2021 Deloitte holiday retail survey

Rod Sides: Right now, consumer sentiment is really good. We’re going to see another K-shaped recovery, though, which is really interesting. It’s something we talked about last year. There’s a number of lower-income households that probably aren’t going to participate as much as we would anticipate, but the higher-income families, they’re going to more than make up for that reduction that we’re seeing overall. But it looks like it’s going to be up about 5% again, a pretty good holiday season. 

Tanya Ott: And the lower-income households, they’re sitting this one out. Why is that? 

Stephen Douglas: That could actually be due to several factors. It could be a loss of stimulus payments, looming evictions, and the anticipation of higher prices. 

Tanya Ott: How do retailers respond to this sort of new demographic scenario with more of the spending coming from high-end consumers and less from the lower-income households? 

Rod Sides: It’s a mixed question in terms of what we expect people to buy. Last year we saw a number of folks really get into household improvements. A lot of decorations. We found things like home gym equipment being on the rise as people were spending more time at home. This year, what we’re starting to see is folks are moving back into travel. They’re going to spend a little more on the road. We anticipate really a rebound from an apparel perspective. That’s what I’m seeing. Steve, how about you? 

Stephen Douglas: I’m seeing the same thing. I will also say that consumers are going to be more into the store this year than they were before. We’re starting to get more comfortable with getting back into the world. But I will tell you, digital retail is here to stay. And 62% of the spend is expected to occur online. One of the things that I find interesting is, convenience rules. There are a whole host of people that have tried curbside pick-up and buy online and pickup in-store, and they like [it]. 

Tanya Ott: So we’ve got some people shopping more, some shopping less. What does it mean for the overall holiday sales? We said up about 5%. How is it looking this year and how does that compare to last year? 

Rod Sides: Last year we saw it rise slightly, but certainly not at that level, and again, what we saw was a K-shaped recovery. On average it was about 1%, something like that year over year. The higher end obviously did much better than the lower end around that. We’re going to get back to more of a normal mix between products and services and travel much more so than we’ve seen in the past. We’re getting back to the new normal, whatever that is as we define it. 

Tanya Ott: Last year, over half of the people that you surveyed said that they were anxious about their health and that might keep them either completely out of stores or doing buy online, pick up at the curb. This year, you’ve got some indications that people aren’t quite as worried about their health. It seems like when I’m out, they're not worried at all. But tell us a little bit about what they told you this year. 

Stephen Douglas: I would definitely say the concern about health and safety has declined over the last year. About 40% of the consumers are anxious this year versus 51% in 2020. People are anxious to get back into the new normal, as Rod said, whatever that looks like. 

Tanya Ott: You alluded to curbside pickup and the buy online, pickup in-store. It’s so convenient. Lots of people have really adopted that. How are retailers going to be able to serve all of these audiences at the same time? Do we have concerns about seasonal labor? 

Rod Sides: There are huge concerns around labor itself, just in terms of availability. What we also have found is there’s a number of folks who have taken on gig work or part-time work, for delivery services, ride-sharing, etc. There’s a lot of that that’s going on that’s taking a fair amount of labor out of the market and nobody’s really talking about that as a contributing factor. But you’re absolutely right. As consumers, convenience has started to really be a key part of the experience. We’ve found that as we’ve talked about over the years. That continues to be something that is on the rise, so being able to allocate labor to be able to do all of that. It’s going to make it really challenging as we get into the holidays from an execution perspective because the expectations we have as consumers [that] when I roll up, I expect within five to six minutes that my goods are loaded in the back of my car. It’s going to be tough. It’s going to be a strain for many retailers trying to find those extra hands to be able to move the product into a car or to get it to me in a mode in which I’m comfortable. 

Tanya Ott: It’s not just moving it into the car, but it’s the retail shopping experience within a facility itself. It seems that right now in some retail locations, there just aren’t enough people to ask questions of when you’re in-store shopping. So how can retailers address this issue of the labor shortage? What are the things that they can do to try to avoid any problems or any friction for consumers? 

Stephen Douglas: They’re certainly incentivizing the labor force with incentive bonuses, flexible hours. That’s what I’ve seen the largest levers be from most of the retailers I’m working with. 

Rod Sides: Also, there’s some training that can go on that can teach the associates what to look for when folks are looking for help. It’s interesting, we kind of laugh about it being “The Gopher,” but if you’re in a store and you see the posture of an individual go up and they start to look around, that’s a pretty good indication they’re looking for help. And so part of that is to help the associate really understand what are those cues. And then, how do I change the metrics in-store so that I’m focused on customer service. Because so much of the year is focused on productivity: How quickly can I get product out? How do I do price changes, how do we do sign changes? Being able to have it be okay to interrupt the work, to be able to move into a customer-service mode: Productivity, at least by the numbers, will go down, but the impact on sales goes up. That’s one of those fine balances that retailers have to look at as we go into the holiday period because at some point, the productivity doesn’t matter nearly as much as customer service in-store. 

