expects more people to shop in stores during these holidays. She started her business, based in Indianapolis, during the pandemic, when online shopping boomed. The percentage of total retail sales done online jumped from 11.5% in 2019 to 17.7% in 2020, then rose again to 18.8% last year, according the Mastercard SpendingPulse, which tracks all kinds of payments, including those by cash and debit card.

    Nash is stepping up discounts and offering bundles to attract shoppers: Her plans include a 15% discount for new customers this year, up from 10%, starting in November. And she’ll offer bundles of products that are about 20% cheaper than buying items separately.

    Major retailers such as Amazon and Walmart are also offering holiday deals to cash-strapped Americans earlier this year. Amazon held a two-day discount event on Oct. 11-12 where the average order was $46.68, $13 less than what shoppers spent during the company’s Prime Day sales event in July, according to the data group Numerator.

    Some business owners are hoping to take advantage of any shift to shopping in holiday markets and in stores.

    Kimberly Behzadi operates Read It & Eat Box in Buffalo, N.Y., which sells themed boxes with food and a book in each box. She started the business in 2020, during the pandemic. She has an online shop but is hoping the return of holiday markets to full capacity will boost sales. She depends a lot on the holidays — 40% of her annual revenue comes between October and December.

    She’s planning on being at six markets this year, with two more applications pending.

    “Last year, holiday markets were still limited by the necessary safety protocols for Covid-19 ,” she said. “This year, gratefully, we are able to attend and sell at more holiday markets locally, so my expectation is to double my holiday revenue this year.”

    Behzadi also plans on being more promotional.

    “With inflation rates high this year I expect consumers to be looking for deals, so I have adapted my holiday strategy to include more bundles and deals,” she said. She’s offering a $60 box that’s bundled with a blind-date book worth $25 for Black Friday, for example.

    Mariana Leung-Weinstein sells alcohol infused jam and marshmallows and other farm-inspired gifts at about 25 stores via her Wicked Finch Farm brand in Pawling, N.Y. that she started in 2019. She’s focusing on stocking up in stores in case online sales slow.

    “I expect people will enjoy seeing and touching things in person this time around, which puts more of my focus in getting my products in physical stores in time for the holidays,” she said.

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