Why Economic Uncertainty Won't Keep Holiday Shoppers Down

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At no other time of year are consumers beset with as many choices and decisions as the holiday shopping season. Consider the following: At press time, Walmart was advertising a cashmere padded leather coat for $79.99. Then there’s the other end of the gifting spectrum: For those with finer tastes and deeper pockets, Overland Sheepskin Co. has its own version of a brown leather coat—the Blade Toscana Sheepskin model—for $1,595.

Walmart’s doing well headed into the holiday season. Its third-quarter earnings posted Nov. 15 saw revenue growth of 8.7% over Q2, and it’s projecting 3% growth through Q4. And so, with all the dour economic news afoot—inflation, rising interest rates, layoffs and a looming recession—you might assume the folks at Overland wouldn’t be getting their hopes up to sell a slew of pricey coats this year.

And you would be wrong.

“We’re looking to be up for the season,” Overland vp of ecommerce Gabriel Openshaw told Adweek, adding that inflation doesn’t concern him much.

“In an inflationary environment, if you have any cash, it’s not doing anything for you in the bank,” Openshaw said. So if a shopper buys a high-quality item, pricey though it may be, “you’re basically trading something that’s going to be declining for something that’s going to bring you value.”

Openshaw’s reasoning goes a long way toward explaining an economic paradox characterizing the 2022 holiday shopping season—and, by association, its marketing, which will cater to those who can spend and those looking for deals and value.

On the one hand, with inflation at 7.7% and recent news of tech giants faltering, a whiff of uncertainty hangs in the air. At the end of October, nonprofit think tank The Conference Board’s senior director Lynn Franco announced that “consumers’ expectations regarding the short-term outlook remained dismal,” while fears of a recession “appear to be rising.”

Franco’s not alone. In a 2022 Holiday Survey conducted by Deloitte, 37% of Americans said their financial situation is worse now than it was this time last year, and 41% expect the economy to weaken. For its part, Horizon Media’s 2022 Holiday Report cautioned that 23% of shoppers are spooked enough that they plan to spend nothing at all. A slightly larger tranche (29%) are “anxious.”

However—dismal outlook be damned—shopping surveys that proliferate at this time of year are nevertheless predicting a pretty healthy season.

A Shopify survey released earlier this month, for instance, found that the majority shoppers (57%) plan to spend as much as—if not more than—they did in 2021. And for all the consumer hesitation recorded in Horizon’s study, 41% of its respondents (the “resilient” consumers, and the study’s largest chunk) said they were confident and fiscally secure enough that they’ll be “sticking to spending as usual.”

“The overall outlook is generally positive as consumer fundamentals continue to support economic activity,” NRF’s chief economist Jack Kleinhenz said in a Nov. 3 statement. “Despite record levels of inflation, rising interest rates and low levels of confidence, consumers have been steadfast in their spending.”

How can these sober and ebullient forecasts coexist? One explanation is that 2022 is shaping up to be a tale of two shopping seasons: A healthy slice of consumers might be eager to tap their debit cards without fretting. Those who lack that confidence (or the necessary bank balances) will shop, too, but behave more conservatively.

And there’s already marketing that speaks to both groups.

Looking at the holiday ads already out there, some retail brands are clearly betting on the resilient crowd. Neiman Marcus, with a creative assist from Young Hero, has invited shoppers to “live your luxury.” In Swarovski’s 2022 spot, “Ignite Your Dreams” (General Idea on creative), Bella Hadid pops out of a pink box wearing more ice than a maharaja. Macy’s recent “Speechless” spot via BBDO shows a husband buying his wife a diamond necklace.

Is everyone suddenly rich? Hardly. But Bob Phibbs, CEO of The Retail Doctor, argues that all the talk of doom and gloom in holiday shopping overlooks an important shift in how many Americans earn their income. The single-paycheck careers of yore have ceded to an array of side hustles (among Gen Z especially) that boost discretionary spending power in ways that are hard to measure.

“We’re not tracking all the activity the right way,” Phibbs argues. “If we are truly getting to the End of Times, there would be way too many people looking for jobs.”

And there are not. October’s unemployment rate was 3.7%—well below what’s considered a “healthy” unemployment rate of 4% to 6%.

Going into the 2022 holiday season, “the reality is people are feeling hopeful,” Phibbs said, “because they’re out shopping.”

Consumers are indeed out shopping. According to NRF data, 46% of them started their holiday purchasing before November. But the fact that so many consumers are already out browsing suggests they’re also looking for the deals that historically come with pre-Thanksgiving shopping. In fact, Deloitte’s data shows that 60% of companies have rolled out their holiday promotions one to two weeks earlier this year.

And that, argues digital marketing strategist Shane Barker, is a portent.

Barker related that many of his brand clients kicked off Black Friday deals well in advance of Black Friday. He also pointed out that Amazon’s “annual” Prime Day happened twice this year. A growing wariness over where the economy is headed is likely to temper the buying spirit, Barker believes: “If [companies are] laying off thousands of people, then [consumers] are obviously probably not going to be too pumped about going and spending all kinds of money during Christmas.”

That warrants a look at the other side of this year’s marketing divide. Brands are obviously not giving up on hopes that shoppers will spend—but many are putting out value-driven messages in an apparent effort to convince Americans that spending is fine so long as it’s smart.

In many cases, the value pitch is simply a matter of dangling discounts. Kohl’s, for example, has trotted out the promise: “More gifts, more savings.” For its part, Target has a price-match guarantee.

“More brands will be using price as a driver to draw down inventory and appeal to frugal customers,” retail analyst and author Bruce Winder told Adweek. “Black Friday is expected to be one of the most promotional in recent memory.”

But experts also argue that this year especially, value has taken on another meaning: Consumers may not spend less money on a given item, but they will get more for what they do spend.

Consider the recent Verizon spot via McCann in which Ebenezer Scrooge, literature’s greatest tightwad, signs up for 5G service—not so much for the better signal, but so he can get a free phone.

Further evidence of the importance of value: 75% of respondents in Shopify’s survey said they’re looking for “products that will last.”

But Openshaw doesn’t need the validation of a study to tell him that many shoppers are putting quality over quantity this year. He sees it himself.

“When [shoppers] get a little bit more concerned about the economy, they’re looking for value,” he said. “We’re on the luxury end, but we’re not fashion-house luxury—it’s luxury by quality. Value for people with some discretionary income is going to be where they can get more bang for their buck.”