Photo courtesy of Deloitte 2017 Holiday Survey
The 2017 holiday shopping season is set to be a good one for retailers, as the rise in personal income and consumer confidence will likely push spending to new levels. After a year full of good economic growth and record stock market levels, consumers are feeling especially optimistic and festive. Holiday spending is expected to rise as much as 4.5%, a full percentage point of growth over last year.
What will drive sales this year?
According to Deloitte, holiday season sales should top $1 trillion over the period covering November through January. These numbers adjust seasonally to eliminate ordinary purchases. Some of the expected rise in retail sales this season will be due to consumers feeling somewhat more settled compared to last year when the country was going through a contentious election cycle.
The proliferation of new retailers claiming niche positions in the marketplace will also have a big effect on how market share will pan out over the retail sector this year. In any event, the retail sector is a healthy part of a growing U.S. economy.
Even with the political distractions consumers are facing every day from the mainstream media, the belief is that consumers are very good at tuning it out for the most part. However, if the Trump administration is able to push through meaningful tax cuts before the end of the year, retailers could see a potential boost in their holiday sales.
More good news is that temporary hiring is likely to increase this holiday season, further bolstering an economy that is already starting to heat up. In fact, Target is planning to make huge hires in temporary help chain-wide. Estimates top 40,000, which is a significant jump over 2016.
A few things may have a negative impact on the holiday seasonal sales. Recently, economists have seen an uptick in saving accounts among consumers. Additionally, the recent devastating hurricanes and wildfires may have consumers pulling back from spending this holiday season. However, the potential impact is impossible to gauge, and retailers won’t know until the holiday season begins. The sales forecasts made by economists ahead of the holiday shopping season are famous for needing revision once the shopping season begins. This is because their forecasts are only guesstimates made with the use of surveys and past years’ data.
What is more important is that retailers work to stay in touch with growing consumer trends, and that they carefully examine what factors are currently driving traffic into their establishments. Monitoring sales growth, engaging customers, and tweaking their methods and expectations along the way will help them capture more market share.
Key characteristics of consumer buying behavior
According to the Deloitte study of consumer behavior, there are some interesting angles driving consumer buying both for this year and in years past. Some of these will surprise you.
For instance, gift buying typically only represents one-third of the total average spending of consumers during the holiday season. The majority of dollars spent by consumers goes to things such as decorations, holiday food, and holiday experiences. Even so, the average projected spending per respondent to the study for the 2017 holiday season was $1,226.
Photo courtesy of Deloitte 2017 Holiday Survey
When it comes to gift giving, the number of gifts consumers have indicated they’ll purchase will remain flat, as they have since 2011. When it comes to the most popular gifts purchased, gift cards and clothing purchases top the list and are roughly equal. Interestingly enough, 50% of consumers will shop for themselves while they are holiday shopping for others, and an even greater percentage intend to give indulgent gifts to their recipients.
Although larger box stores are a big destination for holiday shoppers, more shoppers will purchase gifts from Internet sites this year. Sales from e-commerce shopping are expected to rise nearly 21% during the holiday shopping season of 2017, compared to 2016.
For the first time ever, online shopping is expected to surpass spending in stores with shoppers spending approximately 51% of their budget on digital purchases. Last year, spending between brick-and-mortar establishments and online retailers was about even. People answering their survey also felt that the online shopping experience was superior in terms of the ability to search and compare products and the variety and quality of products available.
While most of those who shop online will do so from desktop or laptop computers, mobile shopping will represent a significant portion of online shopping because such a wide variety of payment options exists.
Interestingly, a good portion of holiday shopping will take place toward the latter third of the shopping season as many consumers look to take advantage of post-holiday sales to purchase non-holiday items, deeply discounted products, and leftover stock at great prices.
When it comes to spending, higher income consumers, meaning those earning $100,000 per year or more, will spend nearly twice that of the average shopper. This equates to an average of $2,226 per consumer as opposed to $1,226. Average spending also equates to age with spending rising with age up until it declines sharply with seniors.
Increased spending may cause a rise in credit card debt
As with prior years, strong consumer spending will, undoubtedly, lead to higher consumer debt, as most consumers will resort to credit cards to cover their holiday expenditures. Those already struggling with credit card debt could see a significant worsening of their debt situation, as estimates say that the average consumer will add over $1,000 to his or her credit card balances. January could prove to be a very difficult month for many consumers who are already struggling to make ends meet.
