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RAPAPORT... Consulting firm PwC expects the U.S. Christmas-shopping season to be characterized by two distinct groups of consumers: the selectionists who represent 33 percent of shoppers and earn more than the median household income of $50,000 per year, and survivalists, who represent the majority (at 67 percent) and earn less than the median. Overall, however, PwC projected that holiday spending will drop nearly 7 percent year on year to $684 per household.
Complicating the 2014 Christmas outlook, there have been fewer selectionsists each of the past three years; nevertheless, PwC anticipates those households will spend about $978 on average. The average household spending projection for survivalists households was $377.
“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 and 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.” PwC determine that shoppers will continue to spend cautiously overall, but there will be a new intensity to their online spending. Key economic drivers influencing consumers this year include: limited disposable income (64 percent); the rising cost of living (61 percent) and insufficient salary (37 percent). Most purchases will have to pass the test of affordability as shoppers carefully prioritize their spend and look for the best value, the group noted. How will retailers attract shoppers? Eighty-four percent of consumers told PwC that "best prices" will be the main reason to visit a store to purchase gifts, remarkably that percentage jumped from 74 percent one year ago. Secondly, 43 percent of shoppers will shop based on frequency and quality of seasonal deals presented by the retailer. In addition, the share of online sales will continue to grow as shoppers seek convenience and value, with 50 percent of spending projected for physical stores and 43 percent of spending conducted online. PwC determined that 50 percent of spending will simply be on gift cards.
Retailers must ensure that shoppers can easily transition across channels with a stellar omnichannel experience, giving consumers many options. PwC noted that three distinct omnichannel shopper profiles will emerge this Christmas: tradeoff shoppers (39 percent) will shop around and buy online if it’s cheaper; transitionalists (29 percent) will shop online somewhat, but generally prefer traditional stores, and digitalists (32 percent) will make online the “go to” channel for most discretionary and planned shopping. Retailers can also expect four waves of shoppers during the 2014 Christmas season, according to the data, with the first wave (21 percent) occurring between now and Thanksgiving weekend. Survivalists plan to spend $86 in this wave, while selectionists plan to spend $202, according to PwC. The second wave will include Black Friday, with 21 percent of spending expected, as survivalists plan to spend $84 and selectionists planning to spend $205. The third wave includes the mid-season spending frenzy, where 50 percent of the holiday spending will happen between Thanksgiving and Christmas with a significant portion of that amount in the last 10 days before December 25. Survivalists plan to spend $184 during this period, compared with $489 for selectionists. Following Christmas, there will be a fourth wave of shoppers -- deal seekers, with 8 percent of holiday spending projected to top off the season.
Retailers must also be prepared for a new Thanksgiving ritual, whereas consumers now hop online that day to prepare a “holiday shopping plan” and this will become increasingly important as consumers have less to spend on gifts. Forty-nine percent of shoppers plan to search, showroom and purchase on Thanksgiving morning, while 50 percent of all shoppers plan to shop during Thanksgiving and Black Friday to grab the best deals.
Top gift categories for both survivalists and selectionists include everyday clothing (61 percent), gift cards (58 percent), traditional toys (39 percent), personal electronics (36 percent) and media and entertainment (31 percent), according to PwC. Shoppers plan to shop at multiple stores as well as websites with mass merchants, department stores and major online retailers as top choices.
“With consumers having ever higher demands for their shopping experience – no matter the channel – we conducted this survey to better understand how retailers can meet the needs of their shopping habits this holiday season. What we learned was that to compete effectively at retail this year, it demands a new level of organizational and operational excellence, which we outline in our report. Retailers have been cautioned about the two distinct groups emerging from today’s economic realities, and we’re offering ways on how to appeal to both groups and have a winning holiday shopping season in 2014,” said Barr. PwC anticipates that successful retailers this year will “shout out” the Christmas season promise, invest in differentiating in-store experience, make sure omnichannel experience is at least market comparable, appreciate that deals are critical for driving traffic, communicate “up close and personal” on everything, increase attention on their most loyal shoppers, ensure cybersecurity and onboard the entire organization to “how we win this holiday season.”
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