Holiday shoppers' purchases will be influenced by elections, hurricane damage, and other factors.

• This holiday season, shoppers' purchases will be impacted by a deal-hunting mindset, unpredictable weather, and election distraction.
• According to the National Retail Federation, it is predicted that holiday spending in November and December will increase by 2.5% to 3.5% compared to 2023, and will fall between $979.5 billion and $989 billion.
• During the 2023 holiday season, consumers plan to spend more on decorations and experiences than they did in previous years, but slightly less on gifts, according to a survey by Deloitte.

Despite the decrease in inflation, retailers are still facing uncertainty during the holiday season.

Factors such as unpredictable weather, election distractions, and a deal-seeking mentality will impact consumers' spending during the holiday season. Additionally, the shorter timeframe between Thanksgiving and Christmas this year will put pressure on shoppers to act quickly.

Retailers can be optimistic during the upcoming holiday season as shoppers plan to spend more and feel more upbeat, according to surveys by Deloitte and the National Retail Federation.

The National Retail Federation predicts that holiday spending in November and December will increase by 2.5% to 3.5% compared to 2023, totaling between $979.5 billion and $989 billion. This is a more modest increase than the 3.9% year-over-year jump from the 2022 to 2023 holiday season, when spending totaled $955.6 billion. The NRF's figure excludes automobile dealers, gasoline stations, and restaurants.

According to Deloitte's survey, shoppers anticipate spending an average of $1,778 on the holidays this year, a 8% increase from the previous holiday season. The survey, which involved about 4,000 consumers, found that the increase in spending was due to a more optimistic economic outlook, higher perceived prices, and a greater willingness to spend among higher-income households with an annual income of between $100,000 and $199,000.

Stephen Rogers, managing director of Deloitte's Consumer Industry Center, stated that low unemployment, typical inflation levels, and a recent Federal Reserve interest rate cut are boosting consumers' mood.

"Despite the political chatter, people feel better when they consider their financial situation and look at their bank account."

Deal-hunting mentality

Weeks before trick-or-treating, shoppers got a taste of their first holiday deals.

The increase in living costs for years has led shoppers to seek out more ways to stretch their budgets during the upcoming season, as indicated by the early offers.

A majority of surveyed shoppers, 79%, said they would participate in deals events in October and November, an increase from 61% the previous year.

"We have been exercising our deal-seeking muscle for the past two years and will continue to do so," Rogers stated.

Matt Shay, CEO of NRF, predicted that this holiday season will have a more promotional environment, with more brands and categories offering deals compared to the previous year.

Another challenge for retailers is catering to customers who prioritize decorations and experiences over gifts. Deloitte's survey found that consumers plan to spend 16% more year over year on experiences, but spend 3% less on gifts compared with the previous holiday period. Additionally, non-gift purchases, such as decor and party apparel, are expected to increase by 9% year over year.

In 2024, the firm's survey predicts that retail spending will remain relatively stable, with an average of $1,043, compared to $1,020 in 2023. Consumers across all income groups reported a focus on value-seeking behaviors, such as less self-gifting, trading down to more affordable retailers, and seeking out private labels or cheaper alternatives to pricier items.

Unless retailers find ways to link their products to experiences, such as recommending hiking gear, that shift could harm them, according to Rogers.

The home improvement retailer is ready for consumers to seek value in addition to the high demand for holiday decor, which includes Santa-themed throw pillows and a giant animated reindeer for yards.

Lance Allen, senior merchant of decorative holiday for Home Depot, stated that the retailer bought more low-priced artificial Christmas trees, including a prelit tree that costs $49, during this holiday season.

Election uncertainty

Will Americans shop for the holidays while awaiting the presidential election results?

Retailers and consumer brands, including and , are hoping that shoppers will browse and buy rather than become glued to the news leading up to the election on Nov. 5. If the race between Vice President Kamala Harris and former President Donald Trump ends up as close as polls suggest, it could take days for a winner to be called.

The holiday season will be shaped by the "biggest unknown" that is the election, as described by SharkNinja CEO Mark Barrocas.

"The news cycle may disrupt things for a few weeks, but it may also be nothing, and it may just be a blip," he said. "The holiday season is coming, and it's just a matter of how many distractions there are."

The election and the surrounding news coverage may affect consumers' perceptions of the economy, as stated by him.

Walmart's internal research indicates that its shoppers experience an increase in positivity during the fall, leading up to Halloween, according to Jen Acerra, vice president of customer insights and strategy at Walmart.

"The election's outcome will determine whether the current situation remains positive or not," she stated.

Some companies have attributed their weak sales forecast in August to the election, which they claim distracted consumers from shopping online. This claim has been met with skepticism by some.

In a CNBC interview this month, Ed Bastian, CEO, stated that the company anticipates lower demand prior to and following the election, which will negatively impact the airline's revenue.

"He believes that consumers will temporarily delay their investment decisions, whether discretionary or otherwise, and that other industries will also discuss this."

Hurricane damage and winter temperatures

During the winter season, retailers consistently desire cooler temperatures for their Christmas sales.

Retailers can use weather data to boost holiday sales by encouraging shoppers to purchase thicker clothing and gifts, according to Evan Gold, executive vice president for Planalytics.

He stated that the weather has a direct, frequent, and immediate impact on consumers' purchasing decisions.

This fall, the start of the holiday shopping season was marked by October sales events, but unseasonably warm temperatures in San Francisco and other parts of the country, and severe hurricanes that hit North Carolina and Florida, made shoppers less likely to buy sweaters, coats, and artificial trees.

Gold stated that the colder temperatures in November and December this year would eventually aid retailers, as a shift in weather, such as a dusting of snow or a cold snap, can signal shoppers to prepare for the season.

According to Jack Kleinhenz, the NRF's chief economist, many families will prioritize rebuilding from hurricane damage instead of purchasing holiday gifts, which may result in redirecting funds towards furniture, clothing, or home repairs.

"It's an adjustment in their budget for what they'll spend on retail, but it's too early to determine the full impact," he stated.

Home Depot anticipates the need for shingles and drywall in hard-hit areas, so it has removed holiday products from 124 big-box stores and will instead sell a limited assortment of items such as wreaths and top-selling trees.

"Since they're focused on rebuilding and recovering their homes, they won't purchase a nine-foot reindeer to display outside."

A shorter holiday season

Thanks to the calendar, the holiday rush may be on overdrive.

This year, shoppers will have five fewer days between Thanksgiving and Christmas compared to last year, which may lead to decreased spending or increased demand for faster shipping, curbside pickup, or other quicker options to get gifts.

Retailers will face pressure to maximize efficiency and provide convenience as shoppers rush to obtain items quickly, with deliveries expected within a few hours or at most, a few days, according to Shay of the NRF.

"Of course, one consequence of a shorter period is that the shipping season will be shorter," he said.

Kohl's Chief Marketing Officer Christie Raymond stated on a recent store tour that the retailer anticipates needing to exert more effort to attract customers, particularly those in the lower- and middle-income brackets, who have been impacted by inflation and time constraints.

"Raymond stated that they believe shoppers are experiencing more pressure this year, while she also mentioned that customers have expressed feeling constrained by time."

Nick Jones, Kohl's Chief Merchandising and Digital Officer, stated that the company aims to meet the needs of its consumers.

The retailer has expanded its selection of gift items, increased its inventory of party dresses, and now offers a broader variety of decorations, including Christmas trees, lawn ornaments, and wrapping paper.

"He stated that they aspire to become a vacation spot, despite not having sufficient culinary offerings, but possessing everything else necessary."