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US retailers cheery about holiday season despite inflation
November 23, 2021
NEW YORK (AFP) – After nearly two years of pandemic gloom, American consumers appear primed to spend generously for the holidays despite worries over inflation and item availability.
Retailers have seen strong buying interest this autumn, with robust back-to-school and Halloween sales fuelling optimism about the holiday season, which kicks off this week with Black Friday.
“All indications are that US consumers are looking to celebrate the holiday season,” Target chief executive Brian Cornell said last week. “They are anxious to get together with family and friends.”
But petrol prices are up more than 60 per cent from a year ago, while this year’s Thanksgiving feast will cost an estimated 14 per cent more, according to the American Farm Bureau Federation, an agricultural lobbying group.
Shortages are another worry.
In earnings conference call over the last week, Target, Walmart and other big-box retailers offered reassurances that they would have sufficient inventories, after recent concerns that supply chain issues would leave Christmas stockings empty.
But there will certainly be gaps, with popular game consoles and some high-demand electronics products from Apple and other companies seen as especially hard to find.
Customers “may not be finding their first choice”, said Foot Locker CEO Richard Johnson.
“If their size, colour, style doesn’t happen to be available, they’ve shown a real propensity to continue to shop, work with our associates in the store and find the next best product.”
Worries about shortages began building significantly last month, when the White House announced an initiative to shift key supply chain infrastructure to 24-hour service following delays at West Coast ports.
Since that time, there have been some signs of progress. The Port of Los Angeles last week reported a 35 per cent drop in the number of containers that have languished there for nine or more days.
But the port is only one source of the trouble, noted University of Iowa Professor Jen Blackhurst, who specialises in supply chain issues.
She warned that customers may notice gaps at stores or encounter trouble with orders that do not arrive in time due to labour issues like a lack of lorry drivers.
“I don’t think there are going to be massive shortages,” she said. “But I don’t think it’s going to be a normal holiday season.”
The US National Retail Federation projects holiday sales will grow between 8.5 per cent and 10.5 per cent, noting that a “stellar” season rests in part on whether retailers can replenish merchandise that runs out.
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‘Turned on its head’
Retailers have taken extraordinary steps this season, such as importing and storing items earlier than usual, ordering shipments by air freight and in some cases even chartering their own vessels.
“We have figured out a way,” said Mr Ernie Herrman, CEO of TJ Maxx parent TJX.
Mr Herrman has described a “surgical” approach to raising prices on some goods, while both Walmart and Target have said they do not expect to pass on all cost increases to consumers.
But Williams-Sonoma, which owns the namesake kitchen wares company as well as upscale chains like Pottery Barn, has phased out website-wide promotions, while Macy’s has been selling more goods at full price.
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Higher prices are also appearing in e-commerce, which Adobe estimates could account for as much as 25 per cent of holiday spending this year.
Last month, online prices were up 1.9 per cent year on year, the 17th straight month of inflation since June last year and a marked shift from the pre-pandemic era when online prices reliably fell, according to Adobe’s digital price index.
“You’ve had the conventional wisdom that’s its always available and it’s always cheaper online,” Adobe lead analyst Vivek Pandya. “And that’s what’s getting turned on its head in the pandemic.”
GlobalData Retail analyst Neil Saunders warned that inflation “is very eroding to peoples’ ability to spend”, although he expects more of a drag next year compared with next month.
One thing that will not derail the United States shopping season is Covid-19, Mr Saunders predicted, citing the lack of appetite to undertake restrictions comparable to those in Europe.
“A lot of people will say ‘enough is enough,'” he said.
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