Deloitte's 2015 holiday survey Embracing retail disruption

03 November 2015

Retailers can look forward to shoppers spending more this holiday season, with the economy picking up and low gas prices putting more money into consumers’ pockets. So what do they plan to buy and from where? Tanya Ott talks to Rod Sides, leader of Deloitte’s US Retail Distribution practice, about trends that came to the fore in the annual holiday survey.


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TANYA OTT: This is the Press Room, Deloitte University Press’s podcast on the issues and ideas that matter to your business today. And if you’re in the retail industry, you’re thinking about how you’ll survive—I mean “serve”—the throng of shoppers who will flock to your store in the next two months.

Pumpkins are already squeezed out by brightly lit trees, Santa Clauses, and reindeers. The National Retail Federation predicts that this year, shoppers will spend more than $630 billion from November to January. That’s a lot of money! Rod Sides says three out of four shoppers plan to spend more than they did last year. Rod leads Deloitte LLP’s US Retail and Distribution practice. They’ve just released their annual holiday survey of consumers. They talked to 4,000 consumers across the country in early September. And Rod says there are a few reasons consumers will be spending more this year.

ROD SIDES: Well, I think we look at things like gas prices being down, that’s one of the big issues. I think home prices have started to rise a little bit. And there’s a general feeling that the economy is better than it has been in the past. And so, that’s one of the reasons, shoppers have told us, why they’re looking to spend a little bit more over the course of the holiday season.

TANYA OTT: Let’s talk about what shoppers say they plan to buy. First of all, it’s not all giftgiving. Many of the people that you talked to say they’re going to buy for themselves or for their homes and that’s up from last year.

ROD SIDES: That’s right. That’s up to about 50 percent saying they’re going to shop for themselves, which is really interesting. But when we look at the categories, there’s a couple that always stick out. I mean clothing is always one that’s among the highest. This year, as well as the last couple of years, that continues to be the hottest category. About 48 percent of the folk say that they expect to give that. Forty-six percent say they expect to give gift cards or gift certificates over the holidays, and so that one kind of held steady. But what’s really interesting about that is that when we ask folks what they wanted to receive, gift cards and cash were No. 1, and have been for quite some time. Then the other categories: Electronics continues to stay pretty high at about 36 percent. We’ve seen jewelry on the rise over the last five years, with about 16 percent to 22 percent of folks saying they plan to give jewelry in the holiday season. So I think that’s indicative of improving consumer sentiment as they think about the kinds of purchases they want to provide for folks.

TANYA OTT: One of the other interesting ones that shows up on your survey is that 16 percent of respondents say they’re going to buy something from a website that offers homemade items or from a craft fair, or they’re going to make something themselves. Now, my family did an all-handmade Christmas about 15 years ago and it nearly killed us! But I guess we could say, “Hey we were ahead of our time.” This homemade Christmas giving . . . this is a resurgence?

ROD SIDES: I think so. This is the first time we’ve asked this question in quite some time and to see that a number of respondents say they’re going to do that is pretty interesting to me in terms of where we’re going. But I do think with this whole maker movement that’s happening in the marketplace, you know, there is this pent-up demand for folks to become somewhat creative. So it will be interesting to see if this continues to be a trend over time. But I’m like you. From a creative perspective I’m not sure I’m the best to do that. (laughs) I can design something online and have somebody else manufacture and send it. That may be the extent of what I want to do around creating unique gifts.

TANYA OTT: I just remember our all-handmade Christmas involved a lot of hot gluing and sewing at like 2 a.m. the day before we had to leave to go meet the rest of the family. How are traditional retailers responding to that maker trend?

ROD SIDES: Well, I think some of them are starting to think about including some of those kinds of items in their assortment. But a lot of them are slow to the game. A lot of respondents said that they were going to shop locally, but I think part of that is looking for unique items. And so that’s a big part of what we’re seeing.

