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UMD Retail Expert Predicts Hits From Inflation, Inventory Glut
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This holiday shopping season might already feel like it’s longer, but like a hockey stick under the tree, it’s not expected to wrap up beautifully.
Retailers this year again rolled out their Black Friday promotions well before the traditional post-Thanksgiving shopping blitz: Amazon introduced a Prime Early Access Sale in mid-October, around the same time that Walmart and Target started offering Black Friday deals.
And while the National Retail Federation this month forecasted a 6-8% increase in holiday sales, inflation now hovers at a nearly 40-year high of 8%—cancelling out any growth, said Jie Zhang, professor of marketing and the Harvey Sanders Fellow of Retail Management at the University of Maryland’s Robert H. Smith School of Business.
“We know the inflation rates, we know the interest rates. Consumer confidence is falling,” she said. “To make things worse for retailers, there has been a big shift of consumer spending patterns since earlier this year.”
Americans are spending more on necessities like groceries and food as well as on discretionary goods like restaurant meals and travel, Zhang said. They are no longer enjoying COVID-19 stimulus checks, so they’re also relying more on credit and savings and looking for deals.
Leftover inventory is where they’ll find them. Unlike the previous two holiday shopping seasons, retailers and consumers no longer face seriously disruptive supply chain issues, said Zhang. Last year, that translated into shortages of holiday merchandise, drastic increases in shipping costs, and for small and medium retailers, price competition from large competitors. This year, she said, many retailers are scaling back.
“They haven’t stocked up big time because some of them are still burned from the extra inventory they had to carry over in the spring,” she said.
In fact, some of this season’s sales will likely be holdover inventory from a glut many retailers found themselves with this past spring, Zhang said. Retailers will likely use holiday sales to clear out any extra inventory they’ve had stashed away without drawing suspicion.
Plus, there are few popular must-have items on wish lists this year, compared to the 2021 run on AirPod Pros and Nintendo PS5s.
“Many households are on tight budgets to start with. If there aren’t those really hot must-have products to generate the buzz for people who do have the disposable income, that will also temper the holiday shopping season,” she said.
But for consumers who are looking to spend, Zhang suggested heading straight to the electronics aisles and home furnishing aisles, where she said there should be plenty of products and good buys, especially on big TVs and appliances.
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