By Ayalla A. Ruvio and Forrest Morgeson
With two big shopping days on the horizon – Black Friday and Cyber Monday – U.S. retailers are getting ready for the most important time of the year. The stakes are high: For some companies, the holiday shopping season accounts for 50% of annual revenue. But economic uncertainty and recent inflation could put a damper on customers’ holiday spending, our new research suggests.
As marketing professors, we know that consumer spending drives the U.S. economy. So for the second year in a row, we surveyed more than 500 Americans about their holiday shopping plans. We found that consumers are conflicted: They’re excited for deals and looking forward to treating themselves, but they’re feeling squeezed by high prices.
Consumers are starting the season cautiously optimistic …
When it comes to Black Friday and Cyber Monday, two-thirds of respondents say they think deals will be as good as or better than they were last year — up from 56% in 2022. That’s in line with the predictions of market research firm Adobe Analytics, which expects record discounts this year.
Shoppers also plan to splurge a little on Black Friday and Cyber Monday. The share who plan to prioritize shopping for necessities fell slightly from 2022, while those who plan to buy luxury items rose modestly. Meanwhile, plans to spend on big-ticket items stayed stable at 15%.
Despite a minor shift to more expensive items, these findings are concerning for retailers. That’s because big-ticket items have historically been one of the top three categories for consumers spending money on Black Friday and Cyber Monday, and 15% is on the low side.
Like in 2022, the majority of consumers we surveyed — 68.2% — plan to shop mostly online. Fewer than 11% of the respondents in our survey said they plan to shop in-store this Black Friday, so malls may suffer from lower foot traffic.
… but they’re still acting like there’s a recession
Last year, despite the brightening economic outlook, we found that customers were pinching pennies and otherwise behaving in ways most commonly seen in times of economic crisis. This year, inflation-fatigued consumers plan to do much the same.
High prices and inflation are still consumers’ main concerns, with roughly 90% of our respondents saying that those issues will affect their holiday shopping. On average, they plan to spend about US$665 on gifts this holiday season — about $35 less than last year, and substantially less than the National Retail Federation’s 10-year average of $826.
On a more optimistic note, the number of people who said they intend to spend “slightly less” or “much less” than last year fell to 24.2% this year — a 10-percentage-point drop from 2022. While nearly 39% of respondents said they will spend “about the same” amount, in nominal terms this means that they will be spending less accounting for inflation.
Ted Shaffrey/AP Photo
Meanwhile, shoppers seem to be budget-planning more than ever. Customers told us they plan to use a variety of strategies to control their purchases, such as strict shopping lists and starting shopping earlier to spread their spending out.
However, we found a silver lining for retailers: While consumers are planning to spend less this year, they expressed more interest in brand names and expensive gifts, which tend to have higher profit margins.
One notable change from 2022 is that more customers think retailers will offer “great value.” This indicates that while consumers are looking for the best prices and affordable options, they aren’t necessarily looking for cheap products.
In times of economic uncertainty, consumers want to stay in control of their spending. So it’s not surprising that almost 50% of our respondents said they would be doing their holiday spending using funds they’d saved for that purpose. A similar proportion said they plan to use credit cards.
However, the use of buy-now, pay-later options is stagnating at about 15%, even though many big retailers have adopted them. This suggests that even though these options are more readily available to consumers, budget-conscious shoppers may be avoiding them.
The bigger picture
Our research adds to an overall mixed picture about this year’s holiday retail season. Trade groups and economic analysts have made conflicting predictions, with some forecasting a return to pre-pandemic holiday spending and others expecting shoppers to exercise caution.
Retailers are also split on their holiday forecasts. Amazon appears bullish, having significantly boosted its seasonal hiring, while FedEx and Target have been more downbeat.
That makes sense, given the broader economic context. Although the U.S. unemployment rate is relatively low at 3.9%, more than half of our survey respondents said they were worried about their job security, with about one-third saying they were “moderately” or “severely” worried. Only 13% said they had no financial concerns at all.
As the U.S. economy is still experiencing uncertainty, consumers are continuing to adopt recession-related shopping behaviors this holiday season. That means retailers would be wise to focus on providing true value.
Ayalla A. Ruvio is Associate Professor of Marketing and the Director of the MS of Marketing Research program at Michigan State University. Forrest Morgeson is Associate Professor of Marketing at Michigan State University.
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Marc Crane says
Biden-omics hurt all of us and it’s going to take Trump to get us back again.