Tanya Ott: Are retailers leaning in on things like cell phones for people to find things, to learn things about products?

Rod Sides: Absolutely. A lot of what they have done over the years is to automate the way-finding, the searching for items. When I go into a store and I’m looking for a particular product, first thing I do is go to the website and see if I can find where it’s stocked in the store. What we as consumers are looking for is essentially the same convenience as we would expect the associate to have. You can create a better customer experience if you make it easier for me to use. 

Tanya Ott: I don’t know about you guys, but some of my family members are planning on getting on a cruise ship this year. I don’t think I’m going to be with them, but we’re seeing a little resurgence, as you alluded to, in travel and experience-based gifts, perhaps because as the consumers have told you, they’re a little bit more, either more confident or less scared when it comes to health this year. Is that just a continuation of the trend we’ve seen over the last several years, or is something else at play here like exhaustion from being cooped up or maybe we’re reorienting of making memories instead of buying things? 

Stephen Douglas: There’s expected to be a 15% increase on experiences: travel, entertaining, etc. And to your point about feeling cooped up and wanting to get back to some sense of normal, that's driving a lot of it. Likely some of the vaccinations that have occurred have helped people feel more comfortable as well. 

Rod Sides: There’s a need in the human spirit to reconnect interpersonally and be together. Over the last year and a half, two years, we’ve all been somewhat restricted from doing that and being able to spend time. After spending a year and a half on video calls, [it] is really important to folks. They’re looking to get back and do that, not only with friends and family but to find those places that are different. That’s where discussions are happening in our household right now. Last night, my wife said, “You know, should we go someplace? We [haven’t been] anywhere in a while.” It's the first time in about two years we’ve had that discussion. 

Tanya Ott: A lot of households are really navigating that space right now. So going back to the people that are actually going to buy things rather than experiences, my 22-year-old daughter, who is an economist, just graduated. She texted our entire family over the weekend to remind everyone that holiday shopping needs to be done early this year because of supply chain issues, and it’s going to take longer for stuff to get to us. So obviously that can be really frustrating for consumers if they feel like they have to wait too long for something. But just how bad is the problem? Why is it happening and what can retailers do about it? 

Stephen Douglas: I would say she’s right. There are 75% of the shoppers are concerned about stock-outs, especially with things like electronics and accessories and toys and hobbies. There are several reasons behind the low stock levels. One is product availability. There’s a shortage of chips to make electronics. Two, supply chain disruptors like transportation issues or weather. And then three, those consumers that are making that decision to start shopping earlier. All will have an impact on stock levels, that’s for sure. 

Rod Sides: The stock-out issue is a super big challenge, but what’s interesting is consumers, probably for the first time in 10 years, are aware of what the supply chain is. As we dealt with stock-outs of household items over the last year, folks realize that the time to move is now around those particular issues. The other thing that doesn’t get a lot of press today is that, based on how COVID-19 has impacted certain markets, we saw some of the manufacturing around the world be shut down for a while in places and in ways that we didn’t think about in the US. I can tell you [about] my wife’s business, as an example; she gets a fair amount of products out of the Far East, and she had plants shut down for about eight weeks over the summer as they were dealing with the resurgence of Delta [variant] over there. That really is not something we’re talking about here. It’s not just the physical movement of goods and the number of ships out sitting in the ocean there in California. It really goes back to the entire supply chain and starting all the way at the manufacturing level. So as those plants come back online, it’s going to take us some time to work that through. 

Stephen Douglas: And the other question [is], what are the retailers doing about it? They’re going as far as getting private cargo ships and ramping up inventory and changing their promotional strategy to address some of these things as well. 

Tanya Ott: Changing their promotional strategy, how?

Stephen Douglas: When they’re starting to see that things are going out of stock, [they’re] making sure they change their promotional strategies so they’re not pushing exactly those items, but pushing some other items. They’re clear on what is and what is not available and visibility of what goods the customer can expect. [That’s] what they’re trying to do via that marketing and communications engagement. 

Rod Sides: The challenge is going to be around pricing. Because if you think about it, when we got into Thanksgiving and Black Friday, several of the brands would start with 30, 40% off to try to drive traffic in through that weekend. But if we’ve got stock outs and shortages, the number of deals available may change pretty dramatically. 

Tanya Ott: If consumers don’t see the deep discounts that they’re used to seeing, does that suppress the buying? 

Rod Sides: I don’t think it suppresses it, but I do think about 68% of the shoppers that we talked to expect higher prices this season. It probably changes the dynamic on the number of goods that we buy. There’s enough pent-up demand and desire to get back to normalcy that it’s not going to suppress the buying necessarily, but I deals are going to be hard to come by. 

