Economic woes are still front of mind for shoppers this holiday season.
With inflation rising over the summer months, back to school spending was stalled—fashion or fuel drove online shoe sales despite higher prices and tighter budgets. It’s no surprise these sentiments are spilling into the year-end season of spending.
The NPD Group’s 2022 Holiday Purchase Intentions Study has financial caution at the forefront, with 43 percent of respondents indicating they will spend less this holiday season due to higher prices. More consumers have negative perceptions of the economy and personal finances—below levels seen at the height of the pandemic. But on a positive note, the report found consumers plan to spend more than they did in 2020 with an average of $760, $25 less than last year.
Of that spending, expect to see fashion shoes and sandals gaining traction in the footwear business. As the fastest growing area of the footwear market this year, this segment has returned to pre-pandemic levels based on Q3 sales-revenue gains.
“Social events are back on the calendar, prompting consumers to purchase dressier silhouettes to refresh and replenish their wardrobes—something they really haven’t had to do for two years,” said Beth Goldstein, fashion footwear and accessories analyst at the NPD Group. “These needs should help drive sales through the holiday season, although footwear sales are projected to be slightly down in the fourth quarter, versus last year, according to the NPD Future of Footwear forecast.”
According to NPD sports industry advisor Matt Powell, inflation and recession fears coupled with supply chain issues have created “shaky ground” for the athletic footwear industry, despite sales remaining above pre-pandemic 2019 levels.
“We can expect a heavily promotional holiday shopping season for athletic footwear as brands promote to drive sales and clear excess inventory,” he said. From Nike to Adidas, some of the biggest sneaker makers around could try to out-promote each other to win holiday wallets this season.
A new Oracle Retail consumer research study found that price will be paramount this season as shoppers are increasingly worried about inflated costs and, therefore, stricter spending limits. Nearly 60 percent of shoppers said current economic factors will cause them to spend less, and 71 percent said they would consider a payment plan to cover the costs of gifts. But if the price is right, shoppers will pay; 47 percent noted cost will be the main factor in moving them from browser to buyer.
“Next to inventory availability, price is the leading factor in how and where consumers will shop this holiday season,” said Mike Webster, senior vice president and general manager of Oracle Retail. “For retailers still dealing with the constant loop of limited inventory supplies or surpluses, getting merchandise and pricing strategies right will be make or break when it comes to managing margins and customer expectations.”
Online shopping could see its first major decline this holiday season. A 5 percent increase from last year, 20 percent of respondents plan to hit the stores for their purchases. Coveo’s 2022 Holiday Shopping Report found that physical U.S. retail growth outpaced e-commerce in 2021 for the first time since online retail sales were tracked. According to the U.S. Department of Commerce Retail Indicator Division, sales in brick-and-mortar grew 18.5 percent while e-commerce grew 14.2 percent. Interestingly, Coveo reported that 54 percent of consumers will look at a product online and purchase it in store, while 53 percent will do the reverse.
“With consumers headed back to stores, retailers must create an endless aisle experience,” Webster said. “To maintain loyalty, nearly every interaction needs to end with the consumer getting the product they want in time for the holidays.”
But of those online shoppers, Coveo’s survey findings confirm that consumers are open to personalization techniques, stating they prefer tailored offers (51.2 percent), top reviews and best seller notifications (46.5 percent), product recommendations (34.3 percent), and virtual try-on tools (22.2 percent).
“Our survey indicates that consumers now expect hyper-personalization and true 1-1 personalization at scale, which is a necessity for brands to win,” said Brian McGlynn, general manager of commerce at Coveo. “We believe brands must provide tailored offers, product reviews, and personalized recommendations that interact with the instantaneous intent of the shopper. Combining these strategies will enable retailers to guide shoppers to the products they really want, reducing the potential for returns, which continues to plague retailers and threatens their profitability by cutting into profit margins.”
Globally, retailers lose more than $600 billion in revenue each year due to returns, The NPD Group reported. And the problem is just getting bigger, according to the National Retail Federation. Online sales’ return rate grew to 20.8 percent in 2021, up from 18.1 percent the previous year. Oracle’s study found that 30 percent of consumers would return half to all their gifts this year.
“With many retailers beginning to charge for returns and over a quarter of shoppers already planning to make them, this holiday season could be end up as a detriment to customer loyalty,” Webster said. “While a return fee makes economic sense, retailers are likely to meet resistance from buyers who will be annoyed by the added cost and less likely to use the return opportunity to browse and buy additional items.”