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At a glance
Canadians expect their holiday travel spending to jump by 31% this year and approach pre-pandemic levels. Overall, they each expect to spend an average of $1,635 on gifts, travel and entertainment—up 13% from 2022.
- In-store experiences play an important role in each stage of a consumer’s holiday shopping journey, from browsing and discovering gift ideas through to making their final purchases.
- Consumers are keen to receive real-time product recommendations powered by generative artificial intelligence and are experimenting with other emerging technologies.
Canadian consumers have entered the 2023 holiday shopping season saddled with cost-of-living concerns and a downbeat economic outlook. But they told us they won’t let this unease spoil their holiday plans: 76% expect to spend the same amount or more this year as they did in 2022.
We’re seeing rising interest rates and inflation stretch the budgets of Canadian households and create a cost-conscious mentality among consumers. They still plan to spend. But an overwhelming 91% cited the importance of product prices this holiday season—the most commonly mentioned factor affecting their shopping plans.
This search for value goes beyond scrutinizing sticker prices. We’re seeing consumers apply this same mindset as emerging technologies change how they research products, pay for their purchases and build relationships with brands.
To help retailers better understand Canadians’ buying behaviours this holiday season, we asked 1,000 consumers from across the country late this summer about their spending plans and preferences—as well as the factors that shape their purchasing decisions.
A jump in Gen X, Gen Z spending habits overshadows modest increases among Millennials
Canadian consumers told us they each expect to spend an average of $1,635 this holiday season, a 13% increase from 2022. This continues an upward trend seen in recent years after purchasing intentions plummeted early in the pandemic. Canadian shoppers still spend less during the holidays than US consumers, but they’re increasing their spending at a faster pace. Shoppers south of the border say they expect their holiday outlays to rise 7% this year to US$1,530.
$
The average amount each Canadian consumer expects to spend this holiday season.
How Canadian holiday spending differs between generations
Use the drop-down filter to compare the spending intentions of different age groups.
These increases are primarily due to planned travel expenditures, which are up 31% in Canada and 12% in the US from 2022. Consumers are resuming their pre-pandemic travel patterns and spending the holidays with friends and family, as well as fulfilling their pent-up demand for trips abroad. Canadian respondents said they’ll spend an average of $687 on travel this year—the highest amount since 2019. They also told us they’re planning more modest increases in other parts of their holiday spending, including gifts (up 4% over 2022) and entertainment (up 1%).
There’s a notable divergence in the spending trajectories of different generations of consumers. Gen X consumers remain the highest overall spenders, as well as the cohort with the largest year-over-year jump in their holiday budget, which is up 29%. Gen Z is not far behind, at 26%. In contrast, Millennials and Baby Boomers both expect their holiday spending to rise by just 3%. These differences are due in part to the different career and family stages of each generation and the uneven impact of rising interest rates.
While consumers intend to spend more overall this holiday season, they plan to be discerning with their dollars. Eight in ten told us they’ll look for deals to counteract recent cost increases—a finding that mirrors other signs of consumers’ price sensitivity. This creates additional opportunities for retailers that correctly time their promotional schedule and highlight discounts when consumers are making their purchasing decisions (see chart).
Question: When are you planning to do the majority of your holiday shopping?
Prices are the most important factor affecting consumers’ holiday shopping this year. But it’s not the only one. Consumers also said they’re looking for frictionless experiences at each step of their purchasing journey. They place high importance on purchasing convenience (cited by 87% of respondents), delivery speed (85%) and the brands with which they shop (63%). We’ve organized our additional findings about consumers’ holiday shopping preferences around this purchasing journey, from discovery, research and recommendations, to purchasing and fulfillment, to retention and brand loyalty.
The return of window shopping: Physical stores dominate consumers’ discovery phase
In-store experiences will play a prominent role in each stage of consumers’ purchasing journeys this holiday season. Visiting a physical store is the most popular method of discovering items to buy as gifts and was cited by 61% of consumers. That figure was even higher among younger shoppers, with 69% of Gen Z consumers planning to visit a store in person to generate holiday shopping ideas.
