Humbug: UMD Retail Expert Points to Challenges This Holiday Shopping Season

While engagement rings and puppies might be welcome holiday surprises, the unknowns of the coming holiday shopping season are not. 

Tariffs and inflation have scrambled holiday spending forecasts, threatening a slump in sales this year. Retailers are scaling back on orders, limiting supply, while cash-strapped shoppers are demonstrating caution as they push their carts.

Adding to the confusion: The government’s delayed October inflation report is unlikely to be released due to the recent federal shutdown. The Consumer Price Index rose 3% in September, the fastest annual pace since the beginning of the year.

“Uncertainty is the big word,” said Jie Zhang, Dean’s Professor of Marketing and the Harvey Sanders Fellow of Retail Management at the Robert H. Smith School of Business at the University of Maryland. “It’s a unique year. Base prices of products are higher across the board.”

If you’ve experienced sticker shock, you might blame tariffs, which Zhang called “the elephant in the room.” Price hikes due to that beast could grow next month, as traditional holiday gifts like clothes, electronics and toys typically come from overseas, where import taxes range from 10% to, in China’s case, 47%. 

Retailers have absorbed some of the costs but are starting to pass them down to consumers. They might show restraint during the holidays to stay competitive, but things might accelerate going into the new year, Zhang predicted. 

For most retailers, higher import taxes mean leaner inventories and fewer options, a frustration exacerbated by supply chain disruptions due to tariff policy fluctuations. Some products placed on backorder might not arrive until after Dec. 25. 

For shoppers who prefer large companies like Amazon, Walmart and Home Depot over local retailers, however, there is some comfort, as these big-box companies were able to stockpile goods early this year in anticipation of tariffs, Zhang said.

Meanwhile, gift recipients accustomed to this season’s hot new stuff should temper their expectations for big-ticket items. But if you’re looking for a new cellphone charger, you’re in luck.

Consumers are in the mood for gift-giving and celebrating the holidays but households facing economic hardship or uncertainty this year will scale back their spending, opting for useful, year-round items rather than lavish gifts, said Zhang.

“The word I keep hearing is ‘practicality,’” she said. “Many shoppers are gravitating toward the basics,” including clothing, wellness items and inexpensive electronics like wireless earbuds, speakers and … chargers. 

Shoppers seeking bargains, meantime, will need to search harder—and faster. In previous years, Black Friday-like sales appeared well before Thanksgiving, but this year’s lower inventories and thinning profit margins are leading to fewer discounts. For that reason, shoppers should act quickly if they see a good deal. “They won’t last,” she said. 

Consumers are committed to gift-giving this season but many are cutting back on spending on themselves, Zhang said, and while she doesn’t have the data to make predictions, “it’s safe to say it’s going to be a challenging year for the retail industry.”

Notably, not all consumers are feeling inflationary pain. A smaller segment of high earners is poised to open their wallets like never before, even in the face of record luxury prices, Zhang said. That’s thanks to a robust stock market helping produce “a bifurcation in our economy,” she added.