Holiday retail sales are expected to exceed $1 trillion for the first time, despite cautious consumers and mounting pressure from inflation, according to Bain & Company’s annual forecast.
The consultancy expects spending to rise by 4.5% year on year, with about 70% of sales taking place in physical shops. Online retail is nevertheless continuing to increase its share of the market.
Higher tax refunds are helping to support household spending. Refunds are up by $43 billion, or 17%, compared with last year, although Bank of America estimates that half of the additional money has already been absorbed by higher petrol costs.
Bain said inflation accounted for most of the headline increase in spending, meaning the growth in the number of items being bought was considerably weaker. Food and drink, furniture, and health and personal care were among the categories recording declining unit sales.
The forecast comes as consumer confidence fell to its lowest level since 2014 in September, according to the Conference Board. Respondents cited concerns over inflation and the outlook for jobs.
Shoppers seek value as budgets come under pressure
Deloitte has also predicted strong holiday spending, forecasting retail sales of $1.7 trillion this year. Its assessment suggests consumers will become more inventive with their budgets, placing greater emphasis on discounts and reduced-price goods.
“As they look to get more out of their dollars, we continue to see value-seeking behaviors across income levels, including switching among brands and retailers and using promotions to manage spending,” said Natalie Martini, Deloitte’s vice chair and US retail and consumer products leader.
She said those habits were expected to shape the way consumers approached holiday shopping this season.
AlixPartners said shoppers were making smaller purchases at the checkout but visiting shops more frequently, particularly for groceries. Consumers were also moving away from premium products towards own-label goods and buying fewer items of higher quality.
“Consumers are not cutting back evenly across every category,” said Sonia Lapinsky, AlixPartners’ leader of fashion retail. “They are becoming more selective about self-gifting and looking for ways to preserve quality while staying within their budgets.”
Adobe expects buy now, pay later spending to reach a record $21.3 billion during the holiday period, as shoppers take a more deliberate approach to their spending. Its forecast also points to value-led shopping driving sales and market share.
