The holiday season is a busy one for business. With shoppers buying in full force following the massive sales phenomena know as “Black Friday” (which has crept earlier into the week of Thanksgiving, despite its name), “Shop Small Saturday”, “Cyber Monday”, and the more recent trend of “Giving Tuesday”, retailers and restaurants are kicked into full speed operations- and their earning potential during this time is explosive.
How explosive? Let’s take a deep dive into the current consumer economy and at spending trends anticipated this holiday season.
As a preface, we should first take a generalized look at our existing economic climate. The nation as a whole is experiencing a historically low unemployment rate- coupled with moderate inflation of the past few years. The result is that consumer confidence is high. At the same time, however, wage growth has stagnated over the last half-decade, interest rates are rising, and with the stock market declining, there isn’t as much money circulating in the economy.
These indicators essentially mean that for the most part, Americans have jobs and job security but not as much money to spend as they would have had even ten years ago. Increases in housing costs across all types are resulting in larger percentages of annual income going to basic needs and, with dual income households becoming essential to staying financially stable, food costs have soared as regularly dining out has become par for the course in modern life. All this said, the economy is stable and shoppers are spending money this holiday season.
Retail sales forecasts for 2018, based on monthly trend data compiled since 2010, are showing moderate growth, with overall sales expected to be 3.9% over 2017 totals. The largest growth goods categories of retail expected are in Clothing & Accessories, Electronics, and in Food Services sectors. You may be wondering, ‘Why would Food Services be a sector of such strong growth ( 11.4% year over year, in fact!)?’ The answer to that is simple – more people are going out to eat and drink! Holiday parties, family events, long shopping trips – these are becoming much more popular in today’s culture as people are valuing time and experience over goods and items.
According to U.S. Census Bureau data compiled by real estate analytics group CoStar, there is also a relationship between back-to-school sales and holiday sales in a given year. Based on their findings, retail sales in 2018 are expected to be marginally lower than last year’s holiday spending but still higher than in 2015 or 2016.
So who is shopping this year? Consumer reports for 2018 are showing that the average amount of money that an individual person in the U.S. spends on holiday-related items, is $706.40. Of this total, about 74% is spent on purchasing gifts, with 26% accounting for dining, events, gasoline, etc. Further broken down, it is expected that Millennials (aged 20 – 37 years) spend on the lower end of the average: approximately $612.80. Generation Xers (aged 38 – 53 years) average $896.10 and Baby Boomers (aged 54 – 72) are expected to spend around $696.80 over the holidays. Of the three generational groups with the most influential consumer-spending potential today, Millennials top the charts for being those who spend less on things and more on experiences and events in the months of November and December.
Where are people shopping in 2018? Even though a lot of dialogue has taken place regarding the rise of online shopping, actual consumer data tells a vividly different tale. More than 95% of all holiday shoppers in the U.S. will purchase from physical stores this season. Supplementing these on-site purchases, approximately 60% of shoppers will also buy gifts online. Reports indicate that the average shopper who purchases an item online for in-store pickup will make additional purchases 82% of the time on site while there picking up their order. 91% of consumers who make in-store purchases will also purchase from that same retailer online this season. The popularity of online sales is resulting in more ways for traditional retailers to grow sales.
Who is topping the charts for gift-buying? Following general domestic spending patterns, Discount Stores are the preferred choice for holiday shoppers by a massive margin. More than 62% of shoppers will purchase gifts from these types of stores. Rounding out the top 5, Department Stores will rake in 32% of shopper purchases, Electronics Stores will get 26% of the pie, followed closely by Sporting Goods/Hobby/Book/Toy Stores at 24%, and Dollar Stores also seeing at least 24% of all shoppers come through the door.
Fun fact: According to retailer data collected across the country, it may prove to be no surprise that the number one type of gift anticipated to be purchased this year is…. *drumroll*
When I think of the holidays, I think about time spent with my family and the traditions we have cultivated over the years. I think about parties with friends and colleagues, going to community events, watching classic movies cuddled by a warm fire. I don’t think about shopping or consumer behavior. The economic impact of generational purchasing power doesn’t wake me up in the middle of the night. Giving gifts is an act of love and those gifts can come in many forms at any kind of price point and we are all much more valuable than being seen as consumers. My wish for all of you in this busy season, is that you relish the joyful moments of peace with those you love and stress less about the length of your receipts. And if you find yourself in need of an interesting fact to share at a holiday party, maybe this blog post will prove helpful!