When asked about their household finances, a solid three-fourths (75 percent) of 2016 survey respondents perceive their current situation to be the same or better than this time last year (figure 1). Thirty-six percent of consumers believe that their situation has improved, reflecting a three-point increase since 2015. This trend is consistent with the steady increase since 2012. Optimism extends beyond the home, as 45 percent of consumers surveyed expect the economy to improve in the next year (up three points from last season). Comparable to 2015, a third of respondents believe that the economy will remain stable; those anticipating a weakening have dropped from 25 percent to 22 percent.

Economic progress boosts spending plans

Overall plans for this season’s holiday spending remain largely unchanged from last year, with nearly three-fourths (74 percent) of consumers surveyed aiming to spend the same or more compared with last season (figure 2). The number of consumers planning to spend more dipped slightly, from 19 percent to 17 percent, but remains way ahead of 2008 levels (9 percent) when many were experiencing tough times. Of those planning to spend more, most (42 percent) cited improved household finances as the primary reason, second to the need to update personal items, such as clothing, for themselves and their family (30 percent).

This season, it’s more about giving than indulging

Despite perceived economic stability at home, surveyed consumers intend to be slightly more cautious with their spending this holiday season. Prudence is mostly reserved for non-gift spending, which dropped significantly compared with 2015 spending levels (figure 3). The non-gift categories that boasted the highest year-over-year increases in 2015—home holiday furnishings and non-gift clothing—will account for the most significant year-over-year decreases in 2016 (figure 4). Overall, gift spending intentions remain somewhat consistent with previous years, dropping slightly from $487 in 2015 to $426 in 2016.

Presidential election likely to have little impact on spending

Roughly a quarter of respondents believe that the outcome of this year’s US presidential election will have an impact on their spending this holiday season (figure 5). When those consumers were asked how the outcome would influence their spending, the same number (about 44 percent) reported they were likely to spend less in the event of either a Democratic or Republican victory.

Expect standard stocking stuffers (and maybe a bottle of whiskey)

There is little change in the number and types of gifts on shoppers’ lists this season. Survey respondents anticipate buying an average of 14 gifts, consistent with the past couple of years. Clothing maintains its status as the No. 1 gift that consumers plan on giving, and continues to rise in popularity (50 percent in 2016, up from 45 percent in 2014) (figure 6). While the popularity of gift cards and gift certificates is up slightly from last year, the amount consumers plan to spend on them has dipped.

Subscription-based products and services might be garnering a lot of market and media attention, but most consumers do not consider them great gift ideas. Only 7 percent of those surveyed plan to purchase subscription products this holiday season, relatively unchanged from last year (figure 6). Books, which have been on a downward trend since 2011, are up four points from 30 percent in 2015. Jewelry, cosmetics, and food/liquor continue their incremental, but steady, upward trends since 2011.

2. Where consumers shop and why

Consumers “swipe right” for online shopping

While online shoppers continue to grow in number each holiday season, retailers should expect record-breaking web traffic this year. Half of consumers surveyed anticipate shopping online for gifts, up from 45 percent in 2014 (figure 7). Online shopping channels now hold a 7-percentage-point lead over the most popular in-store destination, discount department stores (43 percent), which have lost some popularity in recent years. Continuing on a slight upward trend, nearly one-third (32 percent) of respondents plan to visit traditional department stores. Off-price stores (26 percent) and outlet stores (23 percent) will also be popular stops this season.

Online to steal foot traffic from all popular shopping venues

The expected surge in online shopping is likely to impact all major physical shopping environments. This holiday season, fewer surveyed consumers plan to visit “big box” stores (59 percent), traditional malls (50 percent), local independent stores (38 percent), and strip malls or mini-malls (24 percent) compared with 2015.

Most shoppers open to trying someplace new

While most holiday shoppers have their favorite go-to stores and brands, there is plenty of opportunity for online and offline retailers to attract new business this holiday season. The overwhelming majority (73 percent) of holiday shoppers surveyed see themselves trying new websites and stores in search of the perfect gift (figure 9). Among shoppers planning to try something new, local stores and businesses (66 percent) are at the top of the list, followed by new websites (52 percent). Roughly one-quarter anticipate shopping at festivals and fairs (24 percent) as well as temporary or seasonal pop-up stores (22 percent).

