Retailers have had to make the tough call of passing the higher cost of goods on to consumers, and now holiday shoppers are faced with steeper prices and more trade-offs this gift-giving season. Three-quarters of consumers expect holiday prices to increase relative to previous years, and shoppers who are not able to absorb these higher costs will be hunting for deals and lower-priced options.
Categories where consumers expect prices to increase this holiday season, as compared with previous years:
Food, travel and personal electronics lead consumers’ expectations for categories with price increases. Ongoing media coverage of chip shortages and consumers’ own experiences of the increasing costs of their weekly grocery runs are informing these expectations.
These retailers should be especially vigilant of consumers making tough trade-offs at stores this year, and use tactics such as price match guarantees to prevent the worst-case scenario of consumers shopping elsewhere if the product they’re looking for is too pricey. As Morning Consult’s November U.S. Economic Outlook report illustrates, the ongoing supply chain challenges are dragging down consumer confidence and creating headwinds for retailers hoping to meet this year’s ambitious sales forecasts.
Share of consumers who said they will alter their holiday spending habits if prices are higher than they expect this year:
Consumers’ concerns about inflated prices for holiday gifts will lead to more deal-hunting and openness to lower-cost substitutes.
Gen Z consumers are least likely to seek out alternatives across the board, suggesting that this generation feels most uncertain about how they’ll handle climbing prices this holiday season. Conversely, millennials are most likely to find ways to bear the additional costs. They may do this by blowing their budgets, using “buy now, pay later” services or charging products and services to credit cards.
For retailers, a pricier holiday season means guiding potentially disillusioned customers to more budget-friendly options. Highlighting ratings and reviews can help reassure them that a lower-cost alternative won’t disappoint the recipient.