Holiday forecasts arriving in recent weeks roundly forecast sales will slow this year versus pandemic stimulus-boosted gains in recent years. However, while many expect a “resilient” consumer will drive solid gains similar to pre-pandemic levels, some see inflationary and macroeconomic concerns weighing disproportionately on discretionary spending, while many see their forecasts for sales growth year-over-year roughly aligning with the current 3.7 percent inflation rate, with unit sales essentially flat and sales growth dependent on higher prices.

NRF | Holiday Spending to Return to Pre-Pandemic Levels
The National Retail Federation (NRF) last week forecast U.S. holiday spending from November 1 through December 31 to climb 3 percent to 4 percent over 2022, consistent with the average annualized increase of 3.6 percent between 2010 and 2019.

That marks a slowdown from the pandemic years when trillions of dollars of stimulus boosted spending. Other factors playing a role in lifting holiday spend in recent years include inflationary pricing, pent-up demand and away from experiences (i.e., going out to restaurants, travel) towards goods.

Holiday sales climbed 5.4 percent in 2022 year over year, 12.7 percent in 2021, and 8.3 percent in 2020.

“It is not surprising to see holiday sales growth returning to pre-pandemic levels,” said NRF President and CEO Matthew Shay. “Overall household finances remain in good shape and will continue to support the consumer’s ability to spend.”

Online and other non-store sales, which are included in the total, are expected to increase between 7 percent and 9 percent to account for about 29 percent of spend.

NRF’s forecast is based on economic modeling that considers employment, wages, consumer confidence, disposable income, consumer credit and previous retail sales.

The holiday forecast undercounts seasonal spending because 43 percent of holiday shoppers planned to start making purchases before November, according to a separate NRF-commissioned survey. The forecast also excludes holiday purchases that may be made in January 2024.

“Consumers remain in the driver’s seat, and are resilient despite headwinds of inflation, higher gas prices, stringent credit conditions and elevated interest rates,” NRF Chief Economist Jack Kleinhenz said. “We expect spending to continue through the end of the year on a range of items and experiences, but at a slower pace. Solid job and wage growth will be contributing factors this holiday season, and consumers will be looking for deals and discounts to stretch their dollars.”

Deloitte | Holiday Retail Sales to Increase Between 3.5 percent to 4.6 percent
According to Deloitte’s annual holiday retail forecast, U.S. holiday season sales are estimated to grow 3.5 percent to 4.6 percent between November and January, slowing from the 7.6 percent increase tallied in 2022. The moderating growth is said to reflect less inflation but also weaker consumer spending.

Deloitte expects e-commerce sales would grow between 10.3 percent to 12.8 percent year-over-year.

“We expect healthy employment and income growth to keep the volume of sales growing for the 2023 holiday season,” said Daniel Bachman, Deloitte’s U.S. economic forecaster. “Inflation, which accounted for much of the increase in the value of retail sales last year, should moderate. This means the total value of retail sales will grow more slowly than last year. Our forecast also reflects a decreasing pool of pandemic-era savings, both of which will weigh on retail sales and are reflected in our lower projected growth for the season.”

“Retail sales are expected to increase even as higher prices continue to create a battle for consumer spending. A sharp rise in spending on services post-pandemic shows signs of leveling off since last year, and compared to pre-pandemic levels, spending on durable goods remains high,” said Nick Handrinos, vice chair, Deloitte LLP, and U.S. retail, wholesale and distribution and consumer products leader. “This season, e-commerce sales should continue to be strong as consumers search for the best deals online to maximize their wallets. Retailers who remain flexible to shifting consumer demand and behaviors will likely be poised for growth this holiday season.”

Circana | Financial Concerns to Weigh on Holiday Spend
The majority of holiday shoppers say they plan on spending about the same as last year, but negative feelings about the economy and personal finances are impacting their purchase intentions, according to a holiday purchase intentions consumer survey from Circana,

As a result, 2023 holiday season spending is expected to come close to last year’s results, but may fall short by as much as 2.5 percent during the traditional season which includes November and December, with a slightly improved outlook when the holiday season is expanded to include October.

“The consumer is softly thinking about spending less this holiday season,” said Marshal Cohen, chief retail industry advisor for Circana. “Consumers know they will need to spend more to get what they want and are prepared to do so. But they are also cautious about spending too much and will need to continue to prioritize their purchases through the holidays.”

Among the findings:

  • The number of consumers who view the holidays as a break from the world’s realities, and those who get into the spirit of the season by going out shopping have both declined 5 percent compared to last year.
  • More holiday shoppers rate their personal financial situation as fair or poor than last year, now 43 percent.
  • Nearly two-thirds of consumers rate the state of the economy as fair or poor, up slightly from last year.
  • Almost half (48 percent) of holiday shoppers point to rising costs and other expenses as a reason they plan on spending less this year.
  • More than a quarter (26 percent) of holiday shoppers plan to buy all of their holiday gifts on sale this year.