In general, credit counseling agencies and other debt relief companies such as National Debt Relief see a 20-25% increase in the number of consumers seeking help in the first few months following the New Year. These consumers are driven primarily by the impact of the added debt burden taken on during the holiday shopping period. If consumers are already in a position where they are just able to pay the minimums on their credit cards, the increased balances may make paying those minimums too difficult.
Strategies for controlling holiday spending
Consumers will purchase the largest amount of merchandise in the last couple of months of the year due to holiday shopping. In fact, the final month of the year will represent nearly 30% of annual sales for many retailers. Consumers spend an exponentially higher amount of money during the holiday season than in any other season of the year.
So, what can consumers do to mitigate the impact of holiday shopping on their finances this year? Let’s review a few strategies.
Budget your spending
Ahead of the shopping season, assess your finances and arrive at an amount of money you would like to spend. Remember, holiday expenditures include more than gifts. Most consumers will spend more money on other things such as food, decorations, and travel expenses to see relatives. Being realistic about what you’ll actually spend in these different categories will help you prioritize what is most important to you and how you should adjust your budget if the need arises.
Look out for retailer tricks
Retailers are in the business of making money, so consumers need to be aware of the methods retailers use to encourage consumers to buy their products. These sales tactics are common and especially leveraged during the holiday season. Consumers should keep a sharp eye out for the following:
- False sales: It’s a common retail practice for retailers to raise the price of items ahead of a sale in order to slash prices during the sale to make it look like consumers are getting a significant discount. Consumers should look out for these retailer’s practices, especially when purchasing big-ticket items such as computers, televisions, and other electronics.
- Products of a lesser quality: Many times, retailers will advertise a popular product as a sale item when, in fact, they only have a lesser quality product in stock. Consumers need to be mindful of the specifications of the products they desire.
- Limited supplies: Many retailers will advertise certain high-demand products at incredible prices to drive traffic into their establishments. However, the reality is that many retailers will have a very limited amount of product and will try to convert shoppers to other, more expensive, products.
- Bait and switch: Bait and switch is an age-old practice of luring consumers into a store through advertising, on the promise of having a certain product available. The catch is that, when the customer gets to the store, it doesn’t have the product advertised, but instead offers a product that is more expensive.
- Financing offers: Many retailers will offer “special” financing on big-ticket items such as televisions and computers. These offers are usually not great for the consumer, as most involve very high interest rates and other unfavorable terms.
Don’t spend on yourself
The holidays are a time to give to others but, increasingly, trends show a pattern of self-giving. This means that consumers are spending a portion of their holiday dollars on themselves while in the process of shopping for others. The numbers are quite staggering. Consumers will spend an average of $130 on themselves while shopping for their loved ones.
Set up family expectations
Many times, families base their spending on what they think their family’s expectations are for gifting during the holidays. If looking to curtail your holiday spending, it would be wise to discuss this with your family in advance, so everyone is on the same page and can adjust accordingly. More often than not, your family will welcome your initiative to reduce holiday spending and focus the holidays more on togetherness and tradition rather than material gift giving.
Traveling during the holidays can be an expensive proposition. With flights and hotels, a family’s holiday budget can go out the window quick. Booking early and taking advantage of special rates can help keep you inside of your budget. Shop around for the best rates and avoid extraneous expenses by packing light and bringing along snacks and light meals.
Keep track of your spending
One of the most important things a consumer can do to keep holiday spending in check is keep track of spending throughout the holiday period. Staying on budget and not letting yourself get carried away will go a long way in keeping expenditures in line and making your holidays a more pleasurable experience. After all, if you’ve set a budget for yourself, monitoring your spending should be an easy process. Often times, consumers will spend a lot more money than intended simply because they lose track during the hustle and bustle of the busy holiday shopping season.
Handmade gifts are special
Some of the best gifts you can give to your friends and family aren’t in stores. Handmade gifts are not only economical, but are also more personal. If your budget is running thin, consider putting your creativity to work. Chances are strong that you’ll end up giving gifts that are more special to your family and easier on your wallet.
The holidays can be a very stressful time when gift giving, decorating, and entertaining put a strain on your budget. However, with some planning and some good strategies, you can enjoy the holidays without going into debt. Take control of your spending and manage your finances so you can go into the New Year without jeopardizing your financial future.