Disparity Between High and Low Earners Will Impact Holiday Season
Consumer confidence is down, with Americans spending 25.6% more on gas and 11.4% more on buying groceries than they did a year ago.
A widening difference between high and low earners will continue to impact the holiday shopping season, according to a new analysis from JLL.
Retail shoppers are in a significantly different position than a year ago, with GDP declining 1.6% and 0.6% in the first and second quarters, respectively. Consumer confidence is down, with Americans spending 25.6% more on gas and 11.4% more on buying groceries than they did a year ago.
“There has been considerable trepidation in consumer outlook and a shifting of spending away from durable goods,” JLL analysts note in a new report. “Retail sales have managed to stay afloat, rising nominally most months this year, and slightly eking out the effects of inflation with 9.1% year-over-year growth in August.”
What’s more, inflation is not having a uniform impact: “low- and middle-income earners are much more greatly impacted than high earners. As a result, there has been a swing away from some discretionary spending toward necessities and a move to discount retailers that sell these goods,” the report notes. JLL notes that Costco and Grocery Outlet saw strong growth in comp sales, whil Kohl’s and Burlington saw comps decline. But premium retailers are seeing “robust” sales growth, with Lululemon’s second-quarter earnings soaring by 25%, and Capri Holdings seeing revenue climb by 8.5% year-over-year.
Specifically, JLL says modest income shoppers, defined as those earning less than $50,000, are more likely than average to cut their holiday budgets from last year and start shopping between Halloween and Thanksgiving. They are also likely to look for sales and buy less expensive gifts, and will shop in stores, particularly in mass merchandisers. Conversely, affluent shoppers — defined as those making more than $150,000 per year, will spend considerably more than the average, will start shopping before Halloween, and are more likely to buy online and pick up in store.
JLL research shows that inflation will ave a deeper impact on how consumers with modest incomes shop for the holiday, as about. 49.7% of consumers earning less than $50,000 plan to significantly cut their budgets, while only about 24% of those earning $150,000 will do the same.