The receipts are in and the Thanksgiving spending weekend blew away expectations, including ours. A record nearly 200 millions Americans shopped in stores and online during the 5-day shopping bonanza.

In a sign that consumers are still spending despite grappling with 7.7% inflation, this holiday shopping season may be better than expected and that should be good news for retailers. 

However, because of inflation consumers are spending more just to buy less. People are opting to change their shopping habits to make every dollar stretch farther. 

The Good News

During the five-day holiday shopping period from Thanksgiving Day through Cyber Monday, the National Retail Federation found that a record 196.7 million Americans shopped in stores and online. 

Here are some highlights from their report:

  • Consumers spent an average of $325.44 up from $301.27 in 2021.
  • The total number of shoppers grew by nearly 17 million from 2021 which is the highest figure since NRF first started tracking this data in 2017. 
  • More than 122.7 million people visited brick-and-mortar stores, up 17% from 2021. 
  • The number of online shoppers increased by 2% to 130.2 million online shoppers.

The Bad News

The data confirmed that there are more shoppers chasing deals this year due to inflation.

While they are finding deals, consumers are also altering their shopping behaviors in ways that will reward some retailers more than others. In addition, some households are more affected by inflation than others.

First, shoppers are increasingly shifting to discount retailers and dollar stores this year.

Commercial real estate website Globe Street notes:

All showed foot traffic gains in the second half of the year, with October growth of 20.9%, 16.1%, 26.7%, and 54.1% for Family Dollar, Dollar Tree, Dollar General, and Five Below, respectively, according to’s Bracha Arnold.  And digging into year-over-year trends tells a similar story, with foot traffic to Family Dollar and Five Below remaining above 2021 levels every month this year and registering visit growth of 1.7% and 2.3%, respectively, in October 2022.

Second, shoppers are not chasing labels and name brands. Instead, many households are trading down to cheaper alternatives and store brands.

The Wall Street Journal interviewed people who are trading down or using what they already own:

Stacie Krajchir, 54, a publicist who lives in Los Angeles, has stopped buying Natori underwear and now gets her bras and panties at Target. “I don’t need a $110 bra,” said Ms. Krajchir. “A $12 bra is good enough.

She recently returned a $300 blouse she bought at Nordstrom JWN 0.51%increase; green up pointing triangle. “I can buy a blouse, jeans and a dress at Zara, and it still won’t add up to $300,” Ms. Krajchir said. She plans to trade down in her gift-giving, too. She is getting her sister one gift this year, instead of the five gifts she normally gives her.

Third, there’s a divergence in holiday spending among households of different income levels.

Low-income households are expected to spend less this year while high-earning households will likely spend more.

NPR reports that those “in households that earn less than $75,000 a year are expected to spend less than last year, an average of $606. Meanwhile, people in households that make over $150,000 a year plan to spend more, an average of $1,304.”

Bottom Line

Inflation is testing the limits of consumer spending this holiday season. 

Middle-class and high-income households are stretched by rising prices on basic needs that leave less money for discretionary spending. 

Unfortunately, poor families and households on fixed budgets are close to their breaking point.