FDRA | Budget Concerns to Impact Holiday Footwear Purchases

The annual Holiday Shoe Forecast from the Footwear Distributors and Retailers of America (FDRA) found that 56 percent of respondents say their budget and/or inflation is changing where they shop for shoes, while 44 percent say it is not changing where they shop.

Asked if their budget and/or inflation changing where they are shopping for shoes, 57 percent indicated, “No, I’m still shopping at the same retailers but being more selective” while 43 percent indicated, “Yes, I’m shopping more at places like discount retailers to find better deals.”

Among income levels, 60 percent of those with household incomes under $50,000 per year say budget and/or inflation is changing the way they are shopping for shoes, compared to 51 percent of those with household incomes between $50,000 and $75,000, 62 percent of those with household incomes between $75,000 and $100,000, 43 percent of those with household incomes of $100,000 and $150,000, and 39 percent of those with household incomes over $150,000.

Overall, a plurality of respondents (47 percent) plan to spend about the same amount as they did last year on shoes, while 28 percent plan to spend more, and 26 percent plan to spend less.

Other findings in the survey:

  • Forty-one percent of respondents plan to purchase athletic shoes this holiday season, 39 percent plan to purchase casual shoes, 16 percent plan to purchase fashion/dress shoes or boots, and 3 percent plan to purchase work boots.
  • A majority of shoppers (53 percent) plan to make their holiday footwear purchases between Black Friday and Cyber Monday, 31 percent plan to buy before Thanksgiving, and 15 percent are looking to buy sometime in December.
  • Half of respondents plan to shop at shoe store chains this holiday season, while 29 percent plan to shop at large mass retail stores, and 20 percent plan to shop at department stores.
  • Overall, 37 percent plan to shop for shoes online at Amazon, 29 percent plan to shop at the brand’s own website, 20 percent plan to shop on a retailer’s website, 8 percent plan to shop somewhere else, and 6 percent plan to shop at Zappos, or another shoe- specific site.

Bain | Inflation-Adjusted Holiday Sales Expected Well Below Recent Average
Bain projected that adjusted for inflation, real U.S. holiday retail sales growth will arrive well below the 10-year average and witness the lowest real sales growth since the financial crisis.

Unadjusted seasonal sales are expected to grow 3.0 percent year-over-year in November and December. Adjusting for inflation, real U.S. holiday retail sales growth will be sluggish at just 1.0 percent

According to Bain & Company’s analysis, US retail sales have been relatively slow in 2023, up 4.0 percent year-over-year, on a nominal basis. Bain found that growth has largely come from e-commerce, along with select in-store categories, such as health & personal care, general merchandise, and food & beverage. Other in-store categories have decelerated over the past few months, with notable pressure on discretionary items.

“Retailers are facing new challenges this year and are overcoming headwinds from higher interest rates amid increasing debt,” said Aaron Cheris, head of Bain & Company’s Americas Retail practice. “That being said, several tailwinds may boost holiday retail growth with prices remaining elevated as compared to last year, even as inflation slows. Retailers are continuing novel, targeted marketing approaches, using technologies like generative AI and live streaming.”

ICSC | Holiday Retail Sales to Expand 3.8 Percent
The 2023 Holiday Shopping Forecast from the ICSC, formerly International Council of Shopping Centers, projected retail sales would grow 3.8 percent this holiday season, assessing its forecast “shows continued consumer spending and resilience.” Including F&B (freight and beverage, the holiday is expected to see 7.6 percent growth.

“We expect a positive holiday shopping season this year as consumers continue to spend in spite of economic headwinds,” said Tom McGee, president and CEO of ICSC. “This year’s forecast shows the industry is balancing itself out after rapid growth over the last few years, setting retailers up for another successful holiday season.”

ICSC’s survey found that eight in 10 shoppers expect to spend about the same as or more than last year during the holiday season, a slight uptick compared to the 73 percent who said the same in 2022, reflecting continued and consistent spending while navigating economic pressures.

Forty-two percent of consumers attributed their expectation for increased spending to inflation and a higher cost of holiday items, while 54 percent plan to spend less for the same reason. Thirty-eight percent said they expect to spend more as holiday deals and promotions provide more value for their spending. On the other hand, of those who plan to spend less, 43 percent said it was due to a change in budget, regardless of job status or income.

Adobe | Discounts Driving Online Holiday Sales

U.S. online holiday sales from November to December 2023 are expected to rise 4.8 percent year-over-year, marked by retailers offering deep discounts and increased usage of the Buy Now, Pay Later (BNPL) flexible spending method, according to Adobe’s online holiday shopping forecast.

