Why it matters:

  • Holiday spending is expected to increase 4%, but inflation means retailers will be watching their budgets carefully and looking for deals
  • Retailers can avoid relying too heavily on discounts by offering a range of merchandise at different price points, and by granting perks to its best customers – such as early access to product launches and exclusive in-store events where loyal customers can shop in a more private setting, according to retail executives
  • Online shopping will grow faster than in-store, although some retailers expect consumers to embrace in-store shopping this year in the wake of the pandemic

Retailers and brands are preparing for a holiday shopping season in which consumers will be shopping early and spending cautiously, according to panelists at a CommerceNext event.

“We expect to see customers coming in with a very specific budget set for their gifting needs,” said Rachel Goldflam, Vice President of Marketing and Communications at luxury jewelry retailer David Yurman.

Overall, retailers and brands said they’re cautiously optimistic about the year-end gift-giving season, although the economic environment is more turbulent than in recent years. With inflation up sharply, consumers will be watching closely for deals and promotions, panelists said. In this environment, retailers will have to tread carefully to avoid fostering an expectation among consumers waiting for a product to be discounted before buying it.

Luring loyal shoppers with a breadth of merchandise and white-glove service

Ann Marie Ippoliti, Vice President of Digital Commerce at apparel and accessories retailer Michael Kors, said her company is focusing on ensuring consumers can easily select from products across a range of price points, “without emphasizing the promotional aspect of it.”

David Yurman is taking a similar approach by offering a wide range of products across multiple price points, Goldflam said, while also emphasizing the retailer’s white-glove service to its best customers. It does this by providing early access to assortments, for example, or providing access to stores during off hours where loyal customers can shop in a more private setting.

Panelists also said they already see signs shoppers have begun searching for gifts earlier than they typically do, although it’s unclear if they’re trying to avoid out-of-stock inventory on key items. Last year, supply chain snarls led to shortages of some items, prompting some consumers to buy early in the season and some retailers to promote the scarcity of products.

“That’s a question that’s on everyone’s mind,” said Chris Hardisty, Senior Vice President of E-commerce at jewelry retailer Kendra Scott. “I am wondering how much of the shift [toward early shopping] will be because retailers want it, and how much because consumers want it.”

In-store shopping makes a comeback

Kendra Scott’s Hardisty also noted he expects in-store shopping to make a comeback, after two years of strong e-commerce gains during the COVID pandemic. Consumers are eager to get out and enjoy the real-life experiences of the holiday season, he said.

Online spending is still expected to increase for the holiday shopping season, however, according to a survey from Coresight Research.

“We expect e-commerce growth to be in the low double digits, growing faster than in-store,” said Steven Winnick, Senior Analyst, Coresight Research, during the webinar.

He said the research indicated a downtick in searches starting on marketplace websites such as Amazon and eBay, however, and more searches starting on brands’ own websites. He attributed this to improvements in the brands’ websites, as well as an increased focus on personalization and targeted promotions by the brands.

Inflation-weary consumers will shop early for holiday deals and free or low-cost shipping offers

The Coresight survey predicted a slight increase in holiday sales overall, despite finding 71% of shoppers said inflation would have a negative impact on their budget for holiday gifts this year. The increase in sales – projected to be up 4% over a year ago – will be partially driven by price increases compared with last year, but also by a longer shopping window, Winnick said. Many consumers said they’d begin shopping earlier and end shopping later. In addition, demand for luxury gifts will remain strong, Winnick said.

About 30% of consumers said they expect to begin holiday shopping in October, the survey found.

In addition, 82% of gift shoppers said product price would be very or extremely influential in their purchase decisions, and 77% said the same of deals and discounts. About the same percentage – 78% – said shipping costs would be very or extremely important.

Retailers’ holiday focus: Careful inventory planning and pricing, clear messaging on product returns

Retailers, meanwhile, are seeking to avoid having excess inventories left at the end of the season, as many were already discounting surplus merchandise before the season started, Winnick said.

For their part, the retail panelists said their concerns this year are less about supply chain shortfalls, which were a key concern last year. This year, retailers are more focused on having the right inventories in place at the right price points and communicating effectively with shoppers about the services the retailers offer to help consumers make their purchasing decisions. That can include information about product returns, for example, as well as shipping options.

“We really want to establish ourselves early in the season as the gifting destination for our customers,” said Ippoliti, citing the need to offer visibility not only into its product assortment, but also into information such as extended return windows and shipping cutoff times. “We want to reduce friction any way we can.”

John Grech, Chief Commercial Officer at gifting solutions provider GiftNow, said the early start to the shopping season and the tight consumer budgets could indicate shoppers are planning their spending carefully this year. “It probably means they’re finding the item, then looking across multiple merchants to see where they might be able to buy it,” he said, adding “the jury is really out until December 26.”