Sitting out the season: A record number of Americans say they won’t be buying holiday gifts this year

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  • Predictions are rosy for holiday retail sales, with the National Retail Federation calling for a record gain of 8.5% to 10.5% from year-over-year levels.
  • But according to a survey by Deloitte, a record-high amount of people, or 11.5% of Americans, aren’t buying any gifts this holiday season.
  • Wealthy consumers are planning to spend more, which would hide the fact that many others are sitting out of season.
  • Deloitte said that high-income households in the US plan to spend five times more this holiday season than low-income households.

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Code Tenderloin, a non-profit group serving the homeless in San Francisco, said it has about $7,000 worth of gift cards for those who need additional financial support over the holidays.

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In recent weeks, requests have been made for food, clothing and gifts from community members. Others are asking for the help of Code Tenderloin only to put a roof over their heads on a rainy evening. And those solicitations are likely to come only during the holiday season, said Donna Hilliard, executive director of Code Tenderloin.

“While everyone is going through their day-to-day, excited about this holiday season, we have a whole community of stressed out people,” Hilliard said in a phone interview. “We’ve seen more demand this year than ever before.”

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The dynamic at Code Tenderloin San Francisco speaks to a large money gap that has only intensified during the COVID-19 pandemic and will be particularly evident during the holiday season. Predictions are rosy for holiday sales, with the industry’s largest trade group, the National Retail Federation, seeking a historic gain of 8.5% to 10.5% from a year-ago level. But growth is largely being driven by a wealthier segment of consumers. Meanwhile, according to a survey, a record-high amount of people are not expecting to participate in any gifts.

‘People are panicking’

The burden of rising prices of fuel, groceries and other items is falling on the minds of many shopkeepers. Consumer confidence hit a 10-year low in November, according to the University of Michigan Consumer Sentiment Index, as inflation hit the highest level since the early 1990s. Buyers are spending, but they are afraid to open their wallets.

“People who were already struggling before the pandemic are really struggling now,” Hilliard said. “And everyone who has spent their stimulus money is coming now. Now that the rent moratorium is over, people are getting upset.”

According to a survey by Deloitte, this holiday, 11.5% of people plan to sit outside in season by not spending anything on gifts, gift cards, or other items for entertainment. As long as the consulting firm is keeping track, that’s a record amount of Americans.

Deloitte found that high-income households will spend five times more this holiday season than low-income households. The consulting firm surveyed 4,315 consumers about their holiday shopping plans between September 7 and September 14.

Stephen Rogers, executive director of Deloitte's consumer industry division, said, "This tale of two holidays is a great reflection of the tale of two pandemics, isn't it?". "What starts as a health crisis turns into a financial crisis if you are on a low income" [bracket],

"Those of us who have invested in 401k have done quite well," he said. "You can see from 2019 to 2021, the lower income group is spending almost half of what it used to. And the higher income group is spending almost twice what it spent two years ago."

Deloitte's survey found that families that bring in more than $100,000 a year will spend $2,624 on this vacation, up 15% from 2020. Whereas low-income groups, those earning less than $50,000 per year, plan to spend $536 per household, 22% less than the year-ago level.

Big spenders mask non-spenders

Kartik Easwar, an associate professor at Georgetown University's McDonough School of Business who specializes in consumer psychology, said he agrees that the economic impact of the pandemic has been stark and uneven.

For some Americans, this means a lost job, a longer vacation or additional health risks because they worked on the frontline in a one-hour retail position. For Americans in white-collar jobs, this simply meant a change of location from the company office to the home office. Meanwhile, these workers wiped away savings from canceled vacations, summer camps and other activities as the value of the stock in their retirement accounts soared.

Ishwar said, "We all experienced the pandemic, but some experiences were very different for different parts of our society - especially our workforce." "We are still seeing the impact of this."

However, several key economic indicators are pointing to a recovery. The unemployment rate has fallen. There are more job opportunities than people willing to fill them. And a tight labor market means many employers are raising wages and sweetening perks. For example, Macy's is investing $35 million over the next four years to provide its employees with an education program that will cover 100% of tuition, books and fees.

But an economic divide will still be at play this holiday season for those who can spend lavishly and those who feel they have little room to spend, Ishwar said. Some retailers will cater to big spenders. He said his spending coupled with higher sticker prices would ease the fallout among financially strapped consumers.

"There are consumers who want to spend a lot. And if I spend $5,000 on a trip to Disney and then a few thousand dollars on fancy and expensive gifts for my family, or buy a new car.. . A lot of people who aren't spending the $700 they can usually afford," Ishwar said.

Neiman Marcus, known for its affluent shoppers, features an annual holiday catalog that includes over-the-top "fantasy" gifts. this year's copy This includes a 30.86-carat diamond called the Muggle Heart, which is worth $6.1 million. Among the items listed is a Moet & Chandon champagne vending machine that is on sale for $38,000. The department store said it had already sold several.

Neiman Marcus President and Chief Business Officer Lana Todorovich said the company has seen its customers get a head start on their holiday shopping this year and spend more money per transaction.

“We are seeing a lot of activity which is earlier and stronger than in previous years, which really speaks to their anticipation and enthusiasm,” she said. "We're also selling an extraordinary amount of gowns, dresses, and our tuxedo sales are huge."

Some retailers try to keep prices low

On the other end of the price pendulum, however, discount retailers and dollar stores are trying to keep costs down for shoppers who are buying on a budget.

Last week, Walmart CEO Doug McMillan and Target CEO Brian Cornell both pledged to keep prices low -- even if that eats into profits -- adding that consumers are looking for value, especially when inflationary pantry staples and Increases the price of household goods.

"That's what we aim for," Walmart CEO Doug McMillan said in an interview with CNBC's "Squawk on the Street." "We save people money and help them live a better life. These are the words that came from [Walmart founder] Sam Walton's mouth. He loved to fight inflation. so do we."

Inflation has become widespread - even dollar stores have had to swell. Dollar Tree is raising its price floor to $1.25 in an effort to relieve pressure from increased freight costs. But it still believes that a slightly higher price tag is competitive.

“We believe that at $1.25, it is still going to be an undeniable value which is why [shoppers are] "Looking at the market," Dollar Tree CEO Michael Wittensky said on an earnings call this week.

A separate Deloitte survey found that of the 70% of people who had already started their holiday shopping by the end of October, 54% said they were looking at higher prices than last year. And nearly one-third of consumers said they increased their holiday budget more than they had planned in September. Deloitte polled 1,200 consumers from October 21 to October 25.

But not everyone has the same flexibility to make the decision to spend more money.

"It's going to be tough for a lot of people," said Rod Sides, vice chairman of Deloitte's retail distribution practice. "When gas prices, food prices and general things like that continue to rise at the pace that we're seeing, there's this uncertainty that says, 'I probably don't need to spend on that particular item, because now I have to cover my rent, and I probably didn't before.'"

Price sensitivity aside, there may be some consumers who are sitting out on holidays because they still worry about the pandemic, according to God. Either they lost a loved one due to coronavirus or they are still terrified of catching it.

"'Should I go to the store or order online? Should I go to the big holiday party or not?' ... it's going to put a lot of weight on consumer behavior this year because we're all battling that balance," he said.

Before it pivots to gift-giving and gift cards, Code Tenderloin said it's busy trying to secure enough turkey to cook for the Thanksgiving meal this week.

"We're just getting bombed," said Dale Seymour, executive director of Code Tenderloin. "And it's a very prosperous city."


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