TANYA OTT: One of the other things that shows up on the survey is something that probably wasn’t there maybe a decade or so ago. That’s subscription services. Or, as I like to call them, “The gift that keeps on giving.” A perfect example: My husband got a beer subscription for Christmas recently. So every month, a box of craft beer magically shows up on our door step. He loved it! And that’s something you guys are seeing people showing more interest in?

ROD SIDES: We are. About 6 percent of respondents said they were looking for those kinds of subscriptions as something that they want to give as a unique gift item. I think we’ll see more of that. Especially as retailers look to find ways to have that revenue stream hit all year long, it’s a perfect example. I do think there’s a lot of this notion, “I can try new products.” I know. Just like you, I got a coffee subscription last year for the holidays, so I get a different flavor of coffee every month, and it’s fun to try. And who knows, at some point you might find kind of that perfect blend of what you’re looking for, just like your husband with his craft beer. When you find that perfect flavor, it’s a great way to attract customers and create loyalty. And loyalty’s a really important part of what we’re seeing today. You know, when we talk to folks around the survey, 75 percent say they plan to shop at the same locations as in the past. So loyalty is really important, and one of the things that most of our clients are trying to create is a loyal customer base in the marketplace, and subscriptions are a great way to go there.

TANYA OTT: I’m talking with Rod Sides, who leads Deloitte’s US Retail and Distribution practice. They’ve just released their Annual Holiday Survey of Consumers. Rod, one of the appeals of the cash or gift cards that we talked about is convenience for the gift giver and the receiver. And convenience factors pretty significantly into where and how consumers say they’re going to shop. Not surprisingly, many of them are going to be buying online this year.

ROD SIDES: That’s exactly right. And we continue to see that number rise year over year in terms of the amount they’re spending online. So part of it is convenience. Part of it is to be able to do a lot of research before they show up in the store and make the shopping experience much more efficient. But the numbers are up pretty dramatically. I think 75 percent of respondents said at least part of their holiday shopping was going to be done online.

TANYA OTT: Malls and big-box retailers have taken a bit of a PR hit in recent years. That same narrative that’s driving that maker movement says that traditional retailers and big boxes aren’t “cool” anymore. But your survey says that may not be the case during the holiday season. There’s a lot more traditional consuming going on as well.

ROD SIDES: I think that’s right. I think there’s a certain amount of nostalgia associated with shopping in the stores and being in the hustle and bustle around the holidays. I mean, certainly, folks are looking for a more efficient experience when they go in to the malls. But we actually found last year that the Millennial generation, believe it or not, spend more time in the stores than we ever anticipated that they would. And I think that’s part of it.

TANYA OTT: Huh! That’s interesting. Did that surprise you?

ROD SIDES: It absolutely did, because, you know, we figured that that group was all about being online, efficient, whatever. But I do think there’s something about that experience that really makes it important. And so what we’re finding, more and more of our bricks-and-mortar-based retailers are really trying to kind of create that specific experience and that special experience so they can connect emotionally with the consumer as they walk in the door. I think that’s a big part of it.

TANYA OTT: Now the consumers in your survey say that 75 percent of the gifts they’re going to buy are going to come from the same stores and online retailers that they went to last year. Where do the other 25 percent come from? There’s some sort of new players in the field, I guess.

ROD SIDES: A lot of folk are looking to go to some smaller businesses locally to try to support the local economy and look for some really unique items. And so that’s pretty exciting. About 67 percent said they were going to go local. Fifty-four percent said they were going to go to new websites. Things they haven’t tried before. Twenty percent said they were going to go to festivals and fairs, and that’s up pretty dramatically. And again, as we talked about, kind of this whole personalization movement, I think that’s a lot of what comes out of those festivals or fairs.

TANYA OTT: So festivals and fairs. There’s also some that are saying they’re going to go to pop-up stores, which, certainly, some of the major metro areas have seen; even pop-up vans that are filled with clothing and things like that.

ROD SIDES: Absolutely. I think we’re going to find more and more of that over time. And especially, it allows the retailer to be much more nimble, in terms of how they’re deploying products, and it makes it easier for the consumer.