%
of consumers plan to visit a physical store to discover items to buy as gifts.
Question: Which of these channels do you anticipate using to discover items to gift?
Helpful, tech-savvy store associates are powerful resources for retailers in converting these in-store browsers into buyers. Indeed, 43% of consumers say knowledgeable in-store employees will be one of their top sources of product recommendations. But our research also suggests many Canadian retailers face challenges in staffing their stores with skilled and engaged employees.
Our Hopes and Fears 2023—Canadian insights survey found that only 41% of Canadian retail workers find their job fulfilling. That’s lower than the global average for retail employees (44%) as well as the average among all Canadian workers (50%). Retail staff are also less likely than workers in other sectors to believe that valuable skills—such as critical thinking, collaboration, leadership and digital aptitude—are important. And they’re less confident that their employer will help them develop those skills.
Many retailers may be understandably reluctant to invest in upskilling their front-line staff, given the industry’s high turnover rates. But retailers that attract and retain engaged and skilled staff can give customers a more seamless and differentiated shopping experience.
Here are three areas that can help:
- Invest in training as a way of building your employer brand. Helping employees learn and grow changes the employee value proposition, energizing current workers and making your company more attractive to potential hires.
- Help make training stick. Shorter sessions, using formats similar to the content your employees already consume, increase the chances that new concepts will resonate.
- Model workplace engagement. Managers who foster stronger ties with and between in-store staff set an example for employees to engage with customers.
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Emerging retail technologies are changing product recommendations
Shoppers of all ages look for knowledgeable in-store staff to make product recommendations. But consumers often complement these human interactions with digital tools. This is particularly true among younger shoppers: 25% of Gen Z and Millennial consumers told us they’ll use emerging technologies, including virtual and augmented reality, the metaverse and artificial intelligence (AI), in their holiday shopping.
These technologies hold powerful opportunities for retailers, such as assisting online shoppers with selecting accurate apparel sizes (which helps reduce the number of items they return) by asking them to input their height, weight and typical sizing. Brands are also experimenting with virtual try-on features as well as aggregating customer reviews to indicate whether a clothing item runs large or runs small.1
Indeed, receiving recommendations, getting product information and trying on clothing are among the top use cases of emerging technologies this holiday season (see chart).
How will new technologies change holiday shopping?
Question: How will you use these technologies this holiday season?
Base: Users of emerging technologies (150 respondents).
Applying generative AI in retail can help brands make product recommendations that go beyond sizing suggestions. Retailers can use this technology to give consumers a one-to-one level of personalization that transcends traditional marketing tactics such as targeted web ads, email and search keywords.
One area we’re watching closely is how generative AI tools can create powerful affinity maps based on consumers’ purchasing and online browsing patterns to produce personalized product recommendations. It’s already a feature that’s caught the eye of consumers: 51% said real-time suggestions while shopping online or browsing a retailer’s website would be one of the most helpful forms of product recommendations, behind only advice from friends and family (69%).
Many retail leaders are learning about the myriad possibilities to use generative AI in these and other areas of their business. As you decide which investments to pursue, it’s important to develop a strategic approach to generative AI that includes a systematic way of evaluating the value proposition of each use case.
New payment methods take hold with younger consumers
Consumers say physical stores will be the most popular channel for buying products this holiday season, with 63% planning to visit a store in person to make their purchases. That’s significantly higher than various online channels and also higher than the number of US consumers who say they’ll purchase products from a physical store (see chart).
Consumers will complete purchases while shopping in-store
Canada
US
Question: Which of these channels do you anticipate using to make your purchase?
%
of consumers plan to make an in-store purchase this holiday season.
Online marketplaces are the second most popular channel for making purchases. Since many retailers are experimenting with marketplaces of their own, we took a closer look at the competitive landscape from consumers’ perspective. They painted a striking picture of Amazon’s dominance, with 91% planning to shop with the e-commerce giant this holiday season. Three in ten said they’ll use Walmart Marketplace, and 21% said they’ll shop on Etsy—reflecting a desire to buy from independent merchants.
