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Near-record inflation has cast a shadow over this year’s holiday shopping season, which officially kicked off on Black Friday. Higher prices are a key reason retailers are forecasting another year of record spending. Still, there are relatively deep discounts, if you know where to look.
Here are some trends dominating another messy retail year-end.
We spend more to buy less, but not everywhere.
Overall, holiday shopping costs more, both online and in-store. The National Retail Federation expects shoppers to spend between 6% and 8% more than last year. It’s a higher increase than usual, but inflation – averaging nearly 8% at the end of October – is largely to blame.
Buyers are looking for sales even more than in a typical year. In surveys, more people say they will turn to discount stores and dollar stores for their holiday shopping.
“Prices are going up…and our budget is smaller than last November,” said Manuel Rojas, arriving in a TJMaxx in Hyattsville, Maryland, just outside Washington, DC. He was planning on buying the same dolls he had found last year, and hoping they were on sale.
At a nearby mall, some people said inflation had caused them to reconsider their food spending, but they weren’t quite ready to cut back on holiday gifts.
Some data shows that the prices of certain things have started to drop. Adobe Analytics, which tracks online purchases, noticed some of the biggest price drops yet on electronics and computers, appliances, televisions and clothing.
Clothing, whose prices have fallen in recent months, offers a good illustration of what is happening: many stores have “overstock”, or too many bad things in stock. They ordered too many of the hottest items from last year, only to deal with messy supply chains and rapidly changing (post-)pandemic trends.
While many shoppers want deals, luxury items still appeal to the wealthy
On average, the National Retail Federation estimates that people plan to spend $833 on gifts, cards, decorations, food and other holiday purchases, up from last year.
But take a closer look at family income and the story changes. People in households earning less than $75,000 a year are expected to spend less than last year, an average of $606. Meanwhile, people in households earning more than $150,000 a year plan to spend more, on average $1,304.
This divergence in spending widened over the year as wealthier people continued to buy luxury goods, which had little impact on inflation, while other shoppers started moving from more expensive options and name brands to cheaper alternatives and store brands.
People use their savings and credit cards
Many people are heading into the holiday season with the lowest savings levels in quite some time, having exhausted whatever they were able to save during the pandemic.
People buy on credit. Credit card balances jumped 15% from a year earlier, according to this month’s report from the Federal Reserve Bank of New York. This is the largest increase in more than 20 years. Adobe Analytics reports a 13% increase in people choosing buy-it-now and pay-later plans over last year.
Given the high interest rates, experts are urging people to pay off any debt as soon as possible.
“If you have existing credit card debt, make a plan to pay it off as aggressively as your budget allows,” Sara Rathner, personal finance expert at NerdWallet, told NPR earlier this month. “I would also say if you have credit card debt, stop using your credit cards.”
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