A recent Deloitte survey shows that 95% of Americans plan to shop for gifts this season. While the majority expect higher prices due to inflation, experts believe overall spending will increase by 14% compared to 2022.
With so much conflicting news about a softening economy, resilient consumers, and stubborn inflation, this holiday season will see the most interesting consumer behavior yet.
Holiday Participation Is Up
Holiday participation is on the rise. They say this is the happiest time of year, and 95% of people surveyed plan to enjoy the season to the fullest in 2023. That’s nearing pre-pandemic levels; up slightly from 93% in 2022. Especially during the pandemic, many people cut back on Christmas spending, and some skipped it altogether. Now that the pandemic is not the threat it once was, the world is moving past it. People are returning to their old habits and look forward to the greener side of Christmas cheer.
The confidence in this rebound is evident in spending trends. People earning between $50,000 and $99,000 plan to spend 26% more than last year. Those earning more than $200,000 show a spending increase of 22%. Overall, all income groups plan to increase spending by 25%.
Even though 72% of consumers expect prices to be higher this year due to inflation, they plan their spending accordingly, visiting fewer stores and buying fewer gifts. In 2022, the average number of gifts budgeted for and purchased was nine. This year, it’s only eight.
It is unknown how healthy consumers’ finances will be after the holidays. This year, 33% are considering going into debt to pay for the holidays, and according to Trustpilot, another 41% plan to use buy now, pay later services to help cover costs. Older generations employed layaway plans or banks’ Christmas club funds.
Today, similar strategies can be employed. It is always better to start saving for the holidays sooner rather than later. Consumers can put money aside, ideally using a cash stuffing strategy, earlier in the year, to limit the amount of debt they incur.
So, What’s Santa Bringing (And How Much Is He Spending)?
Santa will be a little busier this year than during the pandemic. In 2019, the average amount spent on holiday experiences, non-gifts, and gifts was $1,496. In 2023, the average amount spent on holiday festivities will be $1,652, an increase of 10%.
Even though overall spending will be higher, consumers admit to being more frugal about the gifts they buy. Gift cards will be more prominent this year. An increasing number of consumers say they will allocate more of their gifting budget to gift cards to battle inflation. They are considering spending roughly $300 on gift cards, up from $217 in 2022. Clothing, toys, and electronics are also high on consumers’ wish lists, with food, beverage, and home and kitchen items not as popular this year.
For 75% of respondents, self-gifting is enticing, but they also felt that tight budgets could dampen their merry-making endeavors.
Online vs. In-Store
After several years of almost exclusive online holiday shopping, more consumers are wandering back into physical stores. In fact, they allocate an average of 37% of their budgets to brick and mortar establishments, according to the Deloitte survey. To better understand the gravity of this trend, in 2019 36% of shoppers’ budgets went to in-store shopping, and 35% in 2022.
Overall, the shopping venues of choice are mass merchants. 53% of consumers say they will spend the bulk of their holiday budget there, and online-only retailers, which stand at 63%.
The shopping preference to buy online and pick up in the store is less popular than last year. Only 28% of respondents plan to use this option, as opposed to 35% in 2022. Consumers are also looking for deals on shipping, particularly low purchase thresholds for free shipping. They would gladly spend $40 to get their purchases shipped to them for free.
Corporate practices also influence consumer behavior. Environmentally conscious shoppers still dominate, with more than half of younger shoppers prioritizing sustainable packaging and products.
Buying gifts through social media has remained the same as last year, at 34%. It peaked during the pandemic but dropped in 2022, where it has settled, at least for now.
Should retailers use artificial intelligence (AI) at any point in the consumer’s experience? 75% of shoppers said they have little or no trust in the retailers’ abilities to use AI responsibly.
Peak Timing for Savvy Shoppers
The timing of consumer spending is also shifting. About 78% of shoppers planned to be active during the last two weeks in November, spending almost one-third of their budgets. Promotional events held during this time attracted 66% of shoppers, seeking to combat steadily rising prices. Consumers feel that the deep discounts typically offered that weekend allowed them to double their money‘s reach, with many stores offering discounts of 50% or more.
In 2019, the average shopping “season” was 7.4 weeks long. This year, it’s just 5.8 weeks. This decreases the window of time for shopping and increases competition in the marketplace as retailers look for new and better ways to entice consumers to buy with them instead of their competitors.
Holiday Cheer During a Soft Economy
The 2023 holiday season will be telling as it reveals the state of our economy or, more to the point, the American consumer mindset. Amid rising prices, people are still finding ways to keep their spirits bright this holiday season and not let inflation deflate their holiday joy.
This article was produced by Media Decision and syndicated by Wealth of Geeks.