Ray W. says
While economic theories are commonly disputed, I suspect that every FlaglerLive reader will accept the assertion that the pandemic upended the entire world’s economic underpinnings. Many economists argued early in the pandemic that the upheaval would significantly cool the world’s economy, almost certainly leading to recession and, possibly, depression. As it happened, recession took place in the U.S.; one of nine that have taken place during my lifetime, though thankfully it was a short-lived recession that began and ended during the former president’s administration.
As has happened in nearly all of those nine recessions, Congress quickly reacted by passage of a variety of stimulus packages to offset a cooling economy. During the pandemic, it was a rapidly cooling economy. During the housing crash, it was the $770 billion TARP Act. Most economists since that recession have argued that the TARP Act package was too small; that a larger stimulus package would have returned the economy to normal at a more rapid pace.
The first pandemic package, a $2 trillion sum, was passed 96-0 by a Republican-controlled Senate, and by voice vote in the Democratically controlled House, with a member describing the House voice vote as almost unanimous. Then-President Trump signed the bill into law on March 27, 2020. I still watch commercials from companies that promise to help individuals apply for Cares Act funds, with an ending date coming up soon. The stimulus package obviously heated up the economy, because the recession lasted just over six months.
In December 2020, then-President Trump signed a second stimulus package into law; this one was $900 billion in scope. The Republican-controlled Senate voted 91-7 in passing the package. The House voted 359-53. No one can successfully argue both of these packages were partisan bills.
Thus, $2.9 trillion in stimulus money was signed into law with full bi-partisan support by then-President Trump. Obviously, the purpose of the two bills was to heat up our economy in an effort to avoid recession.
During the current administration, a number of bills have passed, on greater partisan lines, but with bi-partisan support. The total of these bills is approximately $3 trillion. The purpose of these bills was the same, to ensure that the economy did not slide into recession.
To date, well over $4 trillion of the stimulus money has been distributed, by both the former and the current administrations. We have not experienced a second pandemic-fueled recession. The Fed recently reduced its estimate of the chances of the American economy going into recession in the near term to 30%.
In almost every recession I have lived through, inflation has occurred after the implementation of the stimulus packages. Most economists accept that heating up an economy with stimulus money directly causes a bout with inflation, accompanied by job losses. While inflation has occurred since the pandemic, the job losses have not accompanied the inflation, which is a first in the last 60 years. During the Reagan administration, the first recession was caused by the Iran-Iraq War, with its direct impact on oil exports by both Iran and Iraq. At that time, stagflation was nearing its end, but the Fed actually raised its lending rate to over 23%. My first home mortgage carried a 13% rate. I know of people who bought homes in the early 80’s with 18% mortgages.
If one were to accept that the $4 trillion that has already been artificially pumped into the economy sufficiently heated the economy to trigger a bout with inflation, with some $2 trillion awaiting distribution over time, then one would also have to accept the argument that the recent bout with inflation was caused by both administrations, in almost equal measures. I accept this most reasonable of arguments. I disagree with the term Bidenomics on two points. First, it is misleading; it should be Trudenomics. Second, it represents a political ploy by the current administration, not an economic reality. Both houses of Congress approved multiple stimulus measures and both presidents signed them. They cannot be considered independent events, because too much intermingling of spending has occurred over the last 3 1/2 years.
I agree with the headline to the article. We don’t know yet exactly how much people will spend this Christmas season, with different economists citing to different measures to support their positions. But we are tiptoeing out of an inflationary economy, to the relief of us all.
I understand the desire of the gullible to place blame on one political party or the other, but in this instance, Marc Crane is simply wrong. The pandemic hurt us all, not Trudenomics. Both presidents since the onset of the pandemic have taken economically feasible steps to deal with the initial shock and harm. Any argument otherwise is foolish. If former President Trump were reelected, he would certainly sign more stimulus packages if economic conditions warranted that action. It is accurate to argue that then-President Trump saved the economy from free-fall, just as it is accurate to argue that current President Biden appears to have led our economy toward a “soft-landing”, that most elusive of positive economic outcomes after a recession/stimulus-caused bout with inflation. The Fed is raising rates to cool down an overheated economy, but the economy remains stronger than expected, given the amount of the stimulus packages and the level of inflation that has since significantly abated. Standard Keynesian economic theory, in use since FDR implemented it for the first time in the 30’s, appears to have worked as it has always worked. Yes, Trump is responsible for some $6 trillion is deficit spending and Biden, in the end, will be responsible for about the same. Yes, we have a serious problem on our hands with the overall debt. But we are not exacerbating the problem by driving ourselves into recession, or worse, into depression.
