Retailers Prepare For Unpredictable Holiday Shopping Season As Inflation Worries Persist

With inflation at a record high, retailers across the country are steeling themselves for less spendy shoppers heading into the crucial holiday shopping season.

Lower-income shoppers have been hit harder by inflation than their wealthier counterparts, and that’s expected to make an impact on how they shop at the end of this year, Financial Times reported. 

Department and shoe stores are on the front lines of these changes. Nordstrom said it has seen demand from its lower-income shoppers drop 13% and Foot Locker dropped prices on its shoes. Competition among apparel sellers is a major factor, FT said. 

Although inflation is taking a bite out of holiday expectations for many retailers, some are anticipating what they deem a normal shopping season and are boosting inventories to prepare for that.

But knowing exactly how much inventory to have on hand is complicated: Just a couple of months ago, retailers like Target and Macy’s had so much inventory that they were forced to slash prices. 

“Retailers have really been stung by [excess inventory] in the current quarter so they are very wary of over-buying,” GlobalData Retail Analyst Neil Saunders told FT, adding that margins would be the “biggest headache.”

Some industrial real estate watchers are expecting inventory backups to lead to an even greater demand for warehouse space. Leading up to this holiday season, Target said it has locked down warehouse space near ports to hold inventory so it will have enough items on hand for the holidays season, FT reported.