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Six in 10 people are worried about tariffs impacting their holiday shopping, according to a new study.
President Donald Trump had said he chose to delay part of the taxes on $300 billion worth of Chinese imports from Sept. 1 until Dec. 15 "for the Christmas season ... just in case some of the tariffs would have an impact on U.S. customers." But consumers are still anxious.
Fifty-seven percent are concerned about tariffs raising prices on holiday goods, Coresight Research found in surveying 1,784 U.S. consumers last month. And when asked what those people would do if prices were to go up, 22.5% said they would buy fewer items, while 22% said they would switch to a cheaper retailer. Nearly 70% said they would still spend the same amount of money and not increase their spending to keep up with the price hikes, meaning they would likely end up buying fewer goods.
"We think our survey results should sound alarm bells for retailers looking to pass on cost increases even if those come after the holidays: A majority of shoppers are unwilling to accept price hikes and will look to trade down in volume, by retailer, or by product," Coresight CEO and founder Deborah Weinswig said in the report.
While Trump said he was delaying tariffs on more consumer-facing goods ahead of the holidays, the American Apparel & Footwear Association has said that isn't the case at all. It found that 91.6% of apparel, 68.4% of home textiles and 52.5% of footwear imports from China were expected to be hit with the 15% tariff that began Sunday.
"Unfortunately many common holiday items are being hit on September 1 – including holiday stockings," the association said in a statement last month.
Tariffs aside, one analyst had already said last month that he was expecting the holiday season to be dismal for many companies.
"While the majority of companies appear optimistic on their ability to drive solid growth in [the fourth quarter of 2019], we believe that the holiday setup this year is actually quite bearish and thus we continue to view our space through a more cautious lens," Wells Fargo analyst Ike Boruchow wrote in a note to clients. "First and foremost, fundamental trends have deteriorated thus far in 2019."
He listed five reasons for being negative on the 2019 holidays:
1. "Hockey-stick" outlooks: Boruchow noted that many of the retailers he's monitoring have reiterated their full-year outlooks in recent earnings reports. But he added that a lot of companies need "significant" acceleration in fourth quarter earnings and sales to get there, calling out Under Armour, Urban Outfitters, Victoria's Secret parent L Brands, Fossil and Michael Kors-owner Capri Holdings as examples.
2. There are six fewer days between Thanksgiving and Christmas this year compared with 2018. The last time that happened was in 2013, when "many retailers experienced significant traffic/promotional issues and missed plan."
3. Inventory appears to be piling up. Boruchow said that up until late 2018, inventory levels were looking healthy. But they're started to build again.
4. Wells Fargo expects tourism to be a headwind for many companies this holiday season as the trade war between the U.S. and China rages on. The U.S. dollar is also stronger than many foreign currencies year over year. Tiffany is one retailer to recently call these headwinds out as a factor impeding growth.
5. Current weather forecasts are calling for a warmer winter this year, and that could hurt retailers more dependent on selling cold-weather goods like boots and jackets.
Big-box retailers Walmart and Target recently reported strong quarterly earnings and boosted earnings outlooks for the year. But these results stand in stark contrast to mall-based apparel brands like Victoria's Secret and Gap, which are struggling to drive shoppers to stores. Department store chains are also fighting for sales.
The Coresight study found Walmart and Amazon to be neck and neck as the No. 1 destination for holiday shopping this year. In the survey, 78.9% of respondents said they plan to buy gifts at Walmart, and 78.6% said Amazon. Target was next, with 57.1%, followed by Kohl's (34.2%) and Best Buy (33.1%).
Some 68% expect to shop online and in stores this holiday season, Coresight found, with only 4.7% expecting to only buy things online.
"Shoppers primarily go online to strip friction from the shopping," Weinswig's team said. "The appeal of stores remains skewed toward ease of browsing, the ability to see products in person and the enjoyment of the experience."