Cost of living crisis to impact holiday season turnover

With four out of ten households worried about affording Christmas, researching for the best value deals will take precedence this holiday season.

In the US inflation rose 8.3 percent since last August, while in the UK it rose to 9.9 percent since the same period in 2021.

Online sales are expected to be 95 billion dollar less in 2022 compared with last year, according to the Economic Times, a wake-up call for e-commerce businesses and how to approach one of the most important times of the year.

Predictions are futile

While it is too soon to say what will or will not work for brands and retailers to optimise their Christmas turnover, for certain they need to be connective and have integrity at the heart of their messaging and campaigns.

“Brands that emphasize their marketing investments on searchable content that demonstrates consumer value will prevail,” Jacquelyn Baker, chief commerce experience officer at VMLY&R Commerce, told The Drum, a publisher for the marketing industry. “Inflation concerns are very real,” she added, "currency has to stretch much further than it used to and that will continue into the next two years.”

A good example for retailers and brands is to look at data from the financial crisis of 2008-2010, where shoppers eschewed big ticket items and instead gravitated to small, affordable luxuries, like fragrances and accessories.

Holiday shopping this year will be more like 2021, where increased product prices, high shipping fees and supply chain woes affected consumer spending and the bottom line.

According to Salesforce, the demand for online shopping is levelling off, with consumers finding a new balance between digital and physical channels.

Many shoppers are expected to make purchases early in the run-up to Christmas, to avoid pricing hikes and potential product shortages. Others will be waiting for the discounting season to begin, which this year could be the silver lining for consumers on a tight budget, as retailers struggle to offload inventory. Consumers will be waiting for the very best deals and Black Friday and Amazon Prime day could be big bonanza periods for brands.

Key predictions for the peak season by Salesforce include transparency and sustainability, with inflation data showing how it will affect holiday shopping. Brands should be honest about their carbon footprint and offer sustainable packaging and shipping options.

To be clear, the cost of living crisis will extend into well into 2023 and it will be a challenging journey for retailers leading into the Christmas period. As the high street faces a decrease in shoppers, footfall - and sales - are yet to return to 2019 levels.