(New York) The Christmas shopping season kicked off Thursday in the United States with the kick-off of Black Friday (Black Friday) marked this year by significant discounts, but concern is high among merchants concerned about inflation while maintaining the hope that consumers will be there.
The world’s largest economy has been struggling for several months with persistently high inflation, which casts a veil over the holiday season which kicks off with the Thanksgiving weekend.
A year ago, the concerns were different, with the sector facing supply difficulties due to the disruption of global transport and factory closures caused by the COVID-19 pandemic.
To avoid such a mishap this year, manufacturers have anticipated their orders, this time with a risk of overstock, while consumers are reducing their spending.
“Yesterday our problems were related to supply, today it is to have too many things”, summarizes Neil Saunders, managing director of the specialized firm GlobalData Retail.
According to him, traders have succeeded in recent months in significantly reducing their inventories, but the overflow of orders could benefit bargain hunters in many sectors, such as electronics or clothing.
Juameelah Henderson traditionally falls into this category “but this year even more so,” she explains as she leaves a New York clothing store with four full bags. According to her, the prices displayed were “pretty good”, before explaining that “if it’s not on sale, then I don’t need it”.
For many Americans, rising gas and food prices are a real challenge, but not everyone is equal when it comes to inflation. “Low incomes are clearly more affected by high inflation”, recalls Claire Li, analyst for Moody’s, “because they spend proportionately more on essential products”.
A dwindling savings
The consumer price index is slowing down little by little, but still stood at 7.7% on November 10, which means that an equivalent increase during the winter sales will necessarily lead to lower sales volumes.
For the time being, Deloitte and the National Retail Federation expect a single-digit increase, which will however be lower than inflation.
So far, American consumers have shown themselves to be insensitive to the various crises experienced since the start of the pandemic, spending more than expected, even when confidence indicators underlined their concerns.
Part of the explanation was to be found in unusually robust savings, as many households took advantage of government aid during the pandemic, when consumption was at an all-time low due to restrictions imposed to fight the pandemic.
But the cushion is starting to sag: after peaking at $2.5 trillion in mid-2021, US savings fell back to $1.7 trillion a year later, according to Moody’s.
And consumers with an annual income of less than $35,000 are the first to be affected, with a 39% drop in their savings over the first six months of the year. As a result, consumer credit is on the rise, according to data from the Federal Reserve.
“We see continued pressure,” says Michael Witynski, general manager of the low-cost chain Dollar Tree, who observes an “evolution” of consumers “who are much more focused on their needs and trying to ensure that they have enough money to end the month”.
Contrast painting
Revenues released by the retail sector gave a mixed picture of consumer health.
The Target chain took the hit, facing a sharp drop in purchases in October, presaging a bad Christmas season to come, and which expects a “very promotional” period, according to its general manager Brian Cornell.
“We have consumers who are dealing with persistent inflation quarter after quarter,” he explained during a conference call with analysts, “they are very cautious, they are very attentive and say, ‘Okay, if I have to buy, I want to make a very good deal”.
But at its competitor Lowe’s, which specializes in decoration, the mood is quite different, with a “solid” third quarter and no expected sign of slowing down. “We do not observe anything resembling a decline in purchases,” said its managing director, Marvin Ellison.
Consumers, like Charmaine Taylor, who regularly monitors airline sites, remain vigilant. His travel aspirations have been thwarted by skyrocketing ticket prices and Mme Taylor, who works in daycare, isn’t sure she can spend that much this year on her family.
“I try to give them little gifts, but I don’t know if I can, inflation hurts a lot,” she laments.