2018 Deloitte holiday retail survey Shopping cheer resounds this year

15 November 2018

What does the 2018 holiday season have in store for retailers? According to Rod Sides, Deloitte’s wholesale and retail distribution practice’s US lead, consumer optimism and a strong US economy point to a successful season.

I've had instances where my mother-in-law has forgotten where she's hidden the gift, and so we'll get a follow-up gift in February or March that was part of the previous holiday season. I would probably just keep it to myself and hold it over to the next year, but we know she will find it again.

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TANYA OTT: That’s right folks! Whether you want it or not—and those of you in retail definitely want it—the holidays are here.

TANYA OTT: I’m Tanya Ott and this The Press Room—a podcast where we pick apart the trends we’re seeing in the business world. And today, we’re going to get the forecast for holiday shopping from Rod Sides. Rod leads Deloitte’s Wholesale and Retail Distribution practice in the US, and earlier this fall he and his team talked to a couple thousand consumers across the country to find out how they’re feeling about the economy and what kinds of holiday gifts they plan to buy. 

ROD SIDES: The season's going to be as strong as we've ever seen. Our macro forecast says we expect it to be up [by] 5 to 5.5 percent, year over year, in terms of the holiday spend. And for us that's November through about the January time frame. All indications are that it's going to be a really, really exciting holiday season, and retailers have a great chance to see the registers ring pretty quickly.

TANYA OTT: How much does the average consumer plan to spend this year?

ROD SIDES: This year the consumer is up to about US$1,536, and that was up from $1,226 last year. So, it's a full 25 percent over what people said they were going to spend last year. Now keep in mind, we do take a bottoms-up math exercise. We asked them what they're going to spend by category and then we do the math for them. Many of them probably didn't realize that it would add up to a number quite that large.

TANYA OTT: Yeah, and if they looked at that large number, they might be a little bit surprised.

ROD SIDES: Absolutely.

TANYA OTT: And is that across all income levels, or are we seeing some people spending more based on how much money they make?

ROD SIDES: We do see a little bit of difference across income levels in terms of how much folks are going to spend. We do think that it's going to be up for really all the big categories. We also, though, find that people who shop earlier generally spend more. So that has more of an indication in terms of what the spending level will be versus, say, an overall kind of economic position for the folks.

TANYA OTT: So, if someone is like me and they generally wait until the very last minute, they might actually spend less than that.

ROD SIDES: That's what our information tells us. It tells us the folks who start before Thanksgiving and certainly before the beginning of November will spend as much as US$370 more than the average. So, we do find that as people start earlier, of course they were deal-conscious, but generally what they spend goes up [with] the earlier start.

TANYA OTT: That's really interesting because the argument for starting early is—oh you can watch out for those great sales and you can get something at a really good rate.

ROD SIDES: That's what they tell us they're looking for. We did ask the question this year: We said, tell us what you're looking for. And we broke it down in terms of people who start early, people [who] start normally in the end of November, and folks who wait late. And it seems that the folks who start early are much more focused on deals. They will download coupons and they are looking for ways to probably elongate that spend as they go across.

We also took a different look at it as well. We said, OK, tell us how long is your shopping journey going to take you? Is it going to be 40 weeks? Is it going to be eight weeks to 12 weeks or 12 plus? Folks who take 12 plus [weeks] spend about US$2,000 on average. So, I do think those who start earlier probably budget more, and as they come along they probably forget something as they get close to the holiday and find the need to go out and buy more.

TANYA OTT: Wow. I'm just picturing my mother-in-law, who starts for the holiday season in the February before. She's a perpetual shopping-grazer for holiday presents.

ROD SIDES: We have the exact same thing. I've had instances where my mother-in-law has forgotten where she's hidden the gift, and so we'll get a follow-up gift in February or March that was part of the previous holiday season. I would probably just keep it to myself and hold it over to the next year, but we know she will find it again.

TANYA OTT: Gosh, that's funny! What kinds of things are people going to be spending on this year? What are they going to be buying?

ROD SIDES: It always bounces around between gift cards and clothing. Gift cards, we believe, are going to be number one in terms of the things that folks want to give. When we ask what people want to get—cash and gift cards are always number one. So, it seems like the consumer is now aligning to what we would expect for folks to really want to receive as we go through.

Certainly, toys and games are going to be a big element. About 47 percent of the folks said they were going to plan on giving toys and games as they go through the holiday. I think that the rising tide of the economy is going to lift all boats. We'll find a lot of categories to [do] really, really well.

