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Deloitte: Retailers confident about holiday inventory; store spending to rise

All the surveyed retailers expect to receive their holiday inventory on time.
All the surveyed retailers expect to receive their holiday inventory on time.

The continued impact of inflation and a shift in consumer priorities are set to define the 2022 holiday season.

That’s according to Deloitte’s 37th annual Holiday Retail Survey, which found that amid a worsening economic outlook, many consumers plan to cut back on non-essentials to keep the season merry and bright. The report found that inflation will likely curb holiday shopping habits: Holiday spending is expected to be flat year-over-year with an average $1,455 per household, but consumers plan to purchase fewer gifts this year (nine) versus 16 in 2021.

To keep the holidays festive, consumers will pull back on non-gift purchases (down 12% year-over-year) and shift spending to experiences (up 7% year-over year), including entertaining at home and socializing away from home.  Also, gift cards will remain  a go-to gift, prompting an average spend of $252 this year, up 7% from 2021.

Shoppers are also cutting costs by buying pre-owned goods, with 32% of consumers planning to buy resale items. Further, 48% of retail executives will sell refurbished or used goods to keep up with demand.

  With consumers planning to wrap fewer gifts, they will spend less time shopping (5.8 weeks versus 6.4 weeks last year), visit fewer websites and apps (9.1, compared to 11.1 in 2021), and visit fewer stores (5.9, down from 6.6 in 2021).

In good news for physical retailers, the share of in-store spending is expected to rise to 35% in 2022 (up from 33% in 2021), which is nearly on par with the 36% seen in 2019.

Inventory Levels 
   While empty shelves and shipping delays were frequent last holiday season, retailers are more confident about inventory levels. While 77%  of shoppers expect stockouts this season, retail executives are more optimistic.

More than half (60%) of retailers are comfortable with the volume of holiday merchandise ordered. And 100% of surveyed retailers  anticipate receiving their holiday inventory on time — versus 57% who reported the same in 2021.

The holiday shopping season continues to pull forward, with 23% of holiday budgets spent by the end of October, compared to 18% in 2021. Though the season is moving up, 49% of holiday shoppers plan to participate in Thanksgiving week events, up from 47% in 2021. Three in 10 shoppers plan to spend on Black Friday (29% versus 25% in 2021), and Cyber Monday (30% versus 27% in 2021).

Other findings from the Delotte holiday report are below.

•After pulling back last year, lower-income groups (those making less than $50,000 per year) plan to spend an average of $671 this holiday season, up  25% year-over-year and similar to 2019 levels.

Conversely, spending by higher-income earners (those making $100,000 or more per year) is expected to decline 7% year-over-year to an average of $2,438 as they pull back on categories like electronics.

•When asked about the reasons for the change in year-over-year spending plans, 51% of those spending more attributed it to higher costs (versus in 2021) as did 66% of those spending less, similar to 2021 (67%).

•Spending on gifts is nearly the same year-over-year at $507 per household, though consumers plan to purchase fewer gifts.

•More than one-third of American households (37%) say their financial situation is worse than last year, and 41% expect the economy to weaken next year, compared with 33% in 2021.

  • Retail executives are more optimistic: 77% expect holiday sales to increase year-over-year.
  • Prompting shoppers to get a head-start on holiday deals, 60% of retailers surveyed say their companies will start holiday promotions at least one to two weeks earlier than last year.
  • Online continues to be a holiday shopping mainstay, holding steady with a 63% share. Further, the use of smartphones for online holiday shopping is steadily rising, from 52% in 2019 to 56% in 2022.

Consumers continue to value convenience for their holiday shopping, citing online (56%) and mass merchants (49%) as the most preferred retail formats. This year, grocery stores will likely see a boost in traffic (24% in 2022, compared to 19% in 2021).

 • More than half of consumers (60%) will trade brands if their preferred brand is not in stock, and they will check stock availability before making a shopping trip. Nearly two-thirds (65%) will trade brands if prices are too high.

  • More than one-third (34%) plan to use social media for holiday shopping, and this is even higher for GenZ (60%) and millennials (56%). Further, 30% of holiday shoppers follow influencers for product recommendations, up from 24% in 2021.
  • Travel demand slows, with less than one-third (31%) of Americans planning to travel between Thanksgiving and mid-January, down from 42% in 2021.

"High prices have holiday shoppers prioritizing their purchases, but there are bright lights throughout the season,” said Nick Handrinos, vice chair, Deloitte LLP, and U.S retail, wholesale and distribution and consumer products leader. “As consumers aim to be strategic about their purchases to outsmart inflation, retailers who can be flexible to meet consumers where they are will be more likely to build loyalty and profit from the holiday season and beyond."

The "2022 Deloitte Holiday Retail Survey" examines what retailers can likely expect from consumers shopping for the holidays. With the current economic sentiment, Deloitte also explores holiday travel intent to help provide a complete spending picture this holiday season in the complementary report, "2022 Deloitte Holiday Travel Survey."

For both studies, Deloitte surveyed 4,986 consumers online between Sept. 6 and 14, 2022. From that group, 1,540 respondents who noted they would take a leisure trip this season and stay at paid lodging or with family or friends qualified as holiday travelers. For the holiday retail survey, Deloitte also polled 40 retail executives across categories, of which 93% were from retailers with annual revenues of $1 billion or more, conducted Sept. 1-13.

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