The 2022 holiday shopping season is kicking off early this year, with mega retailers Target and Walmart launching their first promotions of the season this week.
Following last year’s 20-year-high year-over-year sales growth, predictions for the 2022 holiday shopping season are somewhat more conservative (though it’s worth noting that last year’s record-breaking growth dramatically outpaced projections).
Here is a roundup of the top 5 predictions for the 2022 holiday shopping season:
1. Inflation will have an Impact
Last year, retailers saw holiday shoppers spending their dollars earlier in the season due in large part to concern over availability and supply chain issues.
Analysts and retailers are predicting another earlier start to the holiday shopping season this year, but not because of the supply chain — because inflation has put many people in a position where they need to budget more carefully, with consumer prices up 8.3% this year (as of August).
More than half of respondents to a recent CNBC holiday spending poll said it would be harder to afford their holiday expenses this year than in 2021. A whopping 80% said they expect their holiday budget to be affected by inflation.
2. In-store & Online Spending Growth to Slow from Last Year
Following a huge spike in holiday spending last year — the highest year over year spending growth in two decades—projections for the 2022 holiday shopping season are “subdued,” according to retail analyst Neil Saudners.
In-store sales are projected to grow 7.1%, while online sales are expected to grow 4.2%, according to Mastercard SpendingPulse. Another report from Deloitte estimates online-spending growth between 12.8% and 14.3%, thanks to budget-focused consumers comparing prices and deal-hunting online.
Regardless, research from Retail Drive found that 56% of shoppers “still like to visit a store before making a purchase online.”
“Online shopping is here to stay, but there’s also a palpable joy people get when shopping at stores,” according to POS-giant Square’s 2022 Future of Retail Report. “While 2020 incited a massive rise in eCommerce, our Future of Retail report found that an overwhelming 92% of consumers still miss in-store shopping.”
It’s also worth noting that research from Deloitte shows that 63% of luxury good purchases still occur in physical stores. The rate peaks at 72% for Baby Boomers, drops to 66% for Gen X shoppers, and dips again to 58% among Millennials.
3. Lower Spending, but More Promotions
In order to combat somewhat subdued spending predictions, retailers will be ramping up discounts and promotions — starting earlier in the year and running more throughout the season — to try to entice budget-conscious consumers.
Inflation isn’t the only cause for more discounts this year, however.
“Retailers are not where they want to be with regards to inventory levels, which will necessitate more discounting,” explains Jefferies Retail Analyst Jonathan Matuszewski. He predicts a “fiercely promotional holiday.”
According to NRF’s annual NRF and Prosper Insights & Analytics’ annual September survey, 58% of holiday shoppers say that sales and promotions are more important to them when shopping for the holidays this year compared with last year — a 10% increase from September 2021.
“Executives at Best Buy, Ulta, Gap and other top chains have said in recent weeks that they are expecting a shopping season packed with discounts,” explains CNN Business’ Nathanial Meyersohn. “Walmart on Tuesday said it was offering more “rollbacks” — temporary price reductions on items — than in previous years and a wider array of toys for less than $50 and $25.”
As a result, expect a longer shopping season with more promotions and discounts offered to entice shoppers into stores.
4. Retailers will Compete to Attract Seasonal Workers
Retail already sees the highest turnover rates of any industry. Pair that with recent hiring challenges and staffing shortages, and many retailers are likely understaffed heading into the holiday season.
Last year, the retail sector planned to hire between 500,000 to 665,000 employees for the holiday season — that number is expected to increase this year.
Savvy retailers will be using the 2022 holiday shopping season to vet potential full-time hires from among the scores of seasonal hires.
Last year, for example, Walmart hired more than 100,000 staff at the holiday season, many of which were hired for full-time positions, or transitioned to full time following the holiday shopping season. As a result, they are only planning to hire 40,000 seasonal employees this year.
Michael’s announced in September that it will boost starting pay for seasonal staff as well as offering a 30% discount and the possibility of transitioning to full-time employment after the holidays.
The holiday shopping season presents a unique opportunity to help retailers vet a wide range of employees and hand-pick those who are the best fit for long-term employment — expect to see that trend continue this year.
5. The Early Birds will Get the Buyers
Despite lower projected spending overall, retailers are still expected to make up to 40% of their annual sales during the 2022 holiday shopping season.
“Retailers across channels who remain aligned with consumer demand and offer convenient and affordable options can be well positioned for success this season,” says Nick Handrinos, vice chair, Deloitte LLP, and U.S. retail, wholesale and distribution and consumer products leader.
Experts believe the key to success in 2022 is being ready to capitalize on the early-season shoppers with low prices and convenient shopping, delivery and payment options.
According to Howard Meitiner, managing director at Carl Marks Advisors, “Retailers that ‘get ready’ early will be the winners.”