TANYA OTT: This is the first holiday season without that big toy giant Toys R Us. What is going to be the impact there?

ROD SIDES: I don't think it's going to be as great as everybody is talking about. Many of the mass players, as well as some of the online players, are moving to fill the void in the marketplace. And when you have an item that is that commoditized, generally you'll find a lot of folks jumping in the fray. I was in a specialty store a couple of weeks ago and we're getting in the toy business, much to the chagrin of the CEO who said, look, we shouldn't be in that business; we'll work our way out of it. But I think the focus on trying to pick up that incremental revenue has been really important for a lot of our clients, a lot of the mainline companies. So, I think people are going to step in to fill that void. I'm not too worried about it.

TANYA OTT: I heard some analysts say that one of the challenges that the exit of Toys R Us is going to have, though, is, because they had so many products, they take chances on new and innovative ideas that weren't actually proven in the marketplace yet, whereas some of these other specialty retailers that are just kind of dipping in, or dipping in a little bit more seriously into toys, may not be willing to take those chances.

ROD SIDES: They may not be on the store shelf per se, but online I think you'll find the ability to go find some unique products that are out there. The movement of a lot of electronics and digital into the toy space has been a little bit slower than many of us probably would have thought over the years. But there's a lot of interesting, innovative products that folks can buy online and take a chance there.

TANYA OTT: One of the other things that you track is the growth in people focusing less on physical gifts and more on experiences. My daughter recently gave her boyfriend horseback riding lessons for his birthday, which he was super thrilled about because he'd never been on a horse before. So, experiences factor pretty big this year as well?

ROD SIDES: They are. They're up pretty dramatically year over year. And I think a lot of that, as we've talked about in the past, is people looking to find a way to connect or looking to find a way to have something that's a little bit different. And so, we continue to see that grow.

One of the things we ask as well is, are you going to shop for yourself as you go through? We found this year that 51 percent of the folks said they were going to shop for themselves. The number one item this year, though, was food and liquor. But at the end of the day, what that tells me is that this move to experiences and finding a way to connect really even extends into what people are buying for themselves. Apparel has traditionally led that particular spot. This year it's number two, so we're seeing a movement there as well.

TANYA OTT: Are people doing more of their shopping online this year? What's happening with online versus in-store spending?

ROD SIDES: The split between online and in-store continues to grow. Online this year is about 57 percent of the total spend versus last year, [when] it was about 53 percent. So, we continue to see the online versus store lines trend in different directions. Now, does that mean the same bricks-and-mortar guys are going to lose? Not necessarily. Because so much of the online growth for a traditional player has come from their website and from that channel, I think all of the retailers are going to do quite well. But what that does is they do have to compete across each of the channels. It's not to say a mainline player will not continue to see the growth—I think they will—but it's come back to the function of convenience for the consumer. And that's what we're seeing more and more. Make it easy for me to find the item. Make it easy for it to show up at my door. Make check-out easy. Make it convenient. Save me time. And a lot of that is really taken care of by online shopping.

TANYA OTT: Speaking of making it easier for the consumer, there's a lot of technology out there. There are all kinds of ways that you can buy, and all kinds of ways that you can check out in more seamless experiences, using your phone and apps and things like that. Are folks going to be using that stuff?

ROD SIDES: We did ask that question this year to try to understand what is that next wave of technology that we're seeing. We presented four or five different new technologies such as a seamless check-out. We said, are you going to use these? Eighty-one percent of the folks came back and said none of the above.

We have not yet cracked the code on how to make it incrementally easier for consumers. Some folks are willing to try it, but at the end of the day, we've had a plateau point from a digital penetration perspective and I'm not sure that the technologies that are coming on the market are positioned to make it that much easier for the consumer. So, we'll see what happens going forward, but folks tell us they're really not going to use that as much as we would anticipate.

What I would tell you is that we're seeing the use of mobile, and specifically transacting and making a purchase on mobile, continues to grow. It's up to 67 percent this year. It was about 59 last year, and we've watched the transacting on mobile grow every year, year over year. Everything else is kind of flattened out. But as phones have gotten bigger, as we've got more computing power, folks have just started making purchases on the phone, and we'll continue to see that trend over time.

TANYA OTT: Do you have a sense of why they're not embracing seamless payment and all that sort of stuff?

ROD SIDES: Part of it is they don't really understand the benefit to themselves to be able to do that. And to a certain degree some of the technologies that are emerging really aren't that mature yet. So, if you think about some of them—whether it be the AmazonGo stores or some of the other pilots that are out there—they're just not in the mainstream yet, where folks have had a chance to experience it. So, it's not quite like China, where they've got a couple of hundred of those stores. We’re still in a handful of stores, so most folks wouldn’t understand the benefit to them.

