: Inflation is coming for your Christmas tree

With inflation at a 40-year high and prices on consumer goods and services up 8.2% in September compared to last year, Americans are cutting back on discretionary spending and dipping into savings to pay for rising bills. 

But they are also hunting for bargains: 58% of consumers said sales and promotions are more important to them compared to last year, according to the holiday season survey by the National Retail Federation. 

While Americans say they are trying to cheat inflation this year by buying more practical gifts for loved ones and/or cutting down on their gift-giving this year, consumer demand for Christmas trees remains strong, industry experts say. 

Even if Americans cut back on other items, it’s likely that they will keep the traditional tree, Mac Harman, CEO of Balsam Brands, a holiday and home-decor retailer that owns the artificial Christmas-tree seller Balsam Hills, told MarketWatch.

“Maybe they’re gonna have fewer presents,” Harman said. A bad-looking or half dead tree or, worse, no tree at all, is a “really scary signal to your kids because it’s such a part of tradition,” he added.

Here’s how to secure a (nice) tree this Christmas:

If you’re buying a real tree, it will cost you

Real trees are likely to get more expensive due to increasing costs such as fertilizer and labor. All 55 growers polled by the Real Christmas Tree Board — which covers about two-thirds of the U.S. market share in total — in August said their input costs had increased compared to last year. 

More than a third of growers said costs rose 11% to 15%, while more than a quarter of growers said costs rose by 16% to 20% compared to the previous year.  

To put that in context: The median price for a real fir, pine or spruce tree for consumers last year was $69.50, according to a consumer survey by the National Christmas Tree Association, a national association representing Christmas tree growers. This was compared to the median price of an artificial tree at $70. (The trade group improved its methodology this year, so it did not provide comparable prices from previous years.)

As a result, 71% of the polled growers expected wholesale prices to increase 5% to 15% compared to last year; 11% expect prices to rise 20% more, while the same percentage see prices rising no more than 5%. 

“Of course, prices vary based on location and type of tree,” Tim O’Connor, executive director of National Christmas Tree Association, told MarketWatch.

In addition to the potential increase in wholesale prices, transportation costs and other retail-related costs, including rent, energy and labor, could further push up the cost of trees this year, Harman said. 

Some good news: The supply of real trees should be broadly in line with last year, said Marsha Gray, executive director of the Real Christmas Tree Board. 

Although there have been reports of extreme weather affecting tree crops, the Christmas tree industry is big and farms are scattered, Gray told MarketWatch. What’s more, farmers use long-term strategies to account for short-term weather disruptions.

The heat wave in the Pacific Northwest last year was unique for the industry. It affected seedlings and scorched some tree branches, Gray said, but because of the long life cycle of the crop (8 to 10 years), farmers had time to manage their inventories to prevent a shortage.

“The real Christmas-tree industry is bigger than any one farm, retailer, or region — and we’ve never run out of trees,” she said. 

If buying an artificial tree, shop early 

Supply-chain issues could, however, disrupt the artificial Christmas tree market this year, said Mac Harman. 

Last year, boxes of artificial Christmas trees arrived at retailers after Christmas because of pandemic-induced supply chain disruptions, Harman said.  

Since then, retailers have storing trees in their distribution centers, “which is not what you want, because Christmas trees are bulky,” he told MarketWatch. 

And it’s not just artificial trees. The inventory-to-sales ratio for general merchandise stores reached a 15-year high in the second quarter, meaning retailers were losing money sitting on unsold supplies.

“If you have a specific tree in mind that will make your holiday shine the brightest, we recommend shopping early to secure your ideal tree at the right price for your family,” Jami Warner, executive Director of the American Christmas Tree Association, said in a statement.

Consumers started searching for artificial Christmas trees online last summer, a lot earlier than usual, said Dallin Hatch, head of communications at e-commerce accelerator Pattern. The search for artificial Christmas trees on Amazon AMZN, -0.84% spiked in July and August, it said. Searches were up 60% in July on the year, and up 41% in August. 

The spikes in searches coincided with news reports of drought and heat waves affecting tree farmers, Hatch said. 

“We haven’t seen consumers shopping in this volume for Christmas trees this early. And I doubt that is something that these Christmas-tree manufacturers could have foreseen beforehand,” Hatch said. 

At the same time, more consumers are displaying multiple trees as more people moved out of cities and into larger homes during the pandemic, Mac Harman added.

People want to celebrate old traditions, let loose after a rough two years of the pandemic. “And sometimes a tree is a symbol of that,” Hatch said.