It’s coined “the most wonderful time of the year” — the holiday season is in full swing and with that comes the hustle and bustle of holiday shopping.

During the months of November and December, the economy relies heavily on consumer spending.

In recent years, the COVID-19 pandemic has resulted in more shoppers tightening their budgets. Now, with inflation and supply chain challenges, many are left to wonder: will this trend continue?

To help you make the most of the buying season, UKNow spoke with Allan Chen, endowed chair and professor of marketing in the Gatton College of Business and Economics at the University of Kentucky. He has insight on this season’s shopping climate and strategies to help you save in the Q&A below.

UKNow: How will the increase in inflation impact holiday deals?

Chen: There is a bigger danger for consumers to overspend, especially in today’s world where inflation has taken a big bite out of your wallet. Consumers who bought a bunch of gifts well before Black Friday may have forgotten about their spending and (happily) spend more when they encounter more deals on Black Friday and Cyber Monday. It would be especially important to track your expenses during these two months, so you don't have to cut back on necessities in the new year.

UKNow: Deals are already starting pre-Black Friday. Should shoppers hold out until then or buy now?

Chen: Firms have accumulated a lot of inventories during the pandemic — due to their fear of not getting what consumers will order from them. As a result of this bullwhipping effect, inventories are at historically high levels for many firms. Therefore, they have started to offer discounts well before the Thanksgiving break in the hope of cleaning inventory. For this reason, many deals are pretty sweet even before Black Friday. This offers an opportunity for consumers to spread their holiday shopping over a longer period of time. 

UKNow: Even if you have a set budget, it is difficult to pass up a "deal." What are some of the tactic's retailers use that shoppers should be aware of?

Chen: Consumers often experience “shopping momentum.” Once you start shopping, you are ready to spend more. That's when the retailers will get you. So, make sure your first purchase is well thought through (no matter whether it is big or small), before you go on a shopping spree.

UKNow: It is easy to get caught up in the holiday spirit and overspend. Do you have any tips for staying within budget?

Chen: Enjoy the deals but watch your budget. Studies have shown that consumers are more generous when they shop for others. While your family will appreciate your generosity, your new year will be merrier if you can show your love without breaking the bank.

“Within” the budget is the key. I suggest following a two-step process:

• Set a budget that is as realistic and reasonable as possible.
• Set a lower budget by multiplying your original budget by a percentage (e.g., 80%).

If you worry you'll outsmart yourself by gaming the system and setting a higher budget in the first place to off-set the budget cut in the second step, you can even break your budget into mini-budgets for various purchases.

To sweeten the deal, make sure you set up a mini budget for an "other" category as well. That way, as long as you don’t overspend in each specific category, you’ll have some extra money left over (for unexpected purchases or to start the new year with a small cash bonus to yourself).

UKNow: Especially on Black Friday and Cyber Monday, shoppers are under the impression they need to act fast to get the best deal. Are there benefits to sitting back and waiting — even during a "Flash Sale?"

Chen: With the extension of Black Friday into multiple days of deals, hopefully, the pressure you face from “flash sales” will be much less. But even before you feel the urge, set a mini budget for each category. Additionally, make a list of items you'll have to buy for the holiday season and familiarize yourself with the regular prices. If you see them on sale, then go ahead and buy them! If you're not sure about the prices, imagine whether you'll really need the “hot” item or not — picturing where the purchase will end up sitting a couple of weeks/months from now will help you decide whether to click the purchase button. Also, remind yourself of the joy of waiting a bit longer and being a smart shopper.

UKNow: All of this being said, can Black Friday and Cyber Monday still be an effective way to save on holiday shopping this year?

Chen: Definitely, there are real deals on Black Friday and Cyber Monday. And a lot of the comparison-shopping websites can help you vet these. But you want to spend your hard-earned money on things you and your significant others will love and use, not something that will go into the attic/garage the next day.