On their mission to purchase an average of 14 gifts, holiday shoppers will visit roughly four different types of shopping venues this holiday season (figure 7). Surveyed consumers report specific motivations for trying different types: The hunt for better prices is the strongest motivator for shopping with new retailers and stores, and the ability to see and touch products is the top motivator for visiting a brick-and-mortar store instead of shopping online (figure 10). Meanwhile, the opportunity to support the local economy and find one-of-a-kind goods will drive many to shop local.

Roughly one in five purchases will be impulse buys

Today’s connected consumers have a dizzying array of devices, websites, apps, and customer reviews literally at their fingertips to help make informed purchase decisions. It should come as no surprise that consumers leverage online research to head into the holiday season with a well-thought-out gift-buying plan. Surveyed shoppers estimate that a little over half of their gift purchases are planned in advance (figure 11). Retailers, however, can exert their influence with strategic marketing and effective promotions. Roughly one in every five gift purchases made this holiday season will be unplanned impulse buys. Another quarter will be loosely based around a product category but with no specific item in mind.

Thirty-three percent of purchases will be tied to a sale or promotion

While consumers bargain-hunt throughout the year, deals and promotions are particularly important during the holiday season when shoppers try their best to stretch their holiday budgets. An estimated one-third of gift purchases will be tied to a sale or promotion, with 77 percent of respondents anticipating that a sale will impact at least one purchase decision this holiday season (figure 12). The hunt for bargains and sales is a likely driver of online shopping, as over half (56 percent) go online to find deals, prices, and coupons.

3. Digital impact on holiday shopping

Online channels set to make holiday history

E-commerce sales are poised for strong growth this holiday season. Surveyed consumers anticipate spending half (47 percent) of their holiday budget via online channels, matching what they plan to spend at physical stores (figure 13). This is a significant turning point in consumer behavior: In previous years, shoppers have always planned to spend more in store. Survey respondents plan to use PCs (desktops and laptops) for the overwhelming majority of online purchases; however, mobile commerce continues to gain traction. Shoppers anticipate mobile devices (smartphones and tablets) will account for over 10 percent of holiday purchases.

Brick-and-mortar retail will still play a significant role

While online channels may be set for a record-breaking season, retailers on either side of the digital divide—online and in store—should neither claim victory nor concede defeat. The majority of consumers surveyed will continue to leverage both channels to find the perfect gifts at the best prices. Webrooming—shopping online before buying in store—will be a popular cross-channel strategy used by two-thirds of consumers this holiday season (figure 14). Significantly more consumers plan to webroom compared with those planning to showroom (shop in store before buying online) (50 percent) or pick up in store after buying online (43 percent). While webrooming and showrooming help shoppers make informed decisions, buying online and picking up in store tends to provide more tangible benefits such as cost savings (64 percent), faster delivery (44 percent), and the option to check products in person before purchasing (31 percent).

Most in-store shoppers arrive well informed—but not for all gifts

The overwhelming majority (84 percent) of surveyed shoppers will research gifts online before buying in store (figure 15). Expect shoppers to research their biggest or most expensive purchases online, as respondents reported only researching “some” gifts prior to arrival. This means many will also hit the store shelves without the information they need to make confident purchase decisions. A staff of motivated, helpful, and engaged sales associates will be critical in guiding these shoppers to the right products and check-out register.

Shoppers often head straight for user reviews when researching products online. In fact, while many will look to friends and family for product recommendations (56 percent), the surveyed shoppers are even more likely to read user reviews on retailer websites (66 percent) and independent websites (55 percent) (figure 15).

Online retailers may boast increased traffic but not loyalty

While online retailers may boast increased web traffic this holiday season, they will have a tough time driving loyalty. Shoppers who make the effort to visit specific retail stores in person are significantly more loyal compared with their online counterparts, who tend to be more brand-agnostic and price-sensitive. When shopping in store, more than half of respondents (58 percent) say they would stick with the same retailer if an item was out of stock—either visiting another store location or completing the purchase on the retailer’s website at a later time (figure 16). In stark contrast, when faced with an out-of-stock item while shopping online, the overwhelming majority (77 percent) of respondents state they would simply buy from another retailer’s store or website.

Consumers employ smartphones as virtual shopping assistants

Mobile device adoption continues to increase among holiday shoppers: 83 percent of respondents own a smartphone, and 61 percent have tablets (figure 17). More importantly, the majority of mobile device owners will incorporate their devices into the holiday shopping process.

