Gulf South Index: Holiday Spending Stalls
NEW ORLEANS — From the Gulf South Index:
The holiday season is either your most favorite time of year or bordering on a total mess … or both, depending on who you ask. But whether you live for the festivities or count the days until January – the 2022 holiday season looks a little different this year. Our mild understatement here is noted.
Inflation Hurts, Holidays Can Help
Supply chain issues, inflation, gas prices and a feared recession are all common phrases in our 2022 lexicon. These issues don’t seem to be going anywhere just yet. People still report decreasing financial security, and Resonate reports that since September, 22% of Americans expect to be significantly or somewhat worse off in the next six months.
Although the approaching holiday season always brings a healthy amount of its own stress, holiday spending isn’t seeing big decreases this year. The National Retail Federation reports 62% of Americans believe “it is important to spend on holiday gifts and celebrations, and they will do what they need to do.” This is not a surprise, as more of us return to our pre-pandemic traditions.
In fact, in our 2022 Gulf South Index by the Ehrhardt Group and Causeway Solutions, 81% of respondents reported they were likely to participate in family holiday traditions, whereas in 2021, only 66% reported plans to do so. However, while the season’s budget isn’t shrinking, it isn’t growing significantly either, and sectors such as retail and travel are still trying to recoup their losses.
Even though Deloitte reports 73% of shoppers expect higher prices, the average expected holiday spend is $1,455 – down only $8 from last year. Instead of spending less, we are finding better ways to make our investments count and our holidays bright. Among all the other stresses of the holiday season, practically everyone is refining and reworking their shopping habits to make their dollar go farther. Some shoppers are relying more on their credit cards for bigger purchases than in past years. Some 32% are intentionally purchasing resale or secondhand gifts this year to save more. More people are shopping earlier to take better advantage of deals, and to take the time to compare prices on different products and different brands than they usually gravitate towards.
According to CNBC, online shopping was expected to grow 2.5% this year. Deloitte reports 63% of shopping is done online, compared to 35% in stores. Even though online shopping might still appeal to customers, companies betting on online growth continuing to accelerate past the pandemic may have been too quick to make changes. Several companies have recently laid off thousands of employees in departments dedicated to online commerce and advertising. Facebook is a recent victim; 13% of its workforce was terminated last week. Facebook, and many other companies, expected the online boom of the pandemic to continue, but are instead faced with little growth and stalled advertising revenue. Right in time for the holidays, these departments are making big cuts.
34% of shoppers plan to use social media as a shopping resource, compared to only 28% last year, according to Deloitte. Apps such as Instagram and TikTok have become huge platforms for companies to advertise their products and sales – whether it be through paid ads, online reviews, or brand deals with popular creators. The power of social media influencers to persuade customers has seen unprecedented growth. In 2020, only 10% of Deloitte respondents saw influencer content as actually impactful. In 2022, it’s gone up to 27%. As our reliance on social media grows, companies find more ways to use the platforms as a resource.
Save More, Shop Early
While it may be annoying that Christmas decorations go up with Halloween, the fact of the matter is that in 2022 customers are buying early. The most common time to begin holiday shopping is early November, with around 40% of Morning Consult shoppers starting then. Although these numbers haven’t shifted drastically year to year, there is an additional benefit to early shopping now. 35% began shopping in early September to avoid anticipated supply chain issues impacting the busier holiday season. According to the NRF, early holiday shopping also benefits those avoiding crowds and unnecessary extra stress of last-minute shopping. Between quashing supply chain concerns and spreading out the budget, early shopping is a trend that isn’t going anywhere.
Early shoppers this year also received another benefit of more deals than usual. Due to record inflation and stalled shopping through the fall, many retailers faced bloated inventories. According to a report by CNBC, this has led retailers to cut prices and push deals and sales well before the holiday season. Black Friday, which used to be a day of mega deals and crazy shopping, has been enjoyed by both retailers and shoppers in favor for weeks-long deals, as opposed to just one day. Deals will continue into the holiday season, benefiting customers but potentially leading to more losses for retailers and businesses.
No Place Like Home for the Holidays
People are out and about. This year saw a serious increase in travel through the summer. Just three weeks ago, TSA recorded the highest number of people passing through the airport since February 2020, according to Travel and Leisure.
The holidays are expected to continue this bounce back says Morning Consult, but the nature of holiday trips looks different than years past and the industry is not in the clear just yet. Deloitte’s travel survey says 31% of Americans will take a trip this holiday season and the number of travelers visiting family and friends is up compared to other reasons, such as for leisure or just to get away.
Family trips also tend to be shorter, and budget concerns make this year’s average trip length shorter as well with 52% of holiday trips lasting less than a week. This is bad news for the hospitality industry, and it certainly isn’t helped by 59% of travelers planning to stay with friends or family. According to Morning Consult, hotel rentals are down 2% from 2021. Although holiday travel still gives the industry a much-needed boost, the sector is still struggling to recoup across the board since 2020.
It’s no doubt a net positive that more individuals feel a stronger sense of holiday cheer in 2022, leading to improved and increased celebrations and spending. But for many industries, the story is not as simple. From staffing cuts, to bloated inventories and supply chain disasters, businesses everywhere are still feeling the heat of inflation and the pandemic.