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More Americans Won’t Buy Holiday Gifts This Year

Donna Hilliard, executive director of Code Tenderloin, said the non-profit group serving the homeless population is currently seeing more demand than it has ever seen.

Source: Code Filet

Code Tenderloin, a nonprofit serving the homeless in San Francisco, said it has about $ 7,000 in gift cards to hand out to those in need of additional financial assistance during the vacation.

In recent weeks, requests from community members have poured in for food, clothing and gifts. Others simply seek help from Code Tenderloin to put a roof over their heads on a rainy evening. And those demands will likely only increase as the holiday season drags on, said Donna Hilliard, executive director of Code Tenderloin.

“As everyone goes about their daily lives super excited about this holiday season, we have a whole community of people who are stressed out,” Hilliard said in a phone interview. “We are seeing more demand this year than we have ever seen.”

The momentum Code Tenderloin is witnessing in San Francisco is testament to a larger wealth gap that only accelerated during the Covid-19 pandemic and will be particularly evident during the holiday season. The forecast for holiday sales is optimistic, with the National Retail Federation, the industry’s largest trading group, calling for historic gains of 8.5% to 10.5% from last year’s levels. But growth is largely driven by a wealthy fraction of consumers. Meanwhile, a record number of people don’t expect to participate in giveaways, according to a survey.

“People are panicking”

Rising prices for fuel, groceries and other commodities are weighing on the minds of many buyers. Consumer confidence hit a 10-year low in November, according to the University of Michigan Consumer Sentiment Index, as inflation hit its highest level since the early 1990s. buyers are spending money, but they are increasingly nervous about opening their wallets.

“People who had struggled before the pandemic are really struggling now,” Hilliard said. “And everyone who spent their stimulus is coming in now. Now that the rent moratorium is lifted, people are panicking.”

On this holiday, 11.5% of people plan to spend the season outside spending nothing on gifts, gift cards or other items for entertainment, according to a Deloitte survey. That’s a record number of Americans on the sidelines, as long as the consulting firm has followed.

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

“This story of two vacations is a pretty good reflection of the story of two pandemics, isn’t it?” Said Stephen Rogers, executive director of the consumer industry division at Deloitte. “What starts as a health crisis turns into a financial crisis if you are in the low income bracket [bracket]. “

“Those of us who have invested in 401k have done quite well,” he said. “You can see from 2019 to 2021, the low income group is spending almost half of what it spent before. And the high income group is almost double what it spent two years ago.”

Households earning more than $ 100,000 a year will spend $ 2,624 each on this holiday, up 15% from 2020, according to Deloitte’s survey. While low-income groups, who earn less than $ 50 $ 000 per year, plan to spend $ 536 per household, down 22% from levels last year.

Big spenders hide those who don’t spend

Karthik Easwar, an associate professor at Georgetown University’s McDonough School of Business specializing in consumer psychology, said he agreed that the economic impact of the pandemic had been brutal and uneven.

For some Americans, this has meant job loss, extended leave, or increased health risks while working on the front line in an hourly retail position. For Americans in white collar jobs, it simply meant a change of location from the corporate office to the home office. Meanwhile, these workers saved on canceled vacations, summer camps and other activities as the stock value of their retirement accounts rose.

“We have all been through the pandemic, but some experiences have been very different for different parts of our society – especially our workforce,” Easwar said. “We are still seeing the effects.”

However, several key economic indicators point to a recovery. The unemployment rate has gone down. There are more job vacancies than there are people looking to fill them. And a tight labor market means many employers are raising wages and cutting benefits. Macy’s, for example, is investing $ 35 million over the next four years to provide its workers with an education program that will cover 100% of tuition, books and fees.

But an economic divide will always play out this holiday season between who can afford to spend lavishly and those who feel like they have little room to spend, Easwar said. Some retailers cater to the big spenders. Their spending along with the higher sticker prices will likely mask the decline among cash-strapped consumers, he said.

“There are consumers looking to spend a lot. And if I spend $ 5,000 on a trip to Disney, then a few thousand dollars on fancy, expensive gifts for my family, or to buy a new car … people who don’t spend the $ 700 they normally should spend, ”Easwar said.

One item in Neiman Marcus’ vacation catalog this year is a champagne vending machine that sells for $ 38,000. The company said it has already sold several.

Source: Neiman Marcus

Neiman Marcus, known for his affluent shoppers, publishes an annual holiday catalog that features exaggerated “fantastic” gifts. This year’s copy features a 30.86-carat diamond, called the Mughal Heart, which will cost $ 6.1 million. Among the items listed is a Moet & Chandon champagne vending machine on sale for $ 38,000. The department store said it has already sold several.

Lana Todorovich, president and chief merchandising officer at Neiman Marcus, said the company has seen customers get a head start on their vacation shopping this year and spend more money per transaction.

“We’re seeing a lot of earlier and more robust activity than in previous years, which is really a testament to their anticipation and enthusiasm,” she said. “We also sell an extraordinary amount of dresses, dresses, and our tuxedo sales are extremely high.”

Some retailers try to keep prices low

At the other end of the price pendulum, however, discount retailers and dollar stores are trying to keep costs low for shoppers who buy on budget.

Last week, Walmart CEO Doug McMillon and Target CEO Brian Cornell both pledged to keep prices low – even if it meant profits – claiming that consumers are looking for value. especially since inflation drives up the price of pantry staples and household items.

“That’s our goal,” Walmart CEO Doug McMillon said in an interview with CNBC’s “Squawk on the Street”. “We save people money and help them live better lives. These are the words that came out of [Walmart founder] Sam Walton’s mouth. He liked to fight inflation. U.S. too.”

Inflation has become widespread – even dollar stores have had to suffer increases. Dollar Tree is raising its floor price to $ 1.25, in an attempt to offset the pressure it faces from rising transportation costs. But he still feels that the slightly higher price is competitive.

“We think that at $ 1.25, it will still be an undeniable value because of what [shoppers are] see the market, ”said Michael Witynski, CEO of Dollar Tree, on an earnings conference call this week.

Another Deloitte survey found that of the 70% of people who had already started their holiday shopping by the end of October, 54% said they noticed higher prices than last year. And about a third of consumers said they increased their vacation budgets from what they expected in September. Deloitte surveyed 1,200 consumers from October 21 to 25.

But not everyone has the same flexibility to just decide to spend more money.

“This is going to be difficult for a lot of people,” said Rod Sides, vice president of retail distribution practice at Deloitte. “When gasoline prices, food prices and that normal stuff keep going up at the rate we see, there’s this uncertainty that says, ‘I probably don’t need to splurge on this particular item, because now I have to cover my rent, and maybe I haven’t done that before. ‘”

Price sensitivity aside, some consumers might also be spending the holidays because they are still anxious about the pandemic, according to Easwar. Either they have lost a loved one to the coronavirus, or they are still nervous about catching it.

“Should I go to the store or should I order online?” Should I go to the big holiday party or not? “… It’s going to weigh a lot on the way consumers act this year, as we all struggle with that balance,” he said.

Before moving on to giveaways and gift cards, Code Tenderloin said it was busy trying to get enough turkeys to cook for Thanksgiving meals this week.

“We’re just being bombed,” said Del Seymour, executive director of Code Tenderloin. “And it’s an extremely wealthy city.”

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