Will Tariffs Make Retail’s Holidays Less Than Festive?

It looks like tariff worries could take a bite out of retail spending this holiday season. According to new data out from AlixPartners cited by RetailDive, only 31 percent of consumers are planning to spend the same or more than they did in 2018. That figure is compounded by data that indicated fewer consumers are reporting stronger financial health than 12 months ago and fewer believing the economy is still improving.

As many as a fifth of consumer say their holiday budgets will be reduced this year if tariffs increase the prices of items more than 10 percent. What will be consistent year to year, according to the report, will be the timing of holiday shopping. Most, 92 percent, say they will start shopping at the same time this year as they did last year, or perhaps earlier.

The figures from AlixPartners come counter to various predictions calling for strong year-on-year advances in holiday spend, raising concerns that consumer confidence is weakening as the fourth quarter, the one where the bulk of holiday shopping happens, is starting up.

“We saw a dramatic drop-off in consumer sentiment and future outlook in this year’s survey,” Roshan Varma, a director in the retail practice at AlixPartners and a co-author of the study, said in a statement.

The tariff hike of 15 percent that appeared earlier this month tags items that traditionally are big holiday sellers — smartwatches, drones, TVs, headphones and smart speakers. It is a trait they share with the items coming in the next expected round of tariffs, which include smartphones and video game consoles.

“That, among other things, means being strategic about what differentiated value-added services to offer and then implementing them with highest of efficiency,” he said.

And tariffs, Wells Fargo Wells Fargo Senior Economist Tim Quinlan said in a note Friday (Sept. 27), might not really be the biggest problem in consumer holiday spending.  The more difficult trend to contend with, he said, is the cooling consumer confidence.

“Consumers could be spooked by the escalating trade war, but even with consumer goods coming under tariffs in the next few months, we expect the direct impact to the consumer to remain limited. It is the indirect hit to consumer confidence that is more worrisome,” he said.