Welcome to the Less Worse Than Expected Holiday

The Fed, the largest grocer and now Amazon all offered hope on consumers and inflation. The trio of comments this week come in the wake of record Black Friday weekend sales, which have lifted the mood and expectations that maybe, just maybe, the holiday shopping season won’t be quite as bad as feared.

“It’s very clear that consumers are spending but they’re being careful about trying to stretch their dollar,” Amazon CEO Andy Jassy told attendees at the New York Times Dealbook conference this week, his first public appearance and comments since the ecommerce giant embarked on a round of “more with less” belt-tightening and layoffs after releasing Q3 results in late October.

While Amazon, like all retailers, is constantly analyzing consumer spending habits, Jassy shared that shoppers are very price sensitive right now, a reassuring if not unsurprising insight.

“We see consumers right now being very thoughtful about how they spend, trying to stretch their dollars, they’re looking for deals,” Jassy said, who took over as CEO from founder Jeff Bezos in July of 2021.  “They’re attracted to stocking stuffers in an even more pervasive way than normal,” he added, while pointing to the well-established inflation-era consumer themes of stretching dollars and trading down in models and brands to get more bang for their buck.

“People care a lot about getting a bargain right now,” he said.

Then Give the People Bargains

If you combine Jassy’s comments with insights from Kroger, the country’s largest chain of grocery stores, that food inflation was starting to ease, and you add in comments from the Federal Reserve that it may begin to ease off a bit from of its aggressive round of rate hikes, and a tidy little holiday narrative starts to emerge.

Clearly, it will be a season of markdowns and promotions, as retailers not only adapt to changing consumers but simultaneously adjust to their own inventory excesses. Where a year ago, there was panic buying to avoid being left empty handed, this year there is patience and precision, as well as a whiff of something even more holiday-esque.

Holiday 2022 will offer a “more civilized” shopping experience, Telsey Advisory CEO Dana Telsey said in a Black Friday discussion on CNBC, adding her belief that “the American consumer is doing just fine so far” albeit oriented toward “value and brands.”

Although Walmart has been somber and understandably silent in the wake of a deadly employee shooting spree at its Chesapeake, Virginia store, rival Amazon characterized what it now calls “The Turkey Five” as its best ever.

While light on details, the eCommerce leader did note that its small business initiatives generated over a billion dollars in sales for its legion of third-party sellers and entrepreneurs.

While reflecting on the company’s holiday gains in light of its ongoing round of layoffs, Jassy shed light on the process with the Dealbook audience, saying that Amazon was forced to make decisions to try to keep up with a surge in demand early on in the pandemic and to “go much faster” than it ever imagined possible.

“We built a physical fulfillment center footprint over 25 years that we doubled in 24 months,” Jassy recalled, admitting that Amazon knew it might be overbuilding but went ahead anyway.

“It was hard for us to imagine what ‘21 was going to be like, let alone ‘22, but we decided that we were going to shade on the side of consumers and sellers who didn’t want to be constrained,” he said, indirectly acknowledging the very same factors that just might lead to the less worse than expected holiday shopping season after all.

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