Inflation to dampen holiday retail sales, Deloitte says
E-commerce sales are expected to jump between 12.8% and 14.3%
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Retail spending growth is expected to slow during the 2022 holiday season as higher costs continue to weigh on consumer budgets, according to a new forecast by Deloitte.
However, these higher costs are expected to drive a surge in e-commerce sales as more consumers seek out deals online "to maximize their spending," according to Nick Handrinos, vice chair at Deloitte.
From November through January, Deloitte projects that retail sales will grow between 4% and 6%, which is down considerably from the 15.1% growth during the same period last year.
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Meanwhile, e-commerce sales are estimated to grow between 12.8% to 14.3% compared with a year ago, according to Deloitte's report. Last holiday season, e-commerce sales grew 8.4%.
As a result, e-commerce holiday sales this year will likely reach between $260 billion and $264 billion, according to Deloitte.
Shoppers walk through the Easton Town Center shopping mall in Columbus, Ohio, on Dec. 10, 2021. (Luke Sharrett/Bloomberg via Getty Images / Getty Images)
Although consumers will undoubtedly hit stores for the gift-giving season, their habits, due to painfully high inflation, will shift.
The lower projected growth for in-store retail sales this season "reflects the slowdown in the economy this year," Deloitte’s U.S. economic forecaster Daniel Bachman said.
While inflation will still help raise dollar sales, "retailers will see less growth in sales volume," Bachman added.
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Bloomingdale's department store in the SoHo neighborhood of New York, U.S., on Sunday, Oct. 24, 2021. (Nina Westervelt/Bloomberg via Getty Images / Getty Images)
However, retailers that "remain aligned with consumer demand and offer convenient and affordable options can be well positioned for success this season," Handrinos said.
Even before the holiday season kicks off, retailers have been facing issues with excess inventory due to higher-than-normal prices and dwindling demand.
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It's an issue major retailers including Macy's, Nordstrom, Kohl's and Walmart have noted on recent earnings calls with investors. To remedy this issue, the retailers have been issuing additional markdowns ahead of the holidays to clear out unwanted products.
Meanwhile, arts and crafts retailer Michaels isn't concerned with product surplus and told FOX Business last month that it regularly sees its holiday assortment sell-through.
"The response to our Halloween merchandise that began setting in-stores in August is an early indicator of the demand this year," Michaels' Chief Operating Officer Joe Venezia told FOX Business.