The Finances Behind Christmas Shopping

It’s that time of year again. Malls overridden with Christmas decorations and sparkling trees, the sound of last-minute Christmas shoppers finding gifts for their loved ones. This year’s Christmas season is expected to bring in roughly 996 billion dollars in revenue, the biggest ever, growing by over 4% since last year. In the last 3 years, the Christmas industry has seen roughly 40% growth, leaving companies to reap the benefits of Christmas shopping.

During an in-depth analysis of the changing markets and last year’s retail growth in the S&P 500, the profits obtained by the retail industry have increased by billions of dollars, reaching a new record, and eliminating any competition in the industry.

Modern-day growth of the retail industry

There are 40 retail-based businesses in the S&P 500, responsible for over 1.5 trillion dollars of profit annually. Of the 10 largest retail companies in the U.S., Walmart, and Amazon comprise nearly 68% of the retail industry. This percentage is extremely inconsistent in comparison to other popular industries such as technology, health care, and heavy industry. For example, Walmart’s profits have increased by roughly 5.5% this year, once again making it its most profitable year ever. It is important to understand that following the COVID-19 pandemic, consumers were looking forward to utilizing their spending power and stimulating the economy once again. The U.S. government has only emphasized consumer spending by requiring retailers to pay raised wages and increasing aggregate demand in the economy. By doing so, popular retailers have only become more popular since 2020 and continue to grow throughout the holiday season.

Marketing is Key:

Over 65.22 billion dollars is spent annually, digitally advertising products and services to consumers during the popular Christmas season. During the COVID-19 pandemic, the need for new marketing strategies became a necessity. Today, marketing gimmicks such as the Macy’s Thanksgiving Parade and Honda’s Random Act of Happiness have gained traction across the United States. However, despite costing millions of dollars to operate these marketing events, they each have a specific purpose in gaining consumer’s interest in these companies. For example, take into account an annual Thanksgiving Macy’s parade that costs over 13 million dollars in the heart of New York City. While this may seem like a 13 million dollar loss for Macy’s, it is important to note that the event will gain traction for the company. The Macy’s parade is streamed across the United States, reminding consumers of Macy’s as the holiday season approaches. As a result, during the holiday season, it is expected that the Macy’s parade will be televised to over 50 million Americans, resulting in billions of dollars in profit during the holiday season.

Pros:

It’s important to note that the economy is still picking up and that consumer spending is the little push our economy needs to get back on its feet once again. The U.S. economy has slowly grown by under 2.2% throughout the year, still leaving many without consumers worrying about their families on a check-to-check basis. The Christmas shopping season helps motivate consumers to continue spending money back into the economy and expand large-scale retailers, providing even more job opportunities for the public. By having these companies expand, the cost of goods and services may become cheaper throughout the United States and regulate consumer spending in the following years.

Cons:

The COVID-19 pandemic has had many ripple effects on our economy, making consumers often spend money that they do not have. The Christmas shopping season only adds to the problem, supporting large-scale businesses that already generate billions of dollars in income. Small businesses across the country have witnessed the devastating impacts of Christmas shopping revolving around the 10 major retail businesses across the country. To date, over 550,000 small businesses closed their doors this year, second only to the COVID-19 pandemic in the last 10 years. This statistic should be alarming, considering that consumer’s main attention is now focused on large-scale retailers than the small businesses that make up nearly 99.99% of all businesses in the United States. It’s important to remind readers that there is an equal balance between small businesses and large-scale retailers in the United States. Despite only making up 0.01% of businesses in the U.S., retailers earn 70% of total profit yearly.

Conclusion:

It’s important that as a consumer, you understand your purchasing power is more important than it may seem. Your choices in today’s market can have ripple effects that stimulate the economy and support local businesses. Consider holiday shopping at your local businesses and supporting the small business community. Happy Holidays!