TANYA OTT: How can traditional retailers tap into that market, or do they just have to be resigned to giving that up to the new, the fresh, the local, the sort of exclusive environment?

ROD SIDES: You know, traditionally retailers would have a fairly consistent store footprint and a look and feel within the stores. Now what we’re finding is they’re using the space in a lot of different ways, and they’re creating smaller formats, they’re looking for pop-ups, etc. It’s a way to change that venue and have consumers drawn in and feel like they’re part of a different experience. So a lot of the mainline retailers are experimenting with that and they’ve had some success.

TANYA OTT: Experimenting with pop-up specialty areas in their original . . .

ROD SIDES: Pop-up specialty. Yep. So you might have an area in the front of the store where you might want to profile maybe a local supplier. And so you’d have a product unique to that particular marketplace and, you know, it’d be a limited assortment, and it would be there for a limited time, and then you end up moving it on. Some of the folks who do that the best are a lot of the wholesale clubs. And they create this mentality that if you don’t buy it while it’s in stock, it’s not going to be there because they’re not going to replenish those seasonal items. So you got to create this whole notion of, if you see it and you find it, you’d better get it because it’s going to be gone. So that spirit of exclusivity is pretty important to drive people to making purchasing decisions.

TANYA OTT: What else are shoppers looking for in their shopping experience this holiday season in terms of, you know, you talked about loyalty, but what helps build that loyalty?

ROD SIDES: They’re looking for fast checkout. They’re looking for an efficient shopping experience. They have an idea already before they come into the store, what they’re looking for. So they want to be able to experience the product, but they want to be able to move through the buying experience pretty quickly. So it’s incumbent upon the retailer to determine, okay, “How do I change the activities of the store associates to be able to be focused on the things that really matter to the consumer?” So part of that is to do things like having new technology in line to be able to do faster checkout. Self-checkout is really important. Being able to service a customer for returns. That’s super important, in terms of being able to make that an efficient process. So understanding that a lot of it’s about efficiency and creating that kind of an experience is really important, and I think that’s where most of our clients are trying to figure out, “Where do I put the allocation of labor to make that a more rewarding experience for the consumer?”

TANYA OTT: Is that demand going up for consumers? Because obviously retailers have not been sitting around saying, “You know what, we want to make this really painful. We want people to sit in line forever to check out, and we want them to not be able to figure out how to return something.”

ROD SIDES: The technology that’s available to retailers now is very different than it was even five years ago. So from a mobile checkout perspective: Do you have the ability to use, whether it be your smartphone or whatever, to make payment? That’s very, very different than it’s been in the past. And you’re right, it’s not like organizations have been sitting idly to have the customer experience degrade, but I think the expectations of the consumer have moved so fast that it’s tough for retailers to follow. And there are so many activities for what has to be done, from getting the product off the truck, onto the floor, priced correctly. You’ve got to have the right signage, etc. There’s just so much activity in that compressed period of time, being able to focus on those activities is often pretty tough. So what happens is a lot of our clients would say, “Well, I’ve got to have associates there to make recommendations for products.” That’s changed a lot! And so a lot of what you might have a sales associate on the floor for, which in the past would be making recommendations, a lot of that has gone to social media. And so people will use friends and family to be able to get advice about a product. They’ll do a lot of research in advance. So changing the focus of the associate to help me find the right size, help me to find the right ensembles, is really important. And so, changing the focus of the associate, I think, is one of the things our clients are lagging on a little bit, and over time they’ll figure it out.

TANYA OTT: I would imagine one of the other things that retailers see customers demanding is really quick delivery. I mean, physics—whatever! I’m sorry, but I want it there in 24 hours.

ROD SIDES: Absolutely.

TANYA OTT: There’s this new expectation that we’re not going to wait a week for something to arrive.