When it comes to paying for their purchases, an overwhelming number of consumers plan to use traditional payment methods such as credit cards (75%), debit cards (55%) and cash (44%). But new payment methods are taking hold with some consumers, particularly those from younger generations. Gen Z consumers plan to use Apple Pay and/or Android Pay (30%), and buy now, pay later (BNPL) platforms (13%) at roughly double the rate as the overall population (14% and 7%, respectively).
While the underlying concept behind BNPL isn’t new—furniture and appliance stores have offered payment plans for decades—tech companies have made these platforms more widely available in recent years. They help consumers spread out the cost of big-ticket purchases into more affordable installments, provided they make their scheduled payments. For retailers, seizing the full potential of BNPL requires making the platform part of a seamless experience on your online and in-store platforms, including loyalty programs. Forcing customers to navigate complex features or complete their transaction on a third-party website disrupts this experience.
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Delivery missteps will cause consumers to switch brands
When shopping online, Canadian consumers are nearly three times more likely to use home delivery services than pick up their products in-store. They’re even less likely to use other pickup locations or alternative methods to receive their items, which are more popular in the US (see chart).
Canadians’ overwhelming preference for home delivery
Canada
US
Question: When doing your holiday shopping online, which of the following methods do you plan to use / did you use to receive your items?
Other areas of our survey underscore the value consumers place on fast, careful—and free—delivery. When asked what would prevent them from shopping with a retailer in the future, consumers put delivery-related incidents at the top of their list, starting with paying for deliveries (37%), items damaged in transit (37%) and purchases not arriving on time (36%). Out-of-stock products, a supply chain issue that was top-of-mind during the pandemic, appears farther down the list and was only cited by 28% of consumers.
Turning casual holiday shoppers into loyal customers
Canadian consumers love loyalty programs: 69% belong to at least one, compared to 57% of US consumers. Gen Z consumers are less likely than older shoppers to belong to a brand’s loyalty program or own a brand’s credit card. But they’re more likely to say that owning a brand’s credit card determines where they shop (see chart).
%
of Canadian consumers belong to a loyalty program.
Questions: Are you a member of the loyalty program of a retailer/brand? Do you also have one of the retailer’s/brand’s credit cards? (Base: Loyalty program members (686 respondents)). Does owning this credit card determine where you shop? (Base: Owners of brand credit cards (256 respondents)).
These data points show there’s an opportunity to use loyalty programs to capture the repeat business of Gen Z customers, especially as more of these younger consumers qualify for credit cards. But brands still face challenges securing the sustained loyalty of tech-savvy younger shoppers. Many are adept at quickly finding competing offers that provide more perceived value than the rewards of a loyalty program. We’re seeing some brands broaden the appeal of their loyalty programs by bundling in third-party services such as streaming subscriptions. But most programs continue to revolve around accumulating points redeemable for rewards.
The importance of communicating the value your brand creates extends beyond loyalty programs. Consumers also want to know how you’re creating value for their community. Nearly nine in ten (89%) said their desire to support local businesses factors into their holiday purchasing decisions. And 83% said they want retailers to prioritize making a positive economic and social impact in the communities in which they and their suppliers operate.
Many retailers have actively supported their community, as well as engaged in other environmental, social and governance (ESG) initiatives, for years. New sustainability reporting requirements, along with rising consumer expectations, are changing how retailers measure and communicate their performance. Brands can share their story both in-store and through online channels. Consumers say they most frequently explore company websites (cited by 42% of respondents) and social media (37%) to learn about an organization’s ESG impact.
Engaging consumers this holiday season and beyond
Retailers that provide seamless, tech-enabled experiences and deliver value at each stage of the purchasing journey can differentiate their brand in ways that can help them earn the sustained loyalty of consumers.
Contact us to learn more about how you can attract and engage consumers, both during this holiday season and beyond.
1. Melissa Daniels, “Brands are increasingly testing out virtual sizing tools,” Modern Retail, August 28, 2023, https://www.modernretail.co/technology/brands-are-increasingly-testing-out-virtual-sizing-tools
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Contact us
National Consumer Markets Leader & Global Consumer Markets Advisory Leader, PwC Canada
Tel: +1 416 687 8598
