Economy
17 November 2022
Holidays in the time of inflation: Fewer festivities, more online deals
“How to save money this Christmas" is trending on Google ahead of Black Friday, reports Ecommerce Intelligence.

“How to save money this Christmas" is trending on Google ahead of Black Friday, reports Ecommerce Intelligence.
Throughout 2022, competing energies in retail have been building: A growing desire to get back out and shop following the lifting of COVID-19 precautions, and a need to pull back in the face of higher prices and tougher economy.
They've created a complicated consumer picture this year, as people have mostly continued spending and shifted toward wardrobe updates for in-person events and travel, even as inflation stayed high.
Yet the tension is set to come to a head as the holiday shopping season gets underway in earnest with the Thanksgiving weekend events of Black Friday and Cyber Monday.
So far, forecasts indicate both factors will be in play for peak season. The question is whether one will win out.
There is intent to get out and shop. After all, holiday shopping is something of a national pastime, and the chance to hit the stores may even feel like a return to normal for some after two pandemic years. A survey from the National Retail Federation and Prosper Insight & Analytics showed that 166.3 million people in the US are planning to shop from Black Friday to Cyber Monday. That’s eight million more people than last year, and the highest estimate since the survey began 2017.
“While there is much speculation about inflation’s impact on consumer behavior, our data tells us that this Thanksgiving holiday weekend will see robust store traffic with a record number of shoppers taking advantage of value pricing,” said NRF President and CEO Matthew Shay, in a statement.
Meanwhile, inflation remains at 40-year-highs, and pandemic-era savings are starting to be depleted. This is expected to take a toll on spending. About two-thirds of people surveyed by YouGov indicated that their holiday shopping will be impacted by inflation, according to data flagged by growth marketing firm Ecommerce Intelligence.
The data that we do have on retail's most important quarter so far is also conflicted, when viewed on the surface. US retail sales for October showed a bounce to grow 1.3% after Amazon, Walmart and Target held early holiday deal events. However, earnings reports from the same three retailers sounded warning bells about a consumer pullback for the fourth quarter.
One answer may lie in a nuance that lies deeper in these reports: Spending is continuing, but it is more tilted toward food, gas and essentials as prices continue to be elevated. While Walmart was lifted by groceries sales, spending on discretionary items like electronics and sporting goods and hobby items, as well as sales of general merchandise at Target and Walmart, are down markedly. That's not a good sign for holiday shopping, which is built around the kinds of nice-to-have gift items and bigger household purchases that leave retailers flush.
“Consumers have already started cutting back on non-essential shopping, and opting for the cheaper supermarkets,” said Ecommerce Intelligence Founder Ryan Turner. “Households are now saving more and borrowing less, painting quite a bleak picture for retailers this Christmas."
The pullback may also be less talked about in public forums, but digital tools can tell a story of how people are making things work, out of view. Using Google and its own analytical tools, Ecommerce Intelligence found that there is a 900% increase in people searching for “How to save money this Christmas.” To Turner, the massive increase shows that shoppers are “in a completely different landscape compared to Christmas 2021.”
This could change the look and feel of the season beyond the Black Friday kickoff, as well. Festive Christmas markets are just as subject to supply and demand as any part of the economy, and may have to scale back.
"The harsh truth is that with limited disposable income it is going to be hard for families to justify going to Christmas markets this year. There have already been some cancellations and I wouldn't be surprised to see the markets that do go ahead scaled down in size," Turner said. “Even vendors themselves are struggling to find the money to rent stalls. This might mean that vendors will have to increase the prices of products to meet rising energy and rental costs.”
However, this picture may prove conducive for online shopping, especially in an environment that is expected to be more “promotional” than ever, as many retail executives have said.
“Many online retailers are doubling down on deals and promotions in Q4 so online shoppers will be spoiled for choice in many markets,” Turner said. “Ecommerce will likely be the obvious place to get the biggest savings. We are expecting to see a period of almost non-stop sales starting just before Black Friday weekend, then running through to the end of the year – a lot of these sales will be online only.”
They may also turn to credit cards and digital options like Buy Now Pay Later (BNPL) to fund gift purchases. Some ecommerce sites are offering multiple different options to split payments into 2023, Turner said. In the YouGov survey, 47% of respondents who said inflation will impact their holiday spending indicated that BNPL solutions will be essential or at least nice to have.
An appropriate way to view the season may be as one of sacrifice. That’s how shopping rewards app Shopkick framed it in a survey of over 10,000 American consumers between November 3 - November 7, 2022. According to the results, 60% of consumers are making holiday-specific sacrifices. When asked how they plan to hold back, the majority said they plan to reduce the overall number of gifts they purchase. Others are planning to curtail travel to see friends and family, holiday decorations or hosting holiday gatherings.
