US consumers will cut holiday gift spending by 14%, finds L.E.K. study
Americans are projected to spend 14% less on holiday gifts in 2020, according to a recent survey from L.E.K. Consulting and Civis Analytics. The survey polled approximately 2,400 US consumers on November 16, 2020.
The average consumer will cut their gift budget to $400, down from $465 in 2019. Budget drops were noted across all annual income brackets, including less than $50k (-20%); $50k-$149k (-14%); and greater than $150k (-7%).
The central reason for reduced holiday budgets is, of course, the global pandemic. And since the pandemic’s economic (and health) impacts have hit lower-income earners harder than rich Americans, they have reduced their gift-giving budgets even more than wealthier brackets.
Forty-four percent of Americans said they had less disposable income in 2020 compared to last year, and 43% said they were concerned about their finances and future income security. Respondents said their income has been reduced by 11% in 2020 due to Covid-19, while 8% said they lost their job because of their pandemic.
As part of the gift budget reduction, nearly half (48%) said that they would give gifts to fewer people this year.
“Consumers will clearly be celebrating and giving gifts, but their celebrations will be subdued," said Manny Picciola, managing director at L.E.K. Consulting. "It's possible that they are planning to give fewer gifts in part because they are traveling and visiting less. But for many, the motivation is financial. Like so much else this year, the holiday season will suffer under the economic weight of the pandemic."
Despite the 14% drop in gift purchasing, the category has remained much more resilient that travel and going out – which have been especially hollowed out by pandemic restrictions and consumer aversion. Most consumers plan to stay home this holiday season, with only 27% traveling to see family/friends (vs 58% in 2019), 18% traveling for vacation (vs 48% in 2019), and 22% attending local gatherings (vs 54% in 2019).
The pandemic also means that consumers will continue their shift to e-commerce during the holidays. Consumers expect to do 48% of their shopping with online retailers – encompassing both home delivery and curbside pickup (up 11% from 2019), while 52% of shopping will be done in-store (down 12% from 2019).
More than half of Americans said they would avoid high-traffic malls and seek to minimize their time in stores. Only 19% said they were planning to stick with their typical holiday shopping routines.
Maria Steingoltz, managing director at L.E.K. Consulting, said, "Online retailers can expect to do well, but consumers are suffering and they are wary. Retail as a whole will feel the impact."
The online shopping shift, however, will remain after the pandemic subsides. The L.E.K. report projects e-commerce share across categories will increase by 5-10% post-pandemic.
Consumers are expected to shift their travel and vacations to domestic markets, driven by preference to drive rather than fly to destinations. Travel involving cruises, music festivals, and all-inclusive resorts is also expected to incrementally decline post-pandemic.
