Total holiday spending is now expected to end around +3.8% according to the National Retail Federation. Others are forecasting closer to 5% growth. Why are consumers spending more than last year in a still tough economy?
Based on news reports and recently reported consumer surveys, GrowthSpring sees six key catalysts for why consumers are spending more this holiday season.
1. Families are working to create the “ideal” Christmas. Each year adults hope for and work to achieve a family Christmas experience that is ideal—an experience just like the holidays pictured in so many TV Christmas movies. The family is together, happy, cheerful and filled with Christmas spirit. In a year when so much has been beyond the control of the average family (the economy, job security, higher food and gas prices, global instability, dysfunctional U.S. government, etc.), families can still influence/create their family Christmas experience. Families are working hard to ensure their family has a special time together and are spending to give their kids a nice Christmas at the end of a tough year.
2. Consumer confidence is up. With recent favorable economic reports on declining unemployment, a dip in gas prices, and efforts to stabilize global financial markets, consumer confidence among Americans with full-time jobs reached its highest level in almost five months (according to the Bloomberg Consumer Comfort Index).
3. This season has featured deep retail discounts from start to finish. From starting Black Friday the night of Thanksgiving to the record-setting shopping events of Shop Local Saturday, Cyber Monday, Green Monday and Free Shipping Friday, as well as retailer specific sales, shoppers have had great values offered to them on this season’s hottest gifts. Shoppers have responded to take advantage of discounts.
4. Shoppers are shopping for themselves as well as for gifts. NRF surveys show that while early holiday spending was up, as of mid-December, shoppers lag last year in how much of their shopping is completed. It appears that some of the Black Friday weekend shopping was to satisfy pent up consumer demand for items wanted and needed by shoppers for the home and for themselves. They took advantage of Black Friday pricing to shop and buy non-gift items at great prices while also shopping for the holidays. Many shoppers are also buying more practical gifts and smaller indulgences for their family and friends allowing them to buy more gifts but stay on budget.
5. The Internet continues to change how consumers shop—and pre-shop. A Shopper Sciences study showed that 42% of shoppers planning to spend more time doing online research prior to buying this year. According to a Shop.org survey, 122.9M consumers said they would shop on Cyber Monday this year. Retailers participated too—over 92% of online retailers offered a special promotion over the Thanksgiving weekend.
Online shopping with free shipping is now playing an increasingly important role in the last two weeks before Christmas—especially among the 41% of consumers who expect to shop for last minute gifts (Source: Price Grabber). Over $1 billion was spent on Free Shipping Day (Friday, December 16). Last week saw YTD online holiday shopping approach $31B and 4 individual days top $1B. Overall, online holiday shopping is up 15% YTD.
6. Mobile has further enabled holiday shoppers to find deals and the products they want. Mobile phones, social media and shopping aps are making it easier to shop and are helping consumers find what they need while staying on budget. Consumers are increasingly locating products, comparing prices and shopping on their smart phones. According to the NRF study, 31.2% of smartphone users will use their phone to compare prices and research holiday items with their smartphone. The Shop.org study revealed 17.8 million consumers planned to use their smartphone to make a holiday purchase—up from just 3.6 million in 2009. Mobile-commerce sales are expected to reach $6.7 billion in 2011 according to online-marketing firm eMarket. And, with Walmart launching its first social-shopping ap, Shopycat, other retailers will rush to do the same in 2012.
These six catalysts provide valuable insights into shopping purchases this year. In the coming weeks, we will continue to learn more about how shoppers behaved this holiday season and why. In the mean time, consumers are giving the gift of a good Christmas season to retailers. It is a welcome gift this year.
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