Portland, national retailers face uncertainty this holiday shopping season

Will Cevarich and his team put considerably more hours this year into marketing Betsy & Iya, the Northwest Portland jewelry and apparel shop he owns with his wife.

The result? Sales are up just 3% compared to last year.

“It’s been a marathon in 2023,” Cevarich said, “and just a really, really tough year.”

Like many business owners, Cevarich has been facing the effects of high inflation. He’s had to pay more for the products he sells, rent for the storefront and wages for the store’s workers. Sales have been slow in November, though he’s cautiously optimistic things will pick up as the holidays draw nearer.

But there are signs that consumers are in a penny-pinching mood this holiday season.

Ben Johnston, chief operating officer of Kapitus, a New York-based business lending firm, said consumers are “more stressed” this year, and that’s causing anxiety for retailers.

“The American consumer has eaten into a lot of their savings, and therefore has less disposable cash on hand,” Johnston said. Although inflation is cooling, he said, prices and interest rates remain high.

Retail bellwethers like Target and Walmart raised concerns about the consumers’ financial health during their latest earnings calls this month.

Walmart executives said that they expect shoppers to be more cautious with their spending during the busiest selling period of the year, even as the largest U.S. retailer raised its forecast for sales and profit for the year.

John David Rainey, Walmart’s chief financial officer, told analysts last Thursday shoppers are “still very choiceful” and waiting for promotional events like Black Friday and Cyber Monday to make big purchases.

Those sentiments were shared by Target executives during that company’s earning’s call last Wednesday. The big-box retailer reported sales declined roughly 5% last quarter, which company executives said was the result of a decline in discretionary purchases like electronics, home goods, toys and apparel.

The big-box stores serve as a warning for small business owners like Cevarich, who will need to fight for every bit of market share they can this holiday season.

“If the big guys are cautious, how does that feel to be a little business?” he said. “It’s scary.”

For many retailers, the holiday shopping season is a critical time and can account for the bulk of their sales in a year. Industry analysts say retailers big and small will need to do everything they can to entice customers.

Aly Fakhry, owner of Tada, a toy store at the Lloyd Center, spent the last six months building up his store’s inventory in preparation for the holidays. He said “it’s a lot of money involved” to stock the store with “not just hot selling items” but an arsenal of gifts, toys, games, apparel, plushies and accessories.

“Most of the businesses here are small and locally owned by people like me in your community. ... We’re all preparing and getting ready for the holidays,” Fakhry said. “For some store owners, it’s a make-or-break time for their business.”

Fakhry said foot traffic was down for most of the year but has seen it pick up over the last two months. He said he hopes it picks up even more during the holidays and that he’s marked down all toys, games and plushies 20% off in the hopes that the sale will lure more shoppers to his store. He said the store, along with other shops at the Lloyd Center, will also be extending hours to 8 p.m. from Black Friday through Dec. 23 to capture more foot traffic during the crucial month.

“We need the support of the community,” he said. “I hope people consider shopping local and supporting us.”

Despite the financial pressures from higher interest rates and costs, consumer demand has been unexpectedly resilient, according to the U.S. Department of Commerce ’s Bureau of Economic Analysis. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose by 0.4% during the third quarter even after adjusting for inflation, the agency reported.

The National Retail Federation , the industry’s largest U.S. trade group, expects holiday sales to increase between 3% and 4% this season, compared to a 5.4% growth a year ago. That would mean a record $957 billion in sales.

But Jessica Ramírez, a retail research analyst at Jane Hali and Associates, said “if there is an increase, it would be because of inflation.”

“The consumer has been cautious, and mostly the lower- and middle-income consumers have really been hit by inflation,” she said. “We’re seeing more shoppers shift their spending toward groceries and other essentials.”

Ramírez said shoppers are likely to space out their purchases and be on the lookout for promotions and discounts this holiday season.

But she warned there might be fewer bargains to be found.

“Retailers have been much more strategic in the way they promote,” Ramírez said, “and the promotions haven’t been very deep.”

Ted Rossman, retail analyst with Bankrate, said thinks there’ll be “a lot of competition” from retailers trying to boost their share of consumer spending.

“I think if you’re a retailer of clothes, toys or electronics, you have to offer deals this year,” Rossman said. “Otherwise, there’s a lot of competition, and people may just buy elsewhere, or buy less, or just not buy as much.”

Rossman said a survey by Bankrate found that more people plan to shop at local small businesses, whether in person or online, this year than last.

“There’s something nostalgic about the idea of going into a store and meeting a friendly shopkeeper, finding things you didn’t even know that you wanted, and being able to touch them and take them home the same day,” Rossman said.

Nedim Korkmaz, owner of Nomadic Vintage Rugs, inspects a rug at his store located at 516 S.E. Morrison St. in the Central Eastside district on Nov. 15, 2023.Kristine de Leon

That’s welcome news to Nedim Korkmaz, who opened Nomadic Vintage Rugs in Portland’s Central Eastside last month. He said his business is doing well and thinks that people are realizing the value of shopping in person and getting to see and touch things.

Korkmaz said he’s noticed that one major way the pandemic has changed consumer behavior is that they prioritize convenience, whether that’s shopping online or visiting a big-box retailer where they can make a variety of purchases in one stop.

That’s one reason why he’s trying to offer an experience shoppers can’t get online or at big-box stores. He said the rugs he sells are “rich in history,” coming from various Kurdish tribes.

“I try to make sure every person who comes here gets the full story on the piece they are buying,” Korkmaz said.

-Kristine de Leon;