With inflation and recession fears looming over the holidays, are retailers still able to market joy?

    Stores are decked out in decorations with holiday music playing, and inboxes are filled with marketing emails from retailers. 

    It’s the holiday season, and like other years during the pandemic, companies are met with a new challenge: For 2022, that’s inflation.

    For months, consumers have grappled with rising prices across all goods, particularly at the grocery store and gas pump. That’s affected consumers’ mindsets heading into the holiday shopping season. According to an ICSC holiday survey released last month, nearly 90% of respondents reported that inflation would affect their holiday spending.

    During a period that’s generally filled with gift-buying, joy and discovery, retailers need to navigate how to market to consumers this season.

    What’s top of mind for consumers right now

    The theme of this year’s holiday season, so far, appears to be discounts and promotions.

    While consumers are estimated to spend 6.7% more during the holidays this year compared to 2021, 43% are looking for deals and promotions, according to the ICSC. And 65% of respondents plan to spend more time looking for discounts, per the survey.

    The economic environment has even prompted 71% of consumers to consider store payments plans or other financing options to cover their purchases this season, according to a separate report from Oracle Retail. A quarter of those respondents have never used financing options in the past.

    “You’re starting to see the shift: People are going to really care about what they spend every dollar on.”

    Tyler Higgins

    Retail practice lead and managing director, AArete

    “The consumer is feeling it,” Michael Brown, a partner and Americas Retail Leader at Kearney, said. “They’ve been feeling it for a while now because the price of groceries has been up and gas has been up and it hits people hard.”

    When faced with financial constraints, “there’s this urge to limit the pains,” according to Jorge Barraza, a professor of consumer psychology at the University of Southern California. Consumers adopt “coping strategies,” which include wanting to reduce, and they will then adapt to changes and become attuned to it, he added. Because consumers have been dealing with higher prices and other economic uncertainty for some time, they are in the adapting stage and are seeking out lower prices for the goods they’ll buy.

    Retailers have been answering this call by launching Black Friday-like sales events earlier in the season and having deals extend for longer. Amazon in October held its second sales event of 2022 for Prime members. Walmart and Target similarly launched their own deal days around that period as well. And Walmart late last month announced its three-week “Black Friday Deals for Days” event would return with discounts spanning from Nov. 7 to Nov. 25.

    “This year, I think what the customer sentiment is, you know, the economy is flipped,” said Tyler Higgins, a retail practice lead and managing director at AArete, adding that a looming recession and news of layoffs are also affecting consumers’ mindsets heading into this holiday shopping season. “You just feel this negative tone. So you’re starting to see the shift: People are going to really care about what they spend every dollar on.”

    But retailers need to strike the right balance. Inundate consumers with too many deals and retailers run the risk of hurting their brand identity, according to Barraza. “If I start discounting and that feels like it’s more of a permanent and prolonged thing, you start shape-shifting the way that consumers are perceiving your brand.”

    Promotions are really the most effective when paired with the element of scarcity, Barraza added. And if retailers continuously push out deals throughout the season, “consumers are going to be worn out,” he added. “They’re going to have this enduring expectation that this is how it’s going to be moving forward.”

    How retailers can respond

    While value is a priority for consumers this year, it doesn’t mean the storytelling element to holiday marketing needs to go by the wayside. Retailers just need to be in tune with what consumers are saying right now and understanding what their pain points are, according to Kearney’s Brown.

    “Retail especially doesn’t shy away from the hard messages. It’s kind of how they play on the emotional side. They have no problem saying, ‘Yeah, the world’s in a tough spot’ or ‘The economy’s in a hard spot. We know you’re feeling this,’” Higgins said. “Retailers kind of cut through it and are willing to just say the hard message, but then also try to come up with a solution to that through their campaign.”

    For its holiday campaign this year, Lego gave creative control over to children to have them highlight what the season means to them. 


    Latest articles

    Related articles