Holiday spending to drop by 7% as consumers avoid travels and experiences
Holiday spending in US households is projected to drop 7% from 2019 to $1,387 in 2020, according to Deloitte’s annual holiday retail survey, which polled 4,000 US consumers in September.
The drop in spending is being driven by financial anxiety and a reduction in travel expenditures and social outings.
Though 71% of Americans say they are in a similar or better financial situation, nearly one-third (29%) say their household’s financial situation is worse than last year. As such, 38% plan to spend less this holiday season – the highest number since the financial crisis, when nearly 60% said they would spend less.
Concerns and restrictions related to the coronavirus pandemic mean that households will spend just $260 on socializing away from home and travel – a drop of 34% year-over-year.
Airlines’ and restaurants’ pain is set to be retailers’ gain – especially on the e-commerce end – as the retail category is set to grow to 66% ($922) of the $1,387 seasonal spending pie. Consumers are projected to spend $435 per household on non-gift items such as home/holiday furnishings and nongift apparel. Spending on gifts and gift cards is expected to fall 5% to $487.
Unsurprisingly, consumers plan to up their online shopping this season as they seek out safer and more convenient shopping experiences. Half of respondents in the Deloitte survey said they are anxious about shopping in-store this season due to Covid-19, and the same number said they wouldn’t return to their pre-Covid shopping behavior before a vaccine is made available.
Households plan to spend 64% ($892) of their budget online, up 5 points from 2019. Online holiday shopping has gained steady ground since 2016, when it represented 50% of spending.
More than 60% of predominantly online shoppers indicated their top reasons for e-shopping included the avoidance of crowds, the comfort of shopping from home, and free shipping and delivery options.
Seventy-three percent of shoppers said they preferred a standard delivery service (up 11 points from 2019), while buy online and pick up in store (BOPIS) preference remained steady at 35% (vs 34% in 2019). Curbside pickup surged in popularity as a preferred option, growing to 27% from 11% in 2019.
"As travel spend declines, retailers will likely benefit, and should receive a higher percentage of total holiday spend. The key for retailers is to stay flexible and offer options that appeal to consumers’ changing behaviors and address their evolving needs. Those that do will likely be better positioned for a bright holiday season,” said Rod Sides, head of Deloitte’s US retail, wholesale, and distribution sector.
Though safety and convenience are important, the survey found that a “great deal” is still the top factor in selecting a retailer, at 61%. As cash-strapped consumers seek out deals remotely, Cyber Monday is slated to be an even more popular event than Black Friday. Consumers of all age groups are likely to rely more on Cyber Monday (29%) than Black Friday (24%).
