Consumer Anxiety Clouds Retail Sector's Holiday Outlook
Sector Analysis

Consumer Anxiety Clouds Retail Sector's Holiday Outlook

A new survey shows shoppers plan to cut spending by 10% amid economic fears, creating a challenging season for retailers.

The retail sector is bracing for a challenging holiday season as widespread consumer pessimism threatens to dampen spending. A new Deloitte survey indicates significant economic anxiety among shoppers, with 57% expecting the economy to weaken and 77% anticipating higher prices for goods.

This sentiment is directly impacting purchasing plans. The survey reveals that average holiday spending is projected to fall by 10% to $1,595 per household. Younger generations are expected to lead this pullback, planning the most significant cuts to their holiday budgets. This creates a formidable headwind for retailers who depend on the fourth quarter for a substantial portion of their annual revenue.

However, the outlook is not entirely bleak, as other data suggests a more nuanced consumer landscape. While shoppers are more cautious, overall sales are still projected to see modest growth. The National Retail Federation (NRF) reported that core retail sales during the 2024 holiday season grew 4% over 2023, surpassing forecasts. This suggests that while consumers may be spending less per household on average, a broader base of spending or price inflation is keeping total sales in positive territory.

The key takeaway for retailers is the evident shift in consumer priorities. There is a notable shift in consumer spending towards experiences over traditional gifts. To succeed, retailers must adapt by emphasizing value, offering deep discounts, and catering to a price-conscious consumer who is actively bargain-hunting. The retailers who can best navigate this cautious environment will be the ones who win this holiday season.