TANYA OTT: Okay. Any other major themes that came out this year that are worth talking about?

ROD SIDES: We asked some questions around cyber, which I thought was really interesting. We wanted to understand, are you willing to share your data and, if so, how comfortable are you with that? It's the first time we've ever asked this question. We ask it in light of the California Consumer Protection Act, because we wanted to understand how nervous people are around their information. What we found is about half of the information that retailers typically ask for, people are generally okay with them maintaining. So, things like gender, first name, last name, etc.—folks are generally pretty good with that. When you get into more specifics like financial history, credit score, some of the biometric data, obviously consumers get more and more uncomfortable with that kind of information. We're trying to really understand where is that point of delineation where folks say, “I'm uncomfortable with my brand keeping that,” and taking that off versus the ability to have more of a customized experience.

What we did find, though, is, we asked folks about what would it take for [them] to share information? The number one item was promotions, discounts, or other offers. About 61 percent of respondents said, yeah, I'll give you the information, but it's going to cost you.

TANYA OTT: They're thinking of their information as a commodity that they can trade.

ROD SIDES: Correct. And most of us realize there's a lot of that information out there. We do have a ton of digital exhaust that we all give off, and consumers are getting more and more comfortable with understanding it's out there. So, if I can create some kind of personal benefit from that, why wouldn't I?

TANYA OTT: Do you have a sense if they are concerned about giving personal information because they're worried about the way that the retailer may use that, or they're worried about data breaches that might get into more nefarious hands?

ROD SIDES: It's a little bit of both. But I would say the data breaches and misuse of that information is probably the issue. It's really funny; they came back, and we had a higher percentage of folks who were uncomfortable with the retailer maintaining their social media presence. Well, it's already out there, so it is a little bit odd in terms of the answer to that question. But I do think that the whole nature of the breach probably is what's driving some of that concern.

But what's really interesting is, when we asked the question, “If you had a breach, would you give the retailer a second chance?” only 7 percent said they would not. Because breaches and data security have become somewhat of an issue, it's pervasive across retail and other industries. As consumers, people just get more comfortable with that; it's kind of a cost of doing business. It's a risk that I have. I have to take steps to be able to maintain security around that information. So, who knows, over time as consumers, we'll get more and more comfortable with what's out there and creating a profile that, if it does get hacked, you'd be able to manage the risk on the downside.  

TANYA OTT: We've got the holiday season already gearing up for this year. And thank you so much for giving us the snapshot of where it's going to look like.

ROD SIDES: Happy to do it. I'm hopeful for all of our clients and for all our associates that it is indeed a happy holiday season for everybody.

TANYA OTT: OK, thanks so much Rod.

ROD SIDES: Thank you!

TANYA OTT: Rod Sides leads Deloitte’s US Wholesale and Retail Distribution practice. You can check out the full Holiday Survey results on our website:  deloitte.com/insights.

So—the holidays … That time of year when I whip up a huge batch of Grandma Nenore’s secret fudge recipe and try like (Charles) Dickens to not eat it all. 

You know what comes after the holidays, right? New Years’ Resolutions! I don’t know about you, but I kinda suck at keeping them. Usually it’s a few weeks, max.

WENDY WOOD: Many of the challenges that we have in health, in finance, in relationships, in employee productivity, student performance really have to do with long-term change.

TANYA OTT: Yea, think?

WENDY WOOD: And we're just not so successful at generating those kinds of long-term changes in diet, in exercise, in the kinds of close relationships that we want to have with people, our performance at work. We're not so good at changing those behaviors that are repeated over time.

TANYA OTT: But, that doesn’t mean you can’t be better at it. When you go to deloitte.com/insights and search for a podcast titled “Can good behavior be habit-forming?” this woman—a really smart professor of psychology and business at the University of Southern California—has some tips for making behavior change stick. Again, that’s deloitte.com/insights

Here’s another way to make your life a little easier—subscribe to the podcast. It’s easy to do, and when you do the latest episode is going to automatically pop up on your device so [that] you don’t have to go hunting.   

Subscribe to the podcast. And don’t be a stranger! Tweet us at @deloitteinsight (no S) or send us an email at deloitteinsights@deloitte.com  I’m Tanya Ott and you can tweet me directly at @tanyaott1.

Thanks for listening … we’ll catch you again in two weeks.

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