joe says
“By most standard measures, the American economy is going gangbusters. GDP grew at a nearly 5% annualized pace in the third quarter, the best since late 2021. Unemployment sits at just 3.9%. Inflation, which had peaked at a 7.5% annual rate in January 2022, has fallen to 3.2%. Joe Biden can trumpet the fact that just under 14 million jobs have been created since he took office, a record for an American president. Over the comparable period in Donald Trump’s term — before the Covid-19 pandemic — fewer than 6 million jobs were created.The conservative media and the associated echo chamber is relentless in its insistence that with a Democrat in the White House, America is a land of unending misery and despair. And with the country as polarized as it is, even Republicans who don’t spend their evenings watching Fox News will be loath to say anything that might reflect well on Joe Biden. Telling a pollster “The economy is terrible!” isn’t much different than saying the same thing on X or Truth Social, a handy way to give Biden the finger if you’re so inclined.”
– Paul Walden, MSNBC
The only thing Trump will “get us back to” is a more unAmerican, fascist type of rule….
JimboXYZ says
Too funny, under Bidenomics Black Friday has become Gray Friday ?
Ray W. says
As is common, JimboXYZ misses the entire point of the article. If it takes a Gray Friday to tiptoe out of economic turmoil, then so be it. The Fed has long been trying to cool our economy in order to tame the inflation caused by the onset of pandemic and the bi-partisan two administration economic Band-Aids we call stimulus packages. While a Black Friday will always be considered the best outcome, a Gray Friday, while less good, is still good; it cannot be said to be bad, in context. But JimboXYZ lives in a perfect or bad world, not a good/better/best, bad/worse/worst world; he simply cannot envision that two things can be good at the same time, with one better and the other still good.
JOE D says
I can’t believe some of these SALES….lowered pricing as much as 40-50%. However, having just retired 3 years ago, my “starry eyes” have been dimmed by the REALITY of my reduced BUDGET (and I’m luckier than most, with a substantial Social Security check, a decent primary pension, and a SMALL pension from a past job…for most current workers pensions have gone away).
But my Flagler County ( and State) Property taxes went up $500 (again x last 4 years)…although my Flagler Beach taxes did not…..Thank you Flagler CITY Commission for holding the line! And my property insurance did too ( but thankfully not as much as some…due to the elevated/poured concrete construction of my beach townhouse)
My Social Security “increase” will be eaten up entirely with just those 2 bills.
Christmas gifts have switched to cash (with a small additional annual “environmentally conscious” gift….solar recharging lantern, etc.)….and the cash has been cut 1/2 after retirement.
Hopefully gas prices and food prices will moderate ( of course OPEC middle eastern oil producers are CUTTING production to keep the sagging prices high, and SOME food producers are keeping prices high, even as the cost of the raw materials has come down …they figure consumers are so USED to high prices, that they won’t even NOTICE, they are often now being simply GOUGED by corporate greed. If the raw material prices were still the reason for high prices, corporate PROFITS would have remained FLAT compared to pre-pandemic years….but they have made (in general) HISTORIC CORPORATE PROFITS!
Hopefully things will moderate in the next few years, but the distance in income between the “haves” and the “have nots” is becoming wider at an ever increasing rate!
Mary Fusco says
Black Friday is a joke. Bunch of fools standing on lines to purchase items they could have gotten months ago for less. My Christmas shopping has been done since October. Doesn’t matter what politician is in office, the weather or how the wind is blowing, I have a Christmas budget. When it is gone, it is gone. Anyone foolish enough to go into debt buying gifts, that is on them.
jeffery c. seib says
This story combined with the actual economic news has me very concerned about the American psychology. Right now, wages are going up, prices are coming down, and all we hear is people whining about how bad things are economically. The truly nutty part is that with all the whining, people are spending left and right. Flying, driving, traveling, buying everything in sight. People so sad that the economy is doing terribly just bought a 70″ TV, a new car, and booking an Alaskan cruise. I fear we see what is going on, how great things are, but the TV folks tell us it’s not. So, which do we believe, what is actually going on or the TV version?
Laurel says
jeffery c. seib: People hear only what they want to hear. Social media algorithms direct confirmation bias to readers and listeners. Many believe this is the white male’s last stand, or the Christian’s last stand, or both, and it’s frightening to not be at the apex they have enjoyed all their lives, so, along comes Trump. A white, male, rich, elite, New Yorker who would otherwise never give a damned minute to the people who now admire him, who now claims to be their “retribution” for the sake of his own, personal power. Far right media tells them so.
Meanwhile, regular working guys manage to purchase trucks costing $90K. If they didn’t, the trucks would not cost so much.