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Consumers are excited for the holidays — how will inflation impact them?

Updated: Nov 10, 2022

With inflation at a four-decade high since March this year, consumers have been readjusting how they spend, including trading down to less-expensive groceries and other necessities, and delaying or cutting back on more indulgent categories.

Lower income households have felt the financial hit the hardest, while higher income households were initially less impacted due to having more savings. However, with persistent inflation and the stock-market plunge in recent months, the wealth of middle- and higher-income households is now also eroding, and they too are more deliberately managing expenses and discretionary purchasing.

So, with Christmas a few weeks away, what can we expect during the 2022 Holiday season?

Recent Consumer & Shopper research (Sep-Nov 2022) by a variety of companies highlight important areas for both brands and retailers to review to win this important season:

Holiday Sales Forecasts indicate strong retail sales:

  • There is potential for 2022 US Holiday retail growth of between +6 to +8% vs 2021: NRF expects +6 to +8% growth, Bain & Co, +7.5%

  • Physical, brick and mortar stores are expected to grow sales, as people come back to stores with more confidence than last year when COVID issues persisted. This will result in slower eCommerce sales growth, that peaked last year. (Adobe forecasts +2.5% online growth this year vs +8.6% in 2021)

Consumers are excited for the holidays after a rocky pandemic

  • While inflation is top of mind, all consumer age- and income-groups are excited/eager for the holidays (average 55% are vs 34% 2021) [McKinsey]

    • Brands should message beyond selling products, and tie them to people’s emotions, need for celebration and socializing, after tough pandemic times.

Consumers vary by Income group in their holiday spending plans; economic concerns will have most people pulling back

  • Higher-income consumers have more to spend and are more willing to splurge on discretionary items, whereas lower-income consumers are more likely to give holiday gifts that fill a need. [Deloitte]

  • After pulling back in participating in holidays last year, low-income shoppers are feeling more confident and plan to spend 25% more this year. [Deloitte]

  • Overall, Consumers plan to purchase fewer gifts, 9 this holiday vs. 16 in 2021, and spend less time shopping [Deloitte]

Source: Deloitte

Consumers are buying earlier; Retailers are promoting earlier

  • 3 out of 4 Consumers expect prices to go up during the holidays and are buying sooner to get gifts cheaper [McKinsey]

  • After facing significant challenges in 2021's holiday season, Consumers are still concerned there will be stock outs of products they want, and not getting them in time, leading them to buy sooner. [Deloitte]

  • Amazon's Prime Day wasn’t the blockbuster of past years, resulting in higher concern for Retailers on how they will perform. [WSJ]

  • Retailers have stockpiled high inventories of many items consumers no longer have much interest in post pandemic (e.g., electronics, casual clothing). Retailers know they must offer aggressive discounts to win the holidays and also offload stock.

    • Retailers and Brands must make product inventory visible to drive consumer confidence. Perception is reality, if Shoppers “believe” something may be out of stock, they may decide to buy something else or somewhere else.

Brands and Retailers continue to face loyalty risk as shoppers seek best deals

  • Over 4 in 10 of consumers that expect prices to go up say they will only buy on promotion. [McKinsey]

  • 43% of consumers say they will switch stores to get the item they want at a lower price and 28% will switch brands. [McKinsey]

    • Ensure strong brand and retailer value propositions along with deal visibility to retain, grow and convert shoppers.

Source: McKinsey

Consumers increasingly rely on Social Media to help with purchase decisions

  • Many will make holiday purchasing decisions leveraging User reviews on both retailer’s websites/mobile apps as well as blogs and online forums. [Deloitte]

  • Video clips on social media and influencers to bring products to life have grown 2.5X in importance vs 2021 in helping make holiday purchase decisions. [Deloitte]

    • Brands and Retailers must be active on Social media, and ensure impactful videos and visibility to reviews

Source: Deloitte


  • 2022 Holiday retail sales are expected to grow vs 2021, this will partially be driven by inflationary pricing as Consumers plan to limit how much they buy. More plan to go back into stores, but eCommerce will continue growth, but at a lower pace.

  • Consumers are looking for value, and with economic uncertainty, are being more surgical about how and where they spend, many buying earlier to get better prices and products in time.

  • Brands and Retailers should:

    • Tailor and personalize approaches to their target segments — high-income will buy discretionary items, while lower-income will focus on gifts that fulfill a need.

    • Make it about celebration — connect emotionally, beyond just product features.

    • Clearly communicate on areas Shoppers care about, particularly strong value propositions, meaningful promotions, product availability, convenient delivery or pick up options, and strong social media inspiration, video and user reviews.

    • Manage for longer term brand equity and loyalty — be thoughtful on how deep to discount and don't make it a race to the bottom in prices and margins.


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