Retailers are gearing up for more durable occasions and extra thrifty prospects in 2023

A shopper browses shirts at the Old Navy children’s department in Denver, Colorado.

Brent Lewis | Denver Post | Getty Images

January is usually an overlooked month for retailers.

Buyers accept returns and exchanges. They come into stores with gift cards. And they can search for workout clothes or other items to make their New Year’s resolutions come true.

But this year, January brings higher stakes. The next few weeks, as many retailers close out their fiscal year, could help determine whether the holiday quarter is a win or a bust. It’s also an important time to help stores clear excess inventory. January could also set the tone for 2023 – when some economists and retail observers expect the US to slide into recession.

So far, pre-holiday results have been better than some economists and retailers feared. Sales rose 7.6% from Nov. 1 to Dec. 24, according to data from MasterCard SpendingPulse, which measures retail sales in-store and online across all payment types. The number includes restaurants and is not adjusted for inflation, which rose 7.1% in November from a year earlier.

However, there are signs that buyers may be running out of gas. Credit card balances have increased. The savings rate of private individuals has fallen. And sales of large items like jewelry and electronics have slowed.

Also, Americans’ spending spree in the earlier years of the pandemic, fueled by stimulus money, boredom and slack savings, has drawn harsh comparisons.

A crucial January

Retailers are heading into 2023 expecting store traffic to lag even during the peak weeks of the holiday season.

At six retailers — Walmart, Target, Best Buy, Nordstrom, Kohl’s and Macy’s — foot traffic fell by an average of 3.22% year over year in the weeks leading up to Christmas week, according to data from, distributed to analytics firms, which uses anonymized data from mobile devices to estimate total visits to sites. It also declined by nearly 5% compared to pre-pandemic patterns.

Now retailers are more nervous.

“It seems like many brands are anticipating a bigger hit in January,” said Stacey Widlitz, president of SW Retail Advisors, a consulting firm.

She’s noticed that more and more retailers are leaving gift cards hanging around to increase sales. For example, Urban Outfitterss-owned retail chain Anthropologie on Friday offered $50 off a future purchase for online shoppers spending $200 or more. But this bonus money must be used by January 31st when the company’s quarter ends.

Widlitz said these deals are focused on getting shoppers to shop at a time when there’s often a post-holiday lull. It’s also the last chance for retailers to sell excess inventory and start the new fiscal year in a cleaner position.

“It just seems like they’re trying to push people to go to the stores after the New Year,” she said.

But for some, a more budget-conscious consumer could be an opportunity.

At an earnings call last month, Walmart CEO Doug McMillon said he expects sales to surge as consumers feel overwhelmed by holiday spending. Like many other retailers, Walmart’s holiday quarter spans January.

“Sometimes those quarters work where late December and January get stronger when people are particularly price sensitive,” he said. “So that’s kind of what I’m expecting.”

The discounter has already attracted wealthier shoppers with its cheaper groceries and household items. Over the past two quarters, about 75% of grocery market share gains have come from households earning more than $100,000 per year.

And yet like competitors Goal and Costcohas had a more difficult time selling consumables, which tend to generate higher profits, than selling milk or paper towels.

What does the new year bring?

Economists are closely watching consumer indicators as the year begins.

On the plus side, said Michael Zdinak, economist at S&P Global Market Intelligence, unemployment is low and the job market is still very tight. There are signs that inflation has cooled, with prices rising less-than-expected in November, the latest month of available federal data.

On the other hand, he said food prices are still high, retail demand is weakening and savings are not as resilient.

The savings rate of private individuals has fallen significantly. According to the US Bureau of Economic Analysis, the percentage of disposable income people save was 2.4% in November. That’s down from an average of 6.3% before the pandemic, according to S&P Global Market Intelligence, which compiled the numbers from 1991 through 2019.

Zdinak said that a low interest rate is unsustainable, especially as consumers have been spending money deposited in their savings accounts in the earlier months and years of the pandemic.

Economists at the market data company expect a recession to start in the first quarter of 2023 and last for two quarters.

Zdinak said the downturn will be fueled by reduced orders and less production as many retailers clear unwanted inventory after consumer preferences changed abruptly in 2022.

Then there are headwinds for consumers. The reality could soon hit families who are on budget for gifts or holiday trips, said Widlitz of SW Retail Advisors.

“Everyone gets through the holidays in denial and February 1st when you get yours [credit card] Statement or January 15, whenever it comes, it’s like ‘Oh!'” she said.

— Caitlyn Freda contributed to this report.

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