PwC: Holiday Shopping Forecast 2014
Cautious spending and a spending divide that has bifurcated the American holiday shopper into two distinct segments, are two of the 10 big trends that are expected to drive the 2014 holiday shopping season, according to a new report from PwC US and Strategy&.
“The upcoming holiday shopping season will look very similar to 2013 as shoppers remain cautious on the economy and are concerned about disposable income, the rising cost of living, and insufficient salary, leading surveyed participants to project an average household spend of $684, down from $735 in 2013,” said Steven Barr, PwC’s U.S. retail & consumer practice leader. “The spending divide among shoppers is widening, creating two distinct groups that we are tracking – survivalists and selectionists – and retailers must cater to both segments. And with shoppers coming to expect a seamless omnichannel experience, deals to woo them into stores and having no tolerance for another season of data privacy invasion, it’s a complex retail landscape that retailers need to master – or they risk losing loyal shoppers.”
The study, 2014 Holiday Outlook: Top trends, consumer behaviors and implications for retailers, outlines 10 big trends that are expected to drive the 2014 holiday shopping season:
1. Shoppers will continue to spend cautiously overall, but there will be a new intensity to their online spending.
Shoppers express strong overall concerns about holiday shopping, as they remain cautious on the economy with 72% believing a same or worse environment when compared to the year before, and 84% plan to spend the same or less than in 2013.
The key economic drivers influencing their holiday shopping decisions include: limited disposable income (64%); the rising cost of living (61%); and insufficient salary (37%). As a result, household spend levels are projected to slightly decrease in 2014.
2. America’s economic conditions have reached holiday shoppers who will bifurcate into two distinct categories during this season: survivalists and selectionists.
The 2014 holiday shopper is segmenting into two distinct groups: survivalists and selectionists. Survivalists – those generally making under $50,000 per year – represent 67% of American shoppers (up from 65% in 2013 and 63% in 2012). They are constrained by daily cost of living and apply the lens of affordability to all purchases. The average household holiday spend for this group is $377.
Selectionists – those generally making more than $50,000 per year – represent 33% of American shoppers (down from 35% in 2013 and 37% in 2012). They make careful decisions based on their disposable incomes. This group’s average household holiday spend in 2014 is $978.
3. Most purchases will have to pass the test of affordability as shoppers carefully prioritize their spend and look for the best value.
Spending drivers are clearer than ever this holiday season. Eighty-four percent of shoppers cite best prices as the main reason for choosing a place to purchase gifts (up from 74% in 2013). Deals rank second, with 43% of shoppers saying they will shop based on frequency and quality of seasonal deals. In addition, the share of online will continue to grow as shoppers seek convenience and value.
Fifty percent of spending is projected for physical stores (down from 55% in 2013), with 43% of spending done online (up from 42% in 2013). Fifty-eight percent of spending will be on gift cards, the hottest category next to clothing this year.
4. Expect more channel fragmentation as shoppers budget for not only dollars, but their time. Giving consumers the right omnichannel experience is essential. That means allowing shoppers to move easily across channels, giving them many options to choose and buy, while providing retailers visibility into inventory and pricing.
Omnichannel has come of age this holiday season and 2014 could be the turning point when consumers make online pre-planning an integral part of their holiday shopping tradition. Forty-one percent of shoppers plan to increase online spend in 2014 over 2013.
This season, three distinct omnichannel shopper profiles will emerge: tradeoff shoppers (39%) will shop around extensively and buy online if it’s cheaper; transitionalists (29 %) will shop online a bit, but generally prefer traditional stores; and digitalists (32% will make online the “go to” channel for most discretionary and planned shopping.
5. Spending will be concentrated during four periods: pre-Thanksgiving, Black Friday, mid-holiday and post-holiday.
The 2014 holiday shoppers are planning their holiday spending in four very distinct waves. Wave one includes the early holiday shoppers, where 21% of all holiday spend will occur from now through the Thanksgiving weekend. Survivalists plan to spend $86 in this wave, while selectionists plan to spend $202.
Wave two encompasses the Black Friday period – 21% of spend will occur over the week of Black Friday. Survivalists plan to spend $84 in this wave, while selectionists plan to spend $205.
Wave three includes the mid-season spending frenzy, where 50% of the holiday spend will happen between Thanksgiving and Christmas with a significant portion of that spend in the last 10 days before Christmas. Survivalists plan to spend $184 during this period, compared to $489 for selectionists.
Wave four is post-season deal seeking, with 8% of holiday spend projected to be after the holidays as shoppers continue their “affordability” journey. Survivalists plan to spend $23; selectionists plan to spend $83. Getting promotions well-timed and relevant to shopper spend profiles is critical.
6. The three S's of shopping — searching, showrooming, and selection — have become permanent. A new Thanksgiving ritual of shoppers going online to prepare their “holiday shopping plan” has emerged and may be the most significant shopping pattern change this season.
Forty-nine percent of shoppers plan to search, showroom and purchase on Thanksgiving morning. Fifty percent of all shoppers plan to shop during Thanksgiving / Black Friday to grab the best deals.
The “early bird tradition” continues with 75% of Black Friday shoppers going to stores. The Black Friday channel choices of these shoppers include mass merchants (80%), department stores (68%), and major online retailers (70%).
7. Shoppers are clear about what they will spend their holiday dollars on, making it critical for retailers to differentiate within those categories.
These five categories are at the core of the holiday 2014 wish list for both survivalists and selectionists: everyday clothing (61%), gift cards (58%), traditional toys (39%), personal electronics (36%) and media and entertainment (31%).
8. Shoppers recognize that experiences are beginning to count just as much, or more, than gifts. Holiday family get-togethers and family occasions will continue to grow in importance.
Thanksgiving dinner tops the list of 2014 holiday eating occasions with 76% of Americans planning some type of celebration. Christmas and Hanukkah celebrations are second, with 73% of America celebrating. Family and friends’ in-home parties rank third in holiday celebrations, with 53% of America celebrating.
Out-of-home formal parties are projected to drop to 32%, d