Holiday spending is expected to reach record levels this year. According to a recent survey from the National Retail Federation, consumers are expected to spend about $902 per person on “gifts, food, decorations and other seasonal items.”
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This is $25 more than what each person was predicted to spend in last year’s survey, and $16 higher than the previous planned spending record of $886 per person in 2019.
The spending surge means the stakes are high for big retailers like Target (TGT) , which rely heavily on strong fourth-quarter sales to turn a profit.
Holiday sales are especially important to the big box retail chain this year because Target's sales slumped in early 2024 following price hikes and a boycott from consumers over its controversial pride collection. As a result, Target is making an important change to ensure it gets its share of holiday sales.
Inflation is a risk to record holiday spending, prompting price cuts
Shoppers are battling higher prices across the country amid inflation. According to the U.S. Bureau of Statistics, the consumer price index, which measures the average prices consumers pay for goods and services, increased by 0.2% in September month-over-month or by 2.4% year-over-year.
Target began cushioning shoppers from the blow of inflation by slashing its prices on over 5,000 items in May.
The tactic yielded positive results for Target, which revealed months later that its comparable sales during the second quarter of 2024 increased by 2% year-over-year, while foot traffic in its stores rose by 3%, according to its latest earnings report.
Now, Target is once again depending on price cuts to attract customers into its stores during the most critical time of year for retailers. The company is decreasing prices on over 2,000 items, including “food and beverages, everyday essentials, holiday gifts, and items to prep the home for the holidays,” according to a new press release.
Those price cuts are designed to attract consumers, who are expected to spend most of their money (about $641) on gifts for family, friends, and co-workers, and $261 on holiday items such as candy, decor, etc.
Some examples of items that Target has reduced in price include Crisco Vegetable Oil, which now sells for $4.79, compared to $5.29. Also, a Magic Bullet Personal Blender Set was previously selling in stores for $49.99; now, most customers can expect to pay $10 less.
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The move is in keeping with competitors, like Walmart, who are trying to hold the line on costs and make the most of a shorter holiday shopping season.
“The winter holidays are a treasured time for Americans, and they are prioritizing spending on family this holiday season,” said NRF Vice President of Industry and Consumer Insights Katherine Cullen in the survey. “Despite the shorter window of time between Thanksgiving and Christmas, retailers are prepared to meet the needs of consumers by providing holiday shoppers with earlier deals and sales and by ensuring inventory is available for the most in-demand items this year.”
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