THERE are some things in life that you can rely on like clockwork. For example, being in a country with the world's longest Christmas season means you can expect malls to start playing classic Christmas songs as early as September.

Jokes about the inevitable Jose Marie Chan holiday comeback will show up on social media as surely as his songs will begin playing on the radio. And just as surely, individuals will start worrying about holiday season expenses, whether in the form of gifts, trips, media noche and noche buena meals or charitable donations.

Filipino Christmas traditions are as grand as they come. However, 2022 poses a unique holiday budgeting challenge. The average consumer is already dealing with painful price jumps, with recent estimates placing inflation for meat and vegetables at 13.9 percent and 9.1 percent, respectively, for example. Experts project that inflation has yet to hit its peak and could rise further in the later "ber" months.

There is no doubt that inflation and the lingering effects of the Covid-19 pandemic have bled into the consumer psyche. So what can retailers expect for the coming holiday season?

When inflation is high, the expectation is that consumer demand will drop as they focus more on buying essentials and preserving the value of their money. Despite this, retailers have so far reported considerable growth and are optimistic.

There is some basis for confidence. For instance, even with record-high US inflation in March 2022, consumer spending was higher than in previous years and was even 12 percent higher than forecasted pre-pandemic, according to a Mckinsey report. In this case, high savings and credit card usage allowed consumers to keep spending despite price inflation. For now, it looks like the Philippines could follow suit.

An often-cited reason for the retail growth is "revenge shopping" or the urge to spend more after a period of frugality. Experts see this happening the most in dining, especially in restaurants that offer al fresco and other unique experiences. Revenge shopping, particularly in fashion and furniture, is expected to provide an additional boost to the retail industry this year.

High vaccination rates and the de-escalation of Covid-19 restrictions are other factors behind the optimistic views. They not only provide consumers with greater mobility but also give them confidence to go to public spaces such as malls. A recent Colliers report revealed that mall foot traffic had reverted to pre-pandemic levels, bolstered further in business districts by company return-to-work mandates. The same report suggested that along with improved consumer confidence, discretionary spending would also pick up.

The return to brick-and-mortar stores also ties in with current consumer behavior. While they aren't likely to "trade down" or look for cheaper as of yet, consumers have picked up a "value for money" philosophy when it comes to spending. This means that while most consumers may still buy on the higher end, renewed emphasis will be placed on a product's comfort, quality and longevity.

Thus, the ability to go to a physical store to test products and gain assurance before purchase will be a big factor for retail during this inflationary period. In line with this, the concept of brand loyalty will weaken as 70 percent of Filipinos are expected to more readily abandon brands in favor of products that offer similar quality at greater value or novelty.

All this is not to say that businesses should step out of the digital space. Filipinos have ranked as the second-highest adapters of e-commerce in Southeast Asia and the lower prices and greater convenience of online shopping can ensure that the practice will persevere beyond a return to normal.

It is likely, however, that online shopping will undergo changes. Online marketplaces may lose steam and give way to brand-specific e-commerce websites. As more and more social media platforms incorporate e-commerce functions, social shopping and the act of selling items via livestream will grow in prominence.

Regardless, retailers should keep in mind that social media algorithms are notoriously fickle. Social media holds massive influence in consumer behavior, but the best strategy is still to strengthen all sales channels as 75 percent of consumers participate in omnichannel activities.

Even as we would like to believe that the holidays can magically solve inflation and a slew of other problems, it is best to maintain caution. The Filipino's ability to spend despite inflation is dependent on a number of factors such as oil prices, wage hikes and the duration of the La Niña weather pattern. For the sake of both a comfortable Christmas celebration for all and a healthy retail industry, here's hoping for the best.

Endel Mata is a partner for the Audit and Assurance Division of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory and outsourcing firms in the Philippines, with 24 partners and more than 1,000 staff members. We'd like to hear from you! Tweet us at @GrantThorntonPH, like us on Facebook at P&A Grant Thornton, and email your comments to [email protected] For more information, visit our website at www.grantthornton.com.ph.