With the holidays around the corner, Minnesota retailers, shoppers expect fewer gift purchases

Three months before Christmas, Steve Carlson of Burnsville already knows he’ll be crossing things off his holiday shopping list.

With consumer prices still high, Carlson said he and his wife plan to buy cheaper, smaller gifts for their family. “Lots more small gifts of lesser value. Go back to what [the holidays] before,” he said while shopping at Twin Cities Premium Outlets recently.

For the same reasons, many consumers will start shopping early this holiday season and seek bargains, retail analysts say. And retailers are already starting to adapt.

According to an August survey of American consumers by the NPD Group, 43% of them will spend less on holiday shopping this year than last year and 56% said they plan to shop sooner. .

But not too soon. Most of the shoppers a Star Tribune reporter spoke to at local malls last week said it was still too early to think about the holidays.

And even if people are buying less, they may end up spending more because consumer prices have gone up so much this year. Deloitte’s annual holiday spending report, released last week, predicts that retailers will experience a 4% to 6% increase in revenue over the holidays.

This matches the annual growth the country saw before the pandemic, as opposed to the outsized jump in holiday sales last year, when sales rose more than 15%.

“We’re kind of back to normal,” Rod Sides, global retail intelligence leader for Deloitte, said in an interview with the Star Tribune.

Last year, retailers took advantage of pent-up demand when shoppers were excited to finally reunite with loved ones. This year, the disposable income of many households is squeezed by rising prices for basic commodities like food and energy. One of the results, said NDP analyst Marshal Cohen, is that they will do less impulse spending, which typically accounts for a quarter of holiday retail revenue.

The holiday season can not only have a huge impact on the annual revenue of many retailers, but it can also be seen as a barometer of the overall health of the US economy.

Doug Killian of Lake Elmo said he will likely give travel-related gift cards to loved ones this year. He plans to spend less than last year and reduce the number of gifts he buys.

“For us, it’s more about enjoying some of the traditions of the church and enjoying the Christmas lights,” Killian said.

Retailers react to changing consumer spending in a variety of ways. Several have hinted that they will increase promotions and sales compared to last year in an attempt to entice shoppers to buy. Amazon is rumored to launch a second Prime Day in October. As it unveiled its top toy list for the season, Walmart announced it would be donating more temporary price “setbacks” on toys this year to help customers save money.

Last week, Minneapolis-based Target announced its own slate of toys with items starting around $15, a few dollars lower than last year. Next month, Target will begin selling an exclusive assortment of FAO Schwarz toys that will include products as low as $10 and 50 toys under $20.

Deloitte’s Sides said he thought the season would be “highly promotional” as retailers try to get rid of excess stock they’ve ordered over the past year.

Some stores have adapted the way they order products. As it works to reduce its inventory of junk items, Target said it has canceled more than $1.5 billion in fall product orders.

This month, Legacy Toys owner Brad Ruoho is ordering the majority of the toys he hopes will be popular sellers over the holidays. Getting some items can still take time, but shipping delays aren’t as much of a concern as they were when he tried to stock early last year. Now Ruoho, who plans to open a new store later this month at Rosedale Center, said he’s being more selective about what he orders.

“I try to predict what customers are buying and act on it,” Ruoho said. “We’re trying to be careful and make sure we have enough stuff. … We’re digging into some SKUs [stock keeping units] and not so wide in others.”

For example, Ruoho narrows Legacy Toys’ car model selection from 200 to nearly 120 items by focusing on some of the most popular models.

Ruoho expects holiday sales, which account for 30-40% of Legacy Toys’ annual business, to be down from a year ago. But he thinks parents will turn to Legacy Toys for that quality gift they may not be able to find at the big box stores.

“There may not be 20 presents under the tree, but there will be the main one,” he said.

Ordering goods for Christmas has been a headache in recent years for Constantine Rolin, co-owner of the Hey Joy toy store which opened at the Mall of America in December 2020. Over the past two years, the store, whose founders are from Ukraine, missed some of their order deadlines and had to deal with logistical issues.

This season, the Ukrainian-Russian war hurt some of Hey Joy’s investors and forced Rolin and the rest of his partners to delay holiday orders until recently.

“It’s extremely, extremely late,” he said.

But Rolin, who helped open two new Hey Joy toy stores last year, said he still felt positive for the season.

“Toys are things that make people happy,” he said.

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