Consumer Behavior

Holiday shopping 2022: What retailers can expect from consumers grappling with inflation

The retail sector faces significant challenges and these factors will no doubt impact how consumers shop this holiday season, creating more uncertainty about whether retail can end a roller coaster year on a high.

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December 7, 2022 | Paige O’Neill

The retail sector continues to face significant challenges — from supply chain interruptions, to overstocked inventory and inflation. These factors will no doubt impact how consumers shop this holiday season, creating more uncertainty about whether retail can end a roller coaster year on a high.

What's worse, contradictory reports are clouding the holiday spending forecast. The National Retail Federation predicts holiday spending to increase by 6-8%, which at first glance seems like good news. However, when factoring in 2022's high inflation (October's rate was 7.7%), this actually puts retail profits lower than 2021.

Despite uncertainties, there are things retailers can do to improve their chances of a successful holiday blitz. The Sitecore 2022 U.S. Holiday Report sheds light on consumer tendencies and priorities for holiday shopping, and how retailers can adapt to meet their new needs.

Pricing takes precedence

Our report found about one in four Americans (22%) expect to spend less on gifts this year as compared to 2021, while the majority (53%) anticipate spending roughly the same. Considering 2022's high inflation, Americans will need to make sacrifices to maintain spending — with many reporting they will sell possessions (15%) or take on another job or work more hours (17%).

Younger Americans will make significant sacrifices, with nearly half (40% Gen Z, 42% mMillennials) cutting back on personal expenses like dining out in order to check off their holiday wish lists. Lastly, 16% of Gen Z and 23% of millennials anticipate using BNPL (Buy Now Pay Later) services, if available, to buy gifts.

Since most consumers this year will either spend less on gifts or cut back in other areas to spend the same, pricing concerns may often override brand loyalty this year. Retailers must remain in tune with price sensitivities and adapt by promoting their deals and discounts, suggesting cheaper alternatives to name brands, and offering a diverse menu of payment options to drive strong holiday returns.

Around the clock impulse shopping

Gone are the days of consumers flocking to stores after work to get their holiday shopping done. Today's consumers shop whenever they want from wherever they are. Sixty-two percent of our survey respondents admitted to shopping online during their workday, and 16% admitted to spending up to four hours of their workday hunting for the best bargains. Additionally, nearly half (49%) reported impulsive purchases.

As shopping habits change, retailers must cater to new behaviors. This could mean offering targeted social media ads to entice shoppers that might be taking a midday work break or launching flash sales for their online stores during traditional working hours to capitalize on the impulse shopping bug.

Free shipping drives sales

Added fees are a nuisance to shoppers, especially those shopping online. This year, a major pain point for consumers is shipping and handling fees. In fact, one third (33%) of consumers won't complete purchases when there are added shipping costs.

To counteract this, retailers should offer cheaper delivery options, or look to incorporate free delivery into flash sales. On the flip side, more than a third of Americans (35%) will buy multiple items to meet free shipping minimums. If retailers can find the "sweet spot" price to offer free shipping at, they could drive additional sales while providing customers with the deals they want — a true win-win.

The holiday spirit runs deep in America, and most consumers will make the sacrifices necessary to purchase gifts for themselves and their loved ones despite tough economic constraints. To help maximize their return, retailers should be cognizant of consumer trends like pricing concerns overriding brand loyalties, impulse shopping during the workday, and a reluctance toward added shipping fees. Retailers who better align their holiday strategy with what is top of mind for consumers are always likely to fare better, especially in an inflation era.