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Compared with the chaos of 2020, this year's holiday season, American consumers will usher in a more "normal" consumption atmosphere. But correspondingly, this year's holiday season, prices will soar sharply. In fact, not only the US market, but also many countries around the world have ushered in the highest inflation rate in nearly 20 years. There are many reasons for this phenomenon, but keywords such as "supply and demand imbalance" and "supply chain rupture" are always avoided. Many economists believe that the high inflation rate is a temporary problem, but many people in the industry have already sounded the alarm.
Leaving the economic environment aside, it is almost a foregone conclusion that consumer spending in the US market in December will be higher than last year (the same amount of money can only buy less).
According to the latest consumer price index released by the U.S. Bureau of Labor Statistics, the main measure of inflation, in November 2021, the consumer price index increased by 6.8% over the previous year, the highest increase in nearly 40 years. Even compared to October, the CPI rose by 0.8%. Product prices have seen an overall increase, with gasoline, housing, food, new cars and used cars and trucks seeing the most pronounced increases. In addition, according to data provided by Adobe, in November 2021, the inflation rate of online consumption also reached its highest level in history, up 3.5% year-on-year.
As Dana Peterson, chief economist at conference board, a nonprofit research institute, puts it, while commodity prices are rising and consumers are shopping, consumer behavior is less concentrated than in previous years. Some consumers did not wait until the black five promotions to shop as in previous years, but chose to place orders in advance – considering the frequent headlines of supply chain delays and shortages of goods, this kind of behavior is understandable to seize the time to spend money to buy goods.
So, how much will U.S. consumers spend this holiday season? Depending on the category, the level of spending by consumers varies. But the same thing is that this year's holiday season will be very "expensive":
Compared with 2020, the price of products suitable for gifts such as toys, clothes, sporting goods, etc. is rising. According to the BLS, even the price of wrapping paper and cards rose by 7.3% year-on-year. If you want to buy a car, the price of new cars and new trucks is up 11.1% year-on-year; the price of used cars and used trucks is up 31.4% year-on-year. Diets during the holiday season will also be more expensive – food prices are up 6.1 percent year-over-year, meat prices are up 12.8 percent year-over-year, and beef in particular is up 20.9 percent. If U.S. consumers often drive to holiday parties or visit family and friends during the holiday season, the spending on oil prices will also be "hot-eyed." (Currently, the average price of gasoline in the U.S. is $3.34/gallon,) according to the American Automobile Association.) A year ago, the average oil price was $2.16/gallon. ）
The overall rise in prices is by no means a "cold day": when the epidemic broke out, consumer shopping demand fell sharply, but as vaccination rates rose, people's lives gradually got on track, consumer demand surged, and supply capacity did not keep up in time.
In addition, due to increased market demand and supply chain disruptions, even the price of Christmas trees (including real and fake trees) has been higher this year – consumers surveyed said that the price of Christmas trees will increase by 10% to 30% this year, and the range of options is smaller than last year.
Stock? Stock!
Most ordinary consumers probably don't pay too much attention to supply chain issues. Instead, the media and vested interests (sellers/platforms) are constantly urging consumers to stockpile (especially gifts during the holiday season). Patrick Penfield, a professor of supply chain management at Syracuse University, explains that perhaps sellers can meet the early demand of the market, and it is difficult to replenish them later. Compared with behemoths such as Walmart and Target, it may be difficult for small and medium-sized sellers to make up for out-of-stock inventory in time, Patrick said that sellers can indeed "make up" goods overnight, but correspondingly, they also have to give up some profit margins.
The supply of goods in e-commerce is not much better than that offline supermarkets. According to Adobe data, in November 2021, consumers "witnessed" more than 3 billion out-of-stock messages from online sellers. The number of out-of-stock information in November 2021 increased by 258% compared to the same month in 2019. Adobe expects the out-of-stock trend to continue until the end of 2021. To its credit, online sales growth remains strong, rising nearly 14 percent to $114 billion in November.
The popularity of out-of-stock information has contributed to the rise in the average price of online sales to some extent, and limited supply means that consumers can get products at higher prices. As time goes up, the price of holiday season products will rise instead of falling. Vivek Pandya, a senior digital insights manager at Adobe, admits that what used to be said to be online was about saving money is now the complete opposite.
Correspondingly, this year's holiday season is not as discounted as in previous years. According to Adobe's data, this year's net One, electronic products discount rate of 12% (last year was 27%), TV discount rate of 13% (last year was 18%).
No new, buy old, used/refurbished products deals are prevalent
In the third quarter of 2021, the value of products sold on eBay (vs. the number of products) increased by nearly 10% compared to the same period before the pandemic. In November, the number of products under the Watches, Handbags and Certified Refurbishment categories on eBay increased by more than double digits year-on-year. Jordan Sweetnam, senior vice president and general manager of eBay North America, said in an interview that the scarcity of products has a greater impact on consumers' shopping behavior, and consumers have a more open consumption attitude towards the type of inventory (degree of newness and oldness, whether it is a second-hand/refurbished product). According to eBay, popular items on eBay this holiday season include the Sony Playstation 5s, the Louis Vuitton Speedy 30 handbag and the Bose Noise Canceling headphones. Sales of refurbished products, including air fryers and vacuum cleaners, also grew alarmingly.
The supply chain woes have an end, but they take time to heal
Supply chain problems will be solved over time, market demand returns to normal levels, factory production levels return, and congestion at major ports improves, but not overnight – it will take years to return to pre-pandemic levels.
Baylor University professor and supply chain expert Pedro Reyes believes that supply chain problems have existed for a long time, but the epidemic has accelerated the process of exposing the problems. He pointed out that the practice of offshore production in factories dates back to the 1990s. "This approach frees companies from taking responsibility, but correspondingly, the control of the supply chain will decrease and the risk will rise." Plus, because U.S. consumers have been "spoiled," they've become accustomed to and expect to get what they want at any time. But there is also a positive side to the current embarrassment of supply chains: the pandemic can be a wake-up call for companies and industries to recalibrate so-called "conventions" to avoid repeating the same problems in the future.
Although the inflation problem is more serious, it has not caused much splash among the American people. According to a Survey Board survey in October, the average consumer budget spent on holiday gifts and related items at Christmas was $1,022, of which $648 was for gift purchases and $374 for other aspects of spending. However, due to reasons such as the increase in spending budgets on social events, consumers' budgets for gifts have decreased slightly in 2021 compared to 2019 and 2020.
However, there are also some consumers whose consumption behavior has shifted, and some consumers have advanced the timing of consumption – according to a survey by npd group, about 4 out of every 10 consumers have already purchased holiday gifts in October due to supply chain concerns.
In essence, this year's Black Friday activities and seller performance may not be as eye-catching as in previous years, but there will be some longer-lasting promotions. The Conference Board's survey found that consumers will see the highest increase in spending on gift cards, followed by footwear and apparel. The gift card can also extend the so-called peak season to January.
There are a lot of uncertainties about this holiday season. The economy is improving, people are returning to work, and the government's economic stimulus measures have helped to raise people's savings. But the recovery of the consumer environment remains a bumpy process. The epidemic is not over, and there are many instabilities in the emerging omicron variant. And the degree of economic and public health events is relatively highly tied — although many Americans have thought of a more "safe" holiday season this year. They may pay for higher-priced products, after all, this time, the expenditure of money can indeed bring them real comfort.