ROD SIDES: Yeah, I think what we found is a couple of things. First of all, I think free shipping has become table stakes. So the expectation of the consumer is that shipping will be free. You know, we asked the question, “When you’re shopping online, which of the two priorities would be most important to you in terms of free shipping or fast shipping?” Eighty-seven percent said free shipping is much more important than fast shipping. And so then we asked, “How would you define fast shipping?” Same-day delivery, next-day delivery—96 percent said that would constitute fast shipping; 92 percent said within two days. When you got to three and four, that’s where we started to flip and it became fast versus not fast. But the expectation is that essentially the product is going to be there the next day. We then asked the consumer, “How much would you be willing to pay for same day vs. three or four days out?” And what we found is that folks would be willing to pay up to $5 for same-day shipping, especially as we get closer to the last window of shipping for the holiday. But for the most part, most people aren’t willing to pay for that incremental shipping over time.

TANYA OTT: So how do you square what consumers want when it comes to shipping—speed and cost—vs. what retailers can traditionally provide?

ROD SIDES: That’s a great question. I think the big challenge for most of our clients is that it’s really tough to have that square at all. Most of the transactions that are taking place today are taking place at a loss. More of the retailers today have had to provide free shipping and fast shipping just as a normal course of business. So they’re losing margin on those particular transactions. And I think they’re having to redefine their entire supply chain to be able to be much more efficient in that regard. And I will tell you, I don’t think anybody’s figured it out yet. So it’s driving a lot of cost and a lot of disruption in the industry, and we haven’t found a model that seems to be kind of the path to the future yet. But it is a huge challenge for most of our clients.

TANYA OTT: So it’s driving up costs for the retailers. Is that being reflected, then, in price adjustments? Are prices going up for consumers or are they just eating that?

ROD SIDES: That’s a great question. It’s really not. What we’re seeing is they’re eating the cost associated with that fast shipping, same-day delivery. And so that’s a big driver in the industry. You go, “Okay, how am I going to change my profit model in a way that allows me to take advantage of and deploy inventory?” It’s a real big challenge.

TANYA OTT: It sounds like a big challenge. Many listeners will remember that holiday seasons past, we’ve seen some big headlines about data breaches at retailers. How concerned are your survey respondents about the safety of their credit card and bank information, and is that influencing, in any way, the way they shop?

ROD SIDES: So when we ask folk, “Who’s worried about it? Who’s concerned about personal data protection?” Fifty-four percent said they were, especially when they were online. We asked, “How concerned are you about online personal data vs. a year ago?” Forty-eight percent said they were more concerned about it than they were a year ago. So it is something that is creeping into the psyche of the consumer. But I do think there have been enough breaches. You know a lot of us will end up getting a new credit card in the mail just because. So that always makes you wonder, is there something going on behind the scenes? The big question is, is it going to change behavior? Are they going to go back to a purely cash-based set of transactions? And the short answer to that is “no.”

TANYA OTT: Rod Sides says he does think the new pin-and-chip technology in credits cards is going to drive more cybercrime online . . . rather than in brick-and-mortar stores where shoppers actually have to “dip the chip” in a point-of-sale terminal and provide a PIN. Rod has a lot more stories to tell about where, how, and why people will be shopping this holiday season. You can take your earphones out and head over to to read more in Deloitte’s 2015 holiday survey.

Remember what Rod said about the maker movement disrupting traditional retail? In our archives, we’ve got a podcast episode on that. Here’s a teaser:

JOHN HAGEL: For many decades, if not centuries, creative people felt the need to come together in large companies because they needed the scale in order to have impact with their creativity. And increasingly, again as a result of digital technology in particular as a force, there is an option for creative talent particularly to say, “I don’t need this large company. I can go off and build my own small business, and I’ll make a good living for myself and, most importantly, I’ll have the autonomy in order to pursue the creativity that’s really driving me.”

TANYA OTT: You can find that interview and a whole lot more in the podcast archive at I’m Tanya Ott for the Press Room, a production of Deloitte University Press. Please tell your friends and colleagues about this. Share it on Twitter. We’re @du_press.

This podcast is provided by Deloitte LLP and its subsidiaries and is intended to provide general information only. This podcast is not intended to constitute professional advice or services of any kind. For additional information about Deloitte LLP and its subsidiaries, go to