Adobe sees retailer discounts hitting record highs, up to 35 percent off listed prices, this holiday season as they contend with an uncertain spending environment with consumers continuing to deal with rising costs in areas such as food and gas.  Of the 18 categories tracked by Adobe, toys, electronics and apparel are expected to offer the biggest deals: discounts for toys are expected to peak at 35 percent off listed prices (vs. 34 percent in 2022), while electronics discounts are set to hit 30 percent (vs. 25 percent) and 25 percent for apparel (vs. 19 percent). Other categories with notable discounts include sporting goods at 24 percent (vs. 10 percent), TVs at 22 percent (vs. 17 percent) and furniture/bedding at 19 percent (vs. 8 percent).

“Despite an unpredictable economic environment, where consumers face several challenges including rising interest rates, we expect strong e-commerce growth this season on account of record discounts and flexible payment methods,” said Patrick Brown, VP of growth marketing at Adobe. “Buy Now, Pay Later, in particular, has become increasingly mainstream and will make it easier for shoppers to hit the buy button, especially on mobile devices where over half of online spending will take place.”

Other findings from Adobe’s survey:

  • Shopping on mobile devices is expected to hit a major milestone, surpassing desktop and driving over half (51.2 percent) of all online spending this season.
  • Cyber Week, the shopping period that includes Thanksgiving, Black Friday and Cyber Monday, is expected to drive $37.2 billion in online spending, up 5.4 percent year-over-year and representing 16.8 percent of the holiday season.
  • Cyber Monday is expected to remain the season’s and 2023’s biggest shopping day, driving a record $12 billion in online spending, up 6.1 percent year-over-year.

JLL | Holiday Spending to Shift Towards Experiences
According to JLL’s 2023 Holiday Shopping Survey Report, consumers plan to increase their spending on entertainment and experiences during the holiday season this year, but at the expense of how much they plan to spend on physical gift-giving.

The online survey by JLL found that spending on physical gifts will decline to $748 per person against an average of $868 in 2022, representing a decline of 13.8 percent. However, by JLL adding a new spending component in the survey measuring “Experience,” respondents’ overall holiday budgets will exceed 2022. With the entertainment metrics factored in, JLL forecasted holiday spending to reach $958 per person in 2023, of which 22.8 percent to be used for holiday entertainment and experiences.

On average, surveyed respondents will spend $218 on entertainment and holiday-related experiences.

“It’s official: consumers want to have fun,” said JLL, the largest real estate firm worldwide, in the study. “And they intend to dive into the holiday experience headfirst. This year, there is a clear focus on enjoying a wide variety of holiday-related entertainment and experiences, enjoying the in-store shopping experience and buying enjoyable gifts for loved ones and themselves.”

Mastercard | U.S. Retail Sales To Grow 3.7 Percent This Holiday Season
Mastercard SpendingPulse forecated U.S. retail sales will increase 3.7 percent year-over-year this holiday season, finding the gains “reinforces continued consumer resilience.”

By channel, sales are expected to rise 6.7 percent online and 2.9 in-store. By category, the biggest gain is expected to come in electronics, up 6 percent; followed by restaurants, 5.4 percent; grocery, 3.9 percent; and apparel, 1.0 percent. The jewelry category is expected to see a 0.3 percent decline.

“This holiday season, retailers will be vying for consumer dollars. With numerous choices and tightening budgets, you can anticipate shoppers to be increasingly selective and value-focused,” said Steve Sadove, senior advisor for Mastercard and former CEO and chairman of Saks, Inc. “We expect the most effective holiday strategy will be to meet consumers where they are personalized promotions to in-store experiences will be key in doing so.”

AlixPartners | Pressures Facing Lower-Income Households This Holiday
AlixPartners annual Holiday Outlook Survey found that 26 percent of consumers plan on spending less this holiday season than last year’s, and that spending reductions are significantly more prominent with lower-income households, as 38 percent of households with incomes under $45K said they plan to spend less.

Among the findings:

  • Trading Down: 33 percent will trade down to more affordable brands and retailer private labels.
  • Less Self-Gifting: 24 percent will reduce spending on gifts for themselves.
  • Deal-Hunting: 38 percent of consumers will buy half or more of their gifts on sale.

“Once again, we are going to see the Dickens classic—A Tale of Two Cities,” said Bryan Eshelman, Americas leader of the retail practice at AlixPartners. “Higher-income consumers may not be in the best of times, but we see them sustaining their spending through the holidays. However, most other consumers, including lower-income ones, will make retailers feel like this holiday is the worst of times. There is a solution, though. This year’s retail winners will be those that are ‘value-right.’ By that we mean those retailers that offer value in categories where consumers are targeting cutbacks.”