Date: Friday, November 12, 2021
Source: The Wall Street Journal
As COVID-19 is set to affect yet another holiday season, a return to some pre-pandemic spending levels is expected to bring holiday cheer for retailers. Amid waning pandemic anxiety and stabilizing consumer sentiment, holiday spending is expected to average $1,463 per household, up 5% from 2020, according to Deloitte’s annual holiday retail survey. Yet consumers and retailers alike are concerned about supply chain issues and rising prices—and are shifting their strategies accordingly.
The annual report examines consumer behavior and sentiment ahead of the holiday shopping season—a critical time for the retail industry. The research includes a survey of more than 4,300 consumers and 30 retail executives. Among the key takeaways:
- Spending on experiences—including socializing, travel, and entertaining—is expected to increase 15% over 2020 to $536 per household, accounting for more than one-third of holiday purchases.
- Optimism among retail executives is strong, with seven in 10 expecting consumers to spend more year over year. Yet potential stockouts may motivate many shoppers to begin earlier this year. Three out of four consumers (75%) are concerned about stockouts, and six in 10 retail executives are worried about receiving their holiday orders in time.
- Nearly seven in 10 consumers (68%) expect higher prices this season, while only five in 10 retail executives surveyed expect higher prices.
Overall, purchasing is expected to increase across categories, with 55% of households planning to spend the same, and 20% planning to spend more on the holidays. Spending on gifts is forecast to be $501 per household, an increase of 3% over 2020, while non-gift purchases are expected to total $426 per household. Forty-two percent of surveyed consumers plan to take a trip this holiday season, mostly by car.
Notably, the survey finds that high-income shoppers are expected to drive nearly all gains in spending. These shoppers plan to spend 15% more than last year (averaging $2,624 per household), while lower-income groups expect to spend 22% less (averaging $536 per household). Moreover, the percentage of all surveyed consumers who do not plan to spend at all this season is 11.5%, more than doubling from 2020 (4.9%). Two-thirds of this non-spender group (65%) are from lower-income households, compared with 12% from higher-income households.
“Despite improving consumer sentiment, the pandemic continues to influence how the holiday season will play out.”
As pandemic anxieties have decreased, the number of consumers who are anxious about shopping in-store during the holiday season has fallen to 40%, compared with 51% last year. The share of in-store spending is expected to rise to 33% in 2021, up from 28% in 2020, although this is still below the 36% seen in 2019.
Despite some recovery to in-store spending, digital continues to see healthy gains, with online spending expected to rise to $924, up from $892 in 2020. Surveyed retail executives are optimistic about online sales, with 40% expecting double-digit channel growth. Consumers continue to look for simplified and more convenient shopping, citing online-only retailers (55%) and mass merchants (51%) as top channels. Many shoppers continue to seek out digitally enabled services such as standard delivery (73%); same-day or next-day delivery (47%); buy online, pick up in store (33%); and curbside pickup (21%). Further, 28% plan to leverage social media for their holiday shopping—researching products (56%), perusing influencer-generated content (52%), and using shoppable media to make a purchase (28%).
Supply Chain Challenges
Retail executives and consumers alike are concerned that ongoing global supply chain delays will affect product availability.
Shoppers are expecting stockouts, most commonly in the electronics and accessories (49%) and toys and hobbies (35%) categories. As a result, the average shopping period is forecast to begin earlier this year and last more than six weeks. Almost 40% of surveyed consumers will likely start their shopping earlier to ensure timely delivery (49%) and avoid stockouts (47%). However, Black Friday events—many of which were canceled last year—are expected to rebound this year, with 31% of holiday shoppers planning to spend on Black Friday (compared with 24% in 2020) and another 34% planning to spend on Cyber Monday (compared with 29% in 2020.
Among surveyed retail executives, 43% already are expecting their ordered holiday inventory to be delayed, and 64% are concerned about receiving inventory in time for the holidays. This is despite 43% of retailers placing their holiday orders earlier than in 2019—even as early as March.
Inflation Drives Holiday Prices Up
When determining where to conduct their holiday shopping, getting a great deal continues to be the top priority for holiday shoppers. However, that may be more difficult this year due to the potential for higher prices and fewer promotions.
More than two-thirds of consumers (68%) and more than half of retail executives (53%) expect product prices to increase this holiday season. Among holiday shoppers who plan to spend less this holiday season, half (50%) say it is because of higher food prices. Conversely, among those who plan to spend more, 39% say it is on account of the generally higher cost of goods. More than one-third of consumers (37%) agree that there are better buys earlier in the season. In a bid to woo early shoppers, 36% of retail executives expect to begin their holiday promotions sooner than in the past.
Despite improving consumer sentiment, the pandemic continues to influence how the holiday season will play out. Retailers expect to see robust growth even as supply chain issues, inflation, and highly bifurcated spending continue to affect the industry. Companies that remain resilient—by offering promotions early, appealing to in-store and online shoppers, and planning their inventories well in advance—are likely to experience a robust holiday season and be well positioned for continued sales into the new year.