During a three-year period that has been marked by economic phenomena of all kinds, the holiday season could be the time when reopening more firmly transitions to austerity. The Shopkick survey found that 61% of consumers plan to keep their budget restricted even if inflation improves. Meanwhile 55% of consumers anticipate that economic challenges will worsen over the next three months.
“Increasing prices and inflation do not appear to be going away, and consumers are tightening their belts to cope,” said Brittany Billings, EVP of marketing and strategic markets at Shopkick, in a statement. “With consumers making trade-offs this year, it is more important than ever that brands and retailers stay on top of sales and discounts for deal days and beyond as price will be the driving force behind consumer’s decision-making this year.”
Given the cultural importance of the holidays, it's doubtful that seasonal pending will go away all together. But given thethe need to hold back may outweigh the want to spend. Brands and retailers must show that they're willing to give a little to meet that sacrifice, even if they could use a little help to make it through this most crucial quarter themselves.
Inflation rose 6% across the US economy in February 2023, according to the Consumer Price Index.
U.S. inflation ticked down in February as food prices started to fall, but shelter prices continued to remain high. Meanwhile, ecommerce prices turned further into deflation, as both annual and monthly comparisons showed prices coming down.
Let’s take a look at data on inflation across the economy, and ecommerce:
The Consumer Price Index for February 2023 showed the following:
On an annual basis, inflation rose 6% from February 2022. That’s down from 6.4% in January, continuing a downward motion in prices.
On a monthly basis, prices increased 0.4%, which was down slightly from the 0.5% increase in January.
Core inflation, which leaves out volatile food and energy prices, rose 5.5% year-over-year, down only slightly from 5.6% in January. On a monthly basis, core inflation was up 0.5%.
Food inflation dipped below 10% for the first time in months, registering at 9.5%. Food at home, which includes grocery, was 10.2%, compared with 11.3% in January. Five of the six major grocery indexes increased on the month.
Snacks brought a rare decrease in the food category, falling 0.9% for the month.
Shelter continues to be the driver of inflation. The shelter index increased 0.8% for the month, and 8.1% for the year.
Among consumer goods categories, CPI showed the following:
The annual change in CPI year-over-year inflation. (Via US BLS)
The report brought the latest sign that growth of the headline inflation reading was slowing. This trend now dates to October 2022. However, there continues to be plenty of signs that inflation is remaining stubborn on the way down. Shelter inflation is particularly high, and only rising. Electricity was up 12.9%. Meanwhile, core inflation's rise only inched down. Inflation continues to be a presence for consumers, which means elevated prices could continue to lead to cutbacks in discretionary spending.
After months of high inflation, consumers are increasing credit card balances and dipping into savings as they seek to make ends meet, said GlobalData Managing Director Neil Saunders.
“On the surface, these adjustments have allowed the consumer economy to remain resilient in the face of persistent inflation,” Saunders said. “However, under the surface there are cracks: behaviors among the lowest income households have changed sharply, reduced volumes are putting pressure on many retail and consumer businesses, and the financial position of many households is deteriorating. In short, inflation is not an enemy that consumers can withstand indefinitely.”
Comparing DPI and CPI. (Image via Adobe)
The Adobe Digital Price Index showed a deflationary motion for February, indicating that ecommerce prices are coming down even as the wider economy still sees prices rising.
Overall, the DPI showed online inflation falling 1.4% year-over-year, and 0.3% on a monthly basis. It was the sixth straight month that annual prices decreased.
Digging further into the data, 10 out of 18 categories showed decreases. Notable categories included:
Electronics fell 12.6% year-over-year, and 1.7% month-over-month. This continues notable drops in electronics prices, even after holiday season discounting has long since been completed.
Toys fell 6.5% year-over-year, and 0.4% month-over-month.
Home and garden products fell 3.8% year-over-year, while rising 0.2% monthly.
Furniture and bedding prices fell for the first time in 33 months, down 0.1% year-over-year and 0.6% monthly. “Consumers have become increasingly comfortable buying furniture online, after a pandemic where many wanted to spruce up their living spaces and had no choice but to tap ecommerce,” Adobe states.
Price increases are also slowing in categories that have shown more stubborn inflation.
Grocery prices cooled for the fifth straight month. They rose 11.4% year-over-year, but that was down from a 12.6% increase in January. This is the rare digital category that moves in concert with the Consumer Price Index. That’s because more people are buying groceries online, and when they do, they are ordering mostly from the same grocery stores where people shop in person.
Apparel prices were up 5.1% year-over-year, which is down notably from 16.7% in February of 2022.
Tools and home improvement are also coming down. The increase was 6.2% year-over-year, falling from 8.3% in December.
Check out the full category breakdown below:
(Photo courtesy of Adobe)