The holiday season is creating financial stress for nearly 48% of middle-class Americans this year, according to a survey from online financial services provider One. Among middle-class consumers’ biggest concerns are inflation (76.47%) and supply chain shortages (62.87%). Meanwhile, only 22.18% are “very concerned” about catching COVID, while 47.06% are “somewhat” concerned. Credit card fraud is also on their radar, with 19.58% “highly concerned” and 46.67% “mildly concerned”.
These factors, among other concerns and mindset shifts, are changing the way holiday shopping looks for many people, for better or worse. “I think people are fatigued. They want to be safe from a health and financial perspective, but they also want life to get back to normal. I think it does create a couple of blind spots where it may have an impact most shoppers may not be expecting,” said One CEO Brian Hamilton.
What are these blind spots, and how can Americans be better prepared this holiday season? And what are some of the surprising positive lessons the struggles of the past two years have taught us?
Concerns about supply chain issues, product shortages and rising prices are leading Americans to shop earlier. The One survey showed that the largest group (32.79%) had already started their shopping in early October. Another 4.73% said they planned to start by Oct. 15, while 15.24% intended to begin before the end of October. Nineteen percent said they planned to start in early November, which is still before the “official” start of the holiday shopping season, which traditionally kicks off on Black Friday.
The early start could be driven by concerns about supply chain shortages as well as rising prices as the season progresses. “Supply chain issues are going to impact not just availability, but prices,” Hamilton said. “If there is a constrained supply and ongoing demand, as we expect during the holiday season, you would expect it to affect prices.”
Although more than three-quarters of holiday shoppers say they are concerned about inflation, only 54.11% say they are already seeing inflated costs. “I’m surprised the number wasn’t higher,” Hamilton said.
He noted that many of the items rising in price — including gas and groceries — aren’t included in traditional metrics like the Consumer Price Index. “I think Americans may start seeing that stuff is more expensive relative to what they can afford, and also more expensive on an objective basis,” Hamilton said. “Household income may have been impacted by COVID, so families might be making less, while the goods themselves might be more expensive. There’s a combined effect on the relative cost of things this holiday season. The constrained supply chain makes things harder to get, but it also makes available items more expensive.”
Although e-commerce is generally on the rise, survey respondents said that 63% of their shopping will be in person versus online. Those who said that more than 51% will be online cited “convenience” over concerns about COVID-19 as the reason.
While 12.3% said “concerns about COVID” keep them shopping from home, nearly 54% said it’s simply more convenient. Another 15.77% cited a greater product selection online, while 10.40% said they found better prices online.
“I think people were already trending toward preferring to shop online,” Hamilton said. However, supply chain issues could be steering people toward shopping malls and brick-and-mortar retailers, where shipping delays are not a concern. “People are shopping wherever they need to,” Hamilton observed. “They’ll go to the mall or they’ll go to whatever website they need to find what they want because the supply chain issues are tough right now.”
The tendency to shop at what Hamilton calls “secondary” websites to find gifts could increase the risk of fraud this holiday season. “I think most people aren’t paying [enough] attention to [fraud],” Hamilton said. “Identity theft and fraud is up — and that’s not specific to the holiday season. There’s so much data out there now, that identity theft and fraud continues to rise as hackers get more sophisticated in their methods.”
Hamilton explained that supply chain issues of the season could drive people to less-than-reputable websites to find the items they need, which could further increase instances of fraud. To protect yourself online, especially if you have to venture off the beaten path to find the gifts you want, consider using a virtual credit card number for purchases.
“People are going to sites that are a little farther afield, and those are the sites where fraud and security are more of a concern,” Hamilton said. “The ability to shop with a dedicated virtual card on e-commerce sites allows you to deactivate that virtual card if there’s a data breach. You don’t have to shut down your primary card, which may also be the one you use to pay all your bills.”
There is one bright spot to this year’s holiday shopping season that the survey uncovered. Cash and debit card usage are up compared to prior years, Hamilton pointed out. Although 56% of holiday shoppers this year said they plan to put the bulk of their purchases on credit cards, 44% will be using cash or a debit card for most of their holiday shopping.
“I think there’s a preference for debit because people don’t want to carry a balance of debt after the holidays and pay interest on it for months,” Hamilton said. “People got into a savings mindset during the pandemic, and that’s still very much part of the collective psyche. Saving came into vogue, and not paying interest on debt is a form of savings.”
With the holiday season not yet in full swing, these mindsets, fears and stressors could change — for better or worse. Hedging against inflation and supply chain issues by shopping early, and protecting yourself from hackers online with virtual credit cards and by keeping an eye on your accounts for unusual activity, could help to keep this holiday season merry and bright.