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Inflation may have eased, but retailers are still facing a holiday season filled with uncertainty. Several unpredictable factors will impact consumer spending as they prepare for the festive season and search for the perfect gifts. Volatile weather, distractions from the upcoming election, and a bargain-hunting mentality may shape the season. With fewer days between Thanksgiving and Christmas compared to last year, shoppers will feel the pressure.

Despite the challenges, there is optimism for retailers as consumers are feeling more positive and plan to spend more this holiday season. Holiday spending in November and December is projected to increase by 2.5% to 3.5% compared to the previous year, with expectations ranging between $979.5 billion and $989 billion. Shoppers anticipate spending an average of $1,778 on holiday gifts this year, 8% more than last season.

Factors such as low unemployment, more typical Inflation levels, and a recent interest rate cut by the Federal Reserve are boosting consumer confidence. People are feeling better about their financial situation, contributing to a more favorable economic outlook.

Shoppers have already been exposed to early holiday deals, setting the stage for a season where they will be looking to stretch their budgets. Nearly 80% of consumers surveyed intend to participate in deals events in October and November, compared to 61% from the previous year. A deal-seeking mentality has been prominent over the past couple of years and is expected to continue.

Another challenge for retailers is catering to customers who are prioritizing decorations and experiences over traditional gifts. Consumers plan to spend 16% more on experiences and 3% less on gifts this holiday season compared to last year. Non-gift purchases, including decor and party apparel, are also expected to see an increase.

Weather can play a significant role in influencing consumers’ purchasing decisions during the holiday season. While the early fall experienced unseasonably warm temperatures and severe hurricanes, colder temperatures in November and December are anticipated to drive shoppers to purchase winter clothing and gifts.

A shorter holiday season with five fewer days between Thanksgiving and Christmas compared to the previous year may lead to heightened pressure for retailers. Shoppers may opt for rush shipping or curbside pickup to ensure timely delivery of gifts. Retailers will need to focus on convenience and efficiency to meet consumer demands within the shorter time frame.

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