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Sluggish Consumer Holiday Spending This Year Will Require a Creative Response from Brands and Retailers

October 29, 2024

As the U.S. enters its critical year-end holiday shopping season, consumers are feeling especially strapped this year and expected to rein in spending compared with prior years. The impact of sustained high inflation on consumer sentiment along with five fewer selling days in November and December will take a toll on overall sales growth in 2024.

According to the National Retail Federation (NRF), U.S. retail spending in November and December this year is projected to grow between 2.5% and 3.5% compared with 3.9% and 4.7% growth in 2023 and 2022, respectively.

Highlight’s From Groceries to Gifts report suggests financial stress is driving negative consumer sentiment about gift purchases this year, shifting their focus toward value pricing as they shop for the holidays.

In this environment, consumers are tightening their budgets and adjusting behaviors in the following ways:

  • Taking on extra work or overtime
  • Using coupons more
  • Looking for discounts
  • Relying on their family for financial support
  • Cutting back on non-essentials

Even with anticipated slow sales growth, the NRF still projects holiday spending to reach around $980 billion in November and December and anticipates hiring between 400,000 and 500,000 seasonal workers this year.

However, despite their pressures, most consumers still want to preserve the tradition of gift-giving this holiday season. For brands this creates an opportunity to respond with value-based products and promotions.

For example, Target has announced price cuts to 8,000 items this year. Walmart and Aldi recently announced significant discounts on Thanksgiving meals, with a per-person cost of $7 and $5, respectively.

Grocery stores have also stepped up their promotions of private-label products and store brands. Affordable holiday-themed or limited-edition products are also a way brands are appealing to shoppers’ desire for something special this year while sticking to their budget.

Holiday Spending and the Splurge Mindset

Despite half of all consumers planning to spend less this year, the From Groceries to Gifts report reveals key products they might consider making small indulgence purchases on this year, including:

  • Groceries (40%)
  • Kids’ Products (37%)
  • Apparel & Footwear (32%)

Brands that recognize and respond to the concerns of strapped American households in 2024 through value pricing and special promotion strategies stand to maintain and even strengthen their connection with consumers this year, while building brand loyalty for years to come.

Want to know more about how to increase your brand loyalty in a tight economy? Book a call!

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