Retailers are the chickens this year.
Every holiday season, consumers and retailers face off in a game of “Discount Chicken.” Stores hope customers splurge on gifts. Savvy shoppers wait for the big sales.
For the past few years, retailers haven’t felt the pressure to offer deep discounts. Consumers had plenty of cash from stimulus payments and pandemic savings.
But this year, Americans aren’t feeling great. And they’re holding back on spending.
The University of Michigan Consumer Sentiment Index measures how people feel about their finances and the economy. In November, it dropped for the fifth month in a row to a value of 61.3.
That’s lower than it was in the first month of the pandemic. And worse than sentiment in 2008 during the Great Financial Crisis.
So retailers have to offer better deals to sell their products.
Today I’ll show you why Americans are cutting back spending and what it means for the economy. I’ll also show you how to collect a reliable profit even when things are looking bleak…
Americans Are Cutting Back on Spending
Retailers are worried.
So worried – that they hired the lowest number of seasonal workers for the holidays since 2008. This means they don’t expect to see as much customer traffic this year.
Normally, shoppers start spending well before Thanksgiving.
This year, they’ve been holding off and waiting until the big sales.
And big retailers like Best Buy and Lowe’s have already reported that shoppers aren’t buying big-ticket items like appliances.
In fact, a forecast from Deloitte projects that holiday retail sales will grow by just 3.9% this year. That’s the slowest pace since the pandemic.
And another forecast from TD Cowen lowered expected holiday spending to just 2-3% growth.
Data from Mastercard shows that in-store sales on Black Friday increased by just 1% this year.
It’s particularly bad for high-end brands that serve wealthier Americans like Apple, Coach, and Nordstrom. An analysis by Bloomberg shows that in October, sales at these retailers dropped 14.4% compared to the previous year.
So retailers have to cut prices to get consumers to keep spending. According to Salesforce, discounts are expected to reach an average of 29% this year. That’s a level not seen since before the pandemic.
The reason is simple – people are running out of money and are tired of inflation.
A recent report from the San Francisco Fed shows that Americans have spent most of the money they saved during the pandemic.
And Bloomberg reports that after adjusting for inflation, 80% of people have less money saved than they did in March 2020.
Americans can’t keep up. They’re racking up debt and falling behind.
Credit card debt is now at an all-time high of $1.08 trillion. Data from the New York Fed shows that auto loans and credit card balances more than 30 days late are at higher levels than before the pandemic.
According to Adobe, usage of “Buy Now, Pay Later” plans increased by 14.5% this year. That means more people are stretching to pay for their purchases.
That’s a big warning sign…
More than two thirds of our economy depends on consumer spending.
So if people are running out of money to spend, the economy will slow down… and may even fall into recession more quickly.
A Reliable Profit as Consumer Spending Slows
But even as the overall retail industry is slowing down, there is still one bright spot – e-commerce. Instead of camping out in front of stores, people are shopping from the comfort of home during the holidays.
According to Adobe Analytics, consumers spent $9.8 billion online on Black Friday this year. That’s up 7.5% over last year. And this is expected to keep growing as more retailers get better at e-commerce.
So how can you collect reliable profit from this trend?
You can profit by investing in the mission critical infrastructure that companies like Amazon rely on to fulfill all those online orders.
And you can collect a reliable yield through what I call “Amazon’s Secret Royalty Program.”
Members of our Intelligent Income Investor service who’ve invested in this strategic play are already up 41%.
Happy SWAN (sleep well at night) investing,
Editor, Intelligent Income Daily