Holidays to be merry for Atlanta retailers. But forecasts show class split.
Like a game of Tetris, delivery drivers hurried to place packages in every inch of their vehicles before a 20-minute clock ran out.
Trunks were popped open and doors ajar inside this Target sortation center in Lawrenceville, which handles the retailer’s online orders within a 90-mile radius.
The facility is ramping up for its busiest time of year — the holiday shopping season, which traditionally starts on Black Friday, the day after Thanksgiving.
“Busy is an understatement,” said David Feliciano, site director of the center, which opened in 2022 and spans almost three times the size of an average Target store.
He expects volume at the center to increase 15% to 20% this holiday season over last year, when it handled about 3.5 million packages.
Driving that increase is growth in online shopping, he said, and consumers wanting those items delivered as soon as possible. “We’ve seen a huge increase in same-day and next-day shipping versus last year,” Feliciano said.
U.S. shoppers are expected to spend more this holiday shopping season than last year, surpassing $1 trillion in sales in November and December for the first time ever, according to the National Retail Federation.
The industry trade group is anticipating holiday sales to grow roughly 4% from 2024, with growth concentrated among people with higher incomes.
On average, consumers are budgeting about $890 for holiday gifts, food, decorations and other seasonal items, which the federation says is the second-highest amount in the 23 years of its survey.
The optimism around spending is notable during a year marked by political and economic uncertainty, including stubborn inflation and new tariff policies, Matthew Shay, National Retail Federation president and CEO, said on an early November call with reporters.
Consumers “have expressed very low sentiment, but yet they drive the economy forward with spending and aggressive participation in commerce,” he said, calling that “somewhat of a surprise.”
But consumers are adjusting the way they spend, Shay said. “We know they are thinking about things much more deliberately, trading down, looking for less expensive options, trying to find value wherever they can find it.”
There is also a growing discrepancy in spending between wealthy and lower-income households, experts say.
Lower-income household spending grew 0.6% in September year over year, while higher-income spending grew more than four times faster, or 2.6% during the same period, according to data from Bank of America Institute.
Consumer spending is closely watched, as it is nearly 70% of the nation’s gross domestic product, according to the National Retail Federation.
“The higher-income consumers really are powering the economy, and they’ve got the ability to devote more of their disposable income to discretionary spending,” Shay said.
Lower-income households have seen their wage growth slow in recent years and no longer have savings left from the government support provided during the pandemic, said Mark Mathews, National Retail Federation chief economist and executive director of research.
“There’s no doubt about it, their sentiment has been declining and their spending has been declining,” Mathews said of lower-income consumers.
Other household pressures include rising child care costs and utility bills, David Tinsley, senior economist with Bank of America Institute, said on a November call.
Bank of America Institute says 62% of consumers anticipate feeling financial strain around holiday expenses because of the economic environment, which is on par with last year.
U.S. consumer sentiment fell in November to a near-record low as Americans remain frustrated about the persistence of high prices and weakening incomes, according to the University of Michigan.
Doug Bowman, a marketing professor with Emory University’s Goizueta Business School, offered tips on how consumers can navigate this holiday shopping season. He said shoppers shouldn’t assume prices are changing the same across all categories.
For example, prices in the broad category of household furnishings and supplies were up 3% in September from the same month a year ago, according to the most recent data available from the U.S. Bureau of Labor Statistics.
The price of jewelry and watches was up 2% during that time period. Tools increased 6.2%, and toys were up 0.2%.
But the price of apparel was down 0.1%, mostly driven by lower prices in some women’s and children’s clothing.
“Be more strategic in terms of the categories that you emphasize and look for ones that do have value,” Bowman said. He also suggested purchasing more secondhand goods or “dupes,” which are lower-priced alternatives to high-end items.
“You’ve really got to look category by category more than you did in previous years,” he said.
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