Why inflation isn't slowing holiday shopping

In the lead-up to Black Friday and Cyber Monday, Annie Scholl fretted that the winds of inflation blowing across the country might finally douse the flame on her Batavia-based candle and handmade crafts business.

“We so hope you come out and join us in shopping small,” she posted on her Hearth and Hammer General Facebook page just before Black Friday. “This month has been suspiciously slow for us compared to past years, so your support is more appreciated than you know.”

The post received eight likes.

Christmas 2021 was a success for the budding business. Scholl chalked that up to a combination of a little extra money in pocketbooks from stimulus checks and a loyal fan base that stood in line in the rain for the opening of the general store in October 2019.

But by mid-2022, inflation plaguing the country and spiked gas prices were giving Scholl a new reason to bite her nails.

“That was a pretty clear marker for us,” she said. “Our sales started to drop below last year's numbers. It wasn't concerning, but it was definitely noticeable.”

Inflation also made it more expensive for Scholl to run her business. The price of the wax she uses to make her signature candles shot up 50%, melting profits in the process. It left her cautious to buy supplies, making her overhead more expensive by losing the savings of bulk purchases. Gas prices also made shipping more expensive.

“Normally, our wholesales would be like, 'I need all the products now!' This year, they waited until the second week of November to place most of the orders,” Scholl said. “I think they were doing what I was doing and just waiting to see what kind of response they were getting from customers.”

Scholl wasn't alone in her caution. The 7.1% inflation rate heading into the holiday shopping month seemed like it would loom large for Santa's helpers on a budget. But stats collected by the U.S. Census Bureau showed retail and food sales were up in October from September. November sales were 6.5% better compared to last year.

That also proved true for Heath and Hammer.

“Black Friday, Cyber Monday, I was definitely holding my breath a little bit,” Scholl said.

She stocked her shelves with expectations, and hopes, that sales would at least be close to what they were in 2021. And she aggressively marked down her signature item — candles crafted in themes from classic novels like “Wuthering Heights” and “On the Road” — at a 20% discount.

“Black Friday was really on par with last year,” Scholl said. “Cyber Monday, our sales were higher than last year, significantly better. We were like, 'OK!' We were very surprised.”

The National Retail Federation forecast that holiday sales during November and December will grow up to 8% over the same period last, to $960.4 billion. That would be a record. The federation attributes the spending growth in the face of inflation to “pandemic spending.”

“Consumers' willingness to spend had been clearly impacted by inflation, but their ability to spend has been supported by job growth, rising wages and tapping into savings accumulated during the pandemic,” according to the federation's report.

Shoppers and shopkeepers know some of that pending record spending comes from the higher prices people are paying due to inflation.

Hearth and Hammer raised prices to match the costs passed on by the mom-and-pop makers that constitute most of its suppliers. But, like the National Retail Federation predicted, Scholl found her loyal customers sort of just got used to that type of news by the time she announced their price increases.

“People were like, 'We totally get it; we'll keep supporting you,'” Scholl said.

In a weird twist, across-the-board inflation helps retailers like Scholl fend off perceptions that any one business is trying to gouge customers, she said. On the flip side, she is trying to make up for the higher prices by amping up customer service even more than usual.

“We understand people have less money in their pockets this holiday season,” Scholl said. “We're trying to put together things for our customers that are $25 and under, $50 and under, that nice, quality and made by makers.

“It's much nicer to get a really nice candle or a great pair of socks than get five pairs of not-great socks. It's more important than ever right now to be a responsive business.”