Most often, consumers will employ smartphones as virtual shopping assistants rather than as a way to purchase on the go. Location-based activities top the list, with 61 percent of smartphone owners planning to use their devices to find store locations (figure 18). Many others plan to use their devices to compare prices (57 percent), get product information (50 percent), and read reviews (51 percent) on the go. In general, tablet behavior still tends to mirror PC activity. Tablet owners are more likely to use their devices to make purchases and browse online, with fewer using them in a location-based context.

M-commerce making slow and steady gains

While progressing a bit slower than many expected, mobile purchasing continues to make steady gains. Forty-three percent of smartphone owners plan to use their device to make a purchase this holiday season—up from 35 percent two years ago (figure 19). Retailer apps lead across mobile payment channels. Twenty-five percent of respondents plan to make purchases via retailer apps, with mobile websites not far behind at 22 percent. Despite widespread availability of mobile wallet functionality at the register, few survey participants anticipate using the technology at the check-out line.

4. Retailer policies and practices

Free shipping most sought-after retail policy

Enticing promotions and sales are not the only strategies retailers can use to boost sales this holiday season. They can also sway purchase decisions through well-thought-out retail policies such as flexible payment options, free shipping, hybrid shipping options, and hassle-free returns.

Free shipping continues to be the retail policy that can most influence holiday shopping decisions (figure 20). Expect this offering to grow in importance as purchases continue to shift toward online channels. Needless to say, shipping policy can be a key differentiator for online retailers, particularly in product markets where several merchants offer similar items at comparable prices. Easy returns (48 percent) and price matching (44 percent) are important as well, but fewer survey respondents cite these policies as important compared with last year.

Cash refunds and free online returns most desirable policies

The perceived value of retail policies differs across online and in-store shoppers. In-store shoppers are most likely to value brands and retailers that offer refund options other than store credit (67 percent) (figure 21). In-store shoppers also appreciate extended return windows (55 percent) and the ability to return gifts without receipts. Free online returns (82 percent) and the ability to return products at physical stores (69 percent) are the most desirable return policies among online shoppers.

The “Prime effect” is here to stay

Consumer expectations of what qualifies as “fast shipping” continue to change as quickly as you can say “Prime effect.” In 2015, 63 percent of respondents considered three- to four-day shipping as a speedy delivery (figure 22). In 12 months, that figure has dropped to 43 percent; consumers have redefined fast shipping as two-day delivery. Additionally, surveyed shoppers want to pay less for same-day, next-day, and two-day shipping this holiday season compared with last year (figure 23).

Most consumers empathetic toward retailers who experience data breaches

Data-privacy concerns seem to be a top-of-mind issue for many consumers. Roughly 7 in 10 surveyed shoppers express some level of concern about retailers that have experienced data breaches in the past (figure 24). Any perceived feelings of insecurity, however, are not likely to have a dramatic impact on brand and retailer choice. In fact, consumers are likely to be empathetic toward retailers that experience data breaches, as long as they take appropriate action to regain their trust.

5. When consumers plan to shop: Is it all about Black Friday and Cyber Monday?

Shoppers will start early, with an expected surge in December

More than half of the consumers surveyed plan to start shopping before Thanksgiving, but only a few—roughly one in four—will complete a majority of their shopping during this period (figure 25). In line with the past few years, 40 percent of shoppers plan to do a majority of their shopping in December.

Black Friday and Cyber Monday participation to remain comparable to last season

Special discount days such as Black Friday and Cyber Monday will attract a similar number of deal hunters this season compared with last year (figure 26). Seventeen percent of consumers surveyed expect to do less shopping on Black Friday in 2016 than in 2015, with roughly the same number (11 percent) expecting to shop more. This trend is similar to Cyber Monday, where only 13 percent expect to shop more and another 13 percent expect to shop less. Overall, most consumers report there will be no difference in their shopping habits either day.

Final thoughts

With the holiday season fast approaching, we urge retailers to consider some of the implications of our survey findings. With consumers planning to spend as much online as in stores, have we reached a critical inflection point in holiday shopping? The customer experience has evolved to become a true blend of digital and physical, and we believe all operating decisions must reflect this new reality.

Retailers must remain vigilant. It seems the more brands aim to please, the more demanding consumers become. Year-over-year survey findings prove that customer expectations around the extras, including shipping and return policies, deals and discounts, customer service, and mobile functionality, continue to rise at a fast clip. Consumers may no longer consider these elements of your business as “perks” or “nice-to-haves,” but important reflections of your brand that will impact purchase decisions in a big way this holiday season.