Holiday Shopping and the US Economy: Dissecting the Data

• Data shows that instore shopping in 2021 was lower that it was in 2019 pre-pandemic when things were “normal” for both Thanksgiving Day and Black Friday.
• High inflation, supply chain issues and fears around the new Corona virus variant may continue to affect holiday shopping as we move towards Christmas.
• Consumer sentiments remain positive as shoppers reman loyal to their favorite brands.

It is that time of the year when we see massive volumes of numbers explaining consumer spending with respect to holiday shopping. In addition to the increasing volumes, this year incorporates supply chain issues, inflation and uncertainty fueled by the new Omicron Coronavirus variant. As expected, the prices of all sorts of consumer goods such as groceries, fast foods, clothing, and essential home appliances have gone up. Statistics aren’t painting an optimistic picture either, for retailers and the economy as a whole.

Shopper traffic analytics on in-store shopping by Sensormatic Solution, part of Johnson Controls shows that Black Friday Shopping this year was 47.5% higher than 2020. This sounds good until you are reminded that 2020 was a tough time due to the Corona virus pandemic as many people avoided being in crowds while others preferred smaller gatherings due to Covid-19 restrictions.

Sensormatic data also compared 2021 shopping statistics against 2019, the pre-Covid year when things were “normal”. The data revealed that the 2021 shopper visits were 28.3% lower than 2019. Shopper visits on Thanksgiving Day alone were 90.4% down from 2019. This may not be necessarily a bad thing for shoppers because online shopping has been found to be rising, the business sector is probably freaking out. Particularly, the retailers who have been looking forward to return to normalcy during the holidays.

Another important data to consider is online shopping data that is tracked by Adobe. Adobe had projected that consumer spending on Thanksgiving Day would be  anywhere between $5.1 billion and $5.4 billion. The final statistics came in at the low end close to $5.1 billion. Likewise, the spending on Black Friday which stood around $8.9 billion was not only, interestingly, lower than in 2020, but also came in at the lower end of the predicted range. However, both numbers were well higher than 2019 when Thanksgiving Day hit $4.2 billion and $7.4 billion on Black Friday .

Reasons For Reduced Spending On Holiday Shopping

The decreasing consumer spending can be explained by a several reasons pointing to the economy and the restraint to be in crowds, particularly after the update on the new Covid-19 variant.

One obvious factor is inflation. Consumer prices have been rising. This explains why the results have come in on the lower side of the estimates, particularly when the main aim of forecasting is creating an informational circus that the high spenders can mull over. The Consumer Price Index (CPI) is the official measure of inflation and has been running at 6.9% since October 2020. This has led to an increase in consumer prices that has forced many Americans to cut back on their holiday spending.

Another reason could be that many Americans are still hurting from the harm that the Covid pandemic has done on their finances. Millions are struggling with keeping up with their installment loans which rise every month they default further straining their incomes. According to the American Farm Bureau Federation’s 36th annual survey, the cost of the Thanksgiving dinner has gone up by 14%. The price of food at home is up 5.4% in the last one year, according to a report by the U.S. Bureau of Labor Statistics released on November 10. The latest consumer price index  (CPI) shows an 11.9% increase in the price of meat, poultry, fish and eggs. Currently, the wholesale price of frozen whole tom turkeys weighing between 16 and 24 lbs is at $1.36 per pound, an 18% increase from a year earlier. These price increases force shoppers to take out as instant online payday loans or to cut back on their in-store spending when making their holiday shopping.

Moreover, retailers are struggling with a range of supply chain issues including labor shortages and higher costs in business operations including packaging materials and transportation. These supply chain related difficulties are driving both inventory and pricing problems, and it couldn’t come at a worse time as we head to the peak of holiday shopping. This particularly when different retail brands and stores ride on the hype of the holiday season to power consumer spending that is expected to raise all sectors which eventually leads to the growth of the U.S. economy.

Bottom Line

While it appears to be a nightmare for retailers, consumer sentiment remains positive as brand loyalty and trust is brought into focus. A survey by Channel Signal involving 1.5 million online product reviews revealed that consumer sentiment remained high at 83% positive during the pandemic. According to the results of the survey, consumers indicated that they could still purchase what they wanted and that was walking and running shoes, bikes, athletic apparel and other equipment for life outside the house. This may remain the same as very little change in consumer sentiment has been seen between September and October.

As such, consumers can still generally buy what they want for Christmas, albeit in low volumes and may spend less given the high consumer prices and logistic nightmares as earlier highlighted.