And so instead of trying to pull our demand forward, the big challenge is, if I don’t have the goods, as Stephen’s saying, what I may have to do is to reprioritize. Luckily, from a pricing perspective, it’s a little bit easier to do things in real time than it ever has been in the past. But that’s going to be really interesting in terms of the impact on consumers and the amount that they’re going to have to spend for goods. 

Tanya Ott: So it sounds like what I’m hearing from you is that retailers have to be able to move on a dime is maybe an exaggeration, but they have to be a lot more flexible in the way they’re going to respond to things as we get further into the holiday shopping season. 

Rod Sides: That’s exactly right. And as we’ve moved to more digital marketing, they now have the flexibility to be able to do that, to change offers on the fly. Had this been 10 years ago, it would’ve been a totally different story in terms of being able to be nimble enough to respond in season. 

Tanya Ott: What are the other things that are key to being successful in this kind of dynamic environment right now? 

Stephen Douglas: We touched on it a little bit earlier, but really focusing on store operations and making sure that things are stocked appropriately. I’ll tell you that’s easier said than done in this time of season, but stock-outs will definitely turn people away. So that experience in the store, when people do decide to make it to the store, it’s going to be key that they get that right. 

Rod Sides: The other thing we have to do is make sure that retailers are very focused on these specific promotions and being able to make sure that they are clear in their messaging to consumers, because we know that the consumers are thinking about [stock-out] as we go in the holiday season. The other thing that [what] retailers can do in this environment is making sure that their brand ethos is very clear to the consumers as well. What does the brand stand for, what’s important to them? It’s one of those things that we’ve seen a slight movement back in social as folks are spending more time thinking about the brands themselves and identifying with them. So being very clear on brand message is also going to be an important component as we go in the holidays. 

Stephen Douglas: One of the things that I thought was interesting in the survey was the sentiment around delivery and that customers would prefer free delivery over fast delivery. They were willing to wait two to three days to get an item as opposed to paying for that additional cost to get it quickly. 

Rod Sides: And so for all of the discussion we have about same day, next day delivery, to Steve’s point, what we’re finding is that folks really aren’t willing to pay for it, and they’ve settled into this norm of when to expect goods. Most retailers have been able to meet that expectation that, even if you have “normal delivery,” it’s still there in two to four days. And generally, that’s okay. That’s fast enough. Obviously, as we get closer to the holiday cut-off, folks get a little more anxious about that. But in general, it really is interesting that that’s where we’ve settled in the market. 

Stephen Douglas: That certainly plays into the folks shopping earlier this year. 

Tanya Ott: How much earlier do you think they’re going to be shopping? 

Stephen Douglas: At least a few weeks, is what I’m seeing. 

Rod Sides:We’re seeing that the consumers are moving their start of their buying for the holiday season up — probably about 5% are moving up earlier in the season. So this whole notion of waiting for the last minute is going to go out the window with some of the supply challenges. 

Tanya Ott: Do we have a big in-person Black Friday shopping this year? 

Rod Sides: Fair question. It depends on how you define big because we’ve seen those numbers decline over the years. Obviously, last year we had some major extenuating circumstances. We’re going to see that week be important. Black Friday probably makes a resurgence just because there are so many brands that have decided to be closed on Thanksgiving. That was a trend we were moving to pre-COVID where everybody was starting to open up on Thanksgiving. Now we’ve seen essentially that most people are shutting down on Thanksgiving and opening up on Black Friday, [which shifts] that demand back to Black Friday. So it’s poised to be bigger than it has been in the recent past. But again, that whole week is largely a promotional week, and the consumers are going to start and start to shop early. 

Stephen Douglas: I’m encouraged by the fact that the sentiment is good. I’m encouraged by the fact that we expect people back into the stores and that we expect holiday spend to be up 5%. And my family is one of those that are probably responsible for the low stock levels by starting the shop earlier. So I’m looking forward to how this all shakes out. 

Tanya Ott: What is the big thing on your list that you guys have not yet been able to find? Stephen. 

Stephen Douglas: My kids are sneakerheads, and so when the newest sneakers come out from you name the athlete, trying to get those has been a challenge for us, but we’re up for it. 

Tanya Ott: You accept the challenge. 

Stephen Douglas: I accept the challenge. 

(swell of theme music, then under VO) 

Tanya Ott: Stephen Douglas is a managing director in the Retail and Consumer products practice at Deloitte Consulting LLP and Rod Sides is the vice chairman and leader of the Retail and Wholesale Distribution practice. We just scratched the surface in our conversation ... you can find a whole lot more in their annual holiday shopping survey, which is available at deloitte.com/insights. 

We’re on Twitter at @deloitteinsight (no S) and you can find me at @tanyaott1.

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