Holiday Outlook 2020: December edition
The pandemic and its resulting economic implications continue to ripple out unevenly into holiday budgets. More than half of baby boomers experienced no economic impact at all while some 20% of millennials are upbeat. Still, almost half of all consumers are feeling some economic pain.
Consumers express more optimism now than they did when we first polled them a few months ago. But they’re still wary, given widespread economic uncertainty. To better understand this fragmented shopping season, we asked almost 500 consumers nationwide about their plans for the holidays.
Consumers told us in November that they plan to spend approximately 7% less than they did last year — an average of $1,194 — likely the result of increasing COVID-19 spikes and ensuing shutdowns combined with little hope of federal economic relief on the horizon.
They do, however, plan to spend 9% more on gifts than they did last year, as many families put plans for travel and gatherings on hold. And they will be more generous with those outside their immediate circle of family and friends, perhaps recognizing the importance of those essential to daily life in the midst of a pandemic. In fact, consumers will spend 16% more on people outside their circle of family and friends. Pets also take pride of place this holiday, with spending increasing 21% over last year.
Overall, consumers are less positive than they were in October but more than they were in August, when we first asked about their intentions for holiday shopping, reflecting an uncertainty that continues to reshape the economy at large.
Free shipping ranks as the most decisive element of brand loyalty by far: For more than two-thirds of consumers (68%), it matters more than free samples, loyalty programs and curbside pickup.
And close to half of all consumers (42%) told us free shipping is of significant importance to their purchasing decisions.
While younger consumers find it less of a draw — and are also more interested in free samples, curbside pickup and early access to sales and new products than older shoppers — free shipping still holds pride of place across all age groups.
By almost 2 to 1, free shipping outranks other benefits for significant impact on purchasing decisions. Meanwhile, curbside pickup and premier access to new products rank 10 or more percentage points higher for younger consumers.
Consumers make no bones about their preference for free shipping. Retailers who deliver have a clear competitive edge.
The biggest deal-breaker for consumers? Long lines for in-store shopping, which is what consumers have told us for several years now.
This year, the vast majority (78%) again identified long lines, underscored by health-related capacity restrictions in a COVID-19 environment. Still, 45% said they would stay loyal, shopping online instead, while 32% would switch brands.
For online shoppers, high shipping costs top the list of deal-breakers, followed by cybersecurity concerns.
Older consumers are far more sensitive to high shipping costs online — by a margin of 20 percentage points — than younger shoppers. With in-store shopping, long lines are by far the biggest deal-breaker.
In return for brand loyalty, consumers have come to expect a convenient, frictionless shopping experience that offers the value they seek.
While Amazon clearly dominates online shopping — with 89% of consumers using the site for at least some holiday shopping — younger consumers are open to options outside the e-commerce giant.
Speed and flexibility matter. The ability to have an item shipped directly from a brand’s website as well as local stores and curbside pickup are among the reasons younger consumers say they’d switch loyalties to a different retailer.
Meanwhile, Amazon loyalists are just as likely as consumers overall to have increased their use of online shopping due to the pandemic.
Younger consumers are most likely to switch away from Amazon. They are also least likely to switch to Amazon once they’ve forged loyalty to a different brand.
Retailers that offer the best of online and in-store options are most likely to entice younger consumers, who are open to switching loyalties. Shipping capabilities also appeal to younger consumers for whom speed is a priority.
With the pandemic interrupting travel and putting a halt to so many in-person visits this year, many of us will likely be turning to gifts as the best expression of the season. For retailers — whether online or in stores — the challenge lies in providing the best value tailored to shoppers’ specific needs, value that balances safety, price and convenience in the most uncertain of economic times.
Private Consulting Solutions Leader, Chicago, PwC US
Consumer Markets, PwC US
Consumer Markets, Senior Analyst, PwC US