KALAMAZOO, Mich.—According to many media outlets, retailers are hoping inflation doesn’t cause holiday shoppers to adopt a more conservative approach when it comes to the holiday season. Whether that happens is largely a factor of what you are purchasing and your age.
According to global management consulting company McKinsey & Co., a long shopping season is critical as consumers focus on spreading out purchases and payments while also looking for the best discounts.
The firm also indicates that holiday splurge purchases will be less likely, especially among Gen Z consumers, with 12% fewer Gen Z shoppers saying they intend to buy larger-ticket items this year. However, as a group, Gen Z still plans to spend more on gifts this year in total versus last year, and both Gen X and baby boomers plan to splurge more than last year.
Western Michigan University business professors weigh in on the 2023 holiday shopping season with their predictions.
Inflation impacts holiday shopping
Dr. Matt Ross
“Around the world, inflation is eroding holiday season prospects,” says Dr. Matt Ross, associate professor of finance. “The Russian invasion of Ukraine has contributed to increased commodity prices and will keep up inflationary pressure until the war is over.”
Ross notes that while inflation around the world is generally high, the U.S. is no exception.
“Even with the Federal Reserve setting the highest interest rates since the dot-com bubble more than two decades ago, inflation is still impairing consumer choice ahead of the holidays. We are experiencing the largest inflation period since the early 1980s. Although the inflation rate has started to dip over the past year, the U.S. rate is high relative to pre-pandemic inflation. Higher prices have already taken a toll on Americans with credit card balances now at an all-time high. Consequently, families may see less under the tree than in past holiday seasons,” he says.
Transportation could affect retailers’ ability to replenish inventory
Dr. Bruce Ferrin
As retailers have effectively reduced inventories from the overstock resulting from the COVID-19 pandemic, this holiday shopping season merchandise availability will depend not only on the amount of inventory retailers hold, but also their ability to replenish their stock.
“Inventory replenishment depends on access to timely and reliable cargo transportation service,” says Dr. Bruce Ferrin, professor of marketing. “In the U.S., almost 75% of freight transportation volume moves by truck. The U.S. trucking industry is stable and typically performs well. However, within the last year, a very large U.S. trucking company declared bankruptcy and ceased operations. The bankruptcy reduced overall available capacity in the industry, which led to upward pressure on the prices trucking companies charge to move cargo.”
Those circumstances, coupled with a labor shortage for long-haul drivers in the trucking industry, present challenges for retailers’ ability to access the cargo transportation service they need to support inventory replenishment.
“If retailers cannot access sufficient transportation capacity, lead times will increase and merchandise availability will decrease,” says Ferrin.
Food purchases largely immune to inflationary impacts
Dr. Russell Zwanka
According to Dr. Russell Zwanka, director of the WMU food marketing program, expect holiday food shopping to be one of the more resilient areas of retail.
“We expect the continued absorption of inflation within the food space. Customers have proven quite nuanced in their understanding of how inflation is impacting their wallets, making shifts in behavior like buying more specials and switching to private-label products. Different from soft and hard goods, food always performs well for the holidays. The holidays call for special occasions, family gatherings, and the mentality that ‘I can save money in January,’” he says.
Zwanka notes that most retailers plan to encourage shoppers to invest in their holiday experience, and expect most customers will.
“When some families only get together once a year, then most will not skimp on the quality of the food,” he says. “January, though, is a different story, and we’d expect re-trenching by consumers.”
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