Ready to Spend…Or Not? The 5 Trends Shaping 2023 Holiday Shopping
The leaves are falling – and in some places, snow – temps are dropping, and the holiday shopping season is in full swing. While COVID-19-related cautions and supply-chain shortages are now memories, this year consumers are challenged by higher interest rates, a lingering hangover from last year’s inflation rate of 7.75%, and the resumption of student-loan payments. Both credit card debt and credit card delinquencies were up in the third quarter compared to 2022 numbers, according to the Center for Microeconomic Data.
Yet, the consumer is still looking for a happy holiday, according to early Black Friday numbers. For example, CNBC reports that, “200.4 million people hit stores and searched websites for gifts from Thanksgiving Day through Cyber Monday.” Last year’s numbers had 196.7 million shoppers for the critical four-day period. The National Retail Federation (NRF) expected 182 million people. The NRF reports that on average, shoppers paid $321.41 on holiday-related purchases during the Black Friday weekend.
In its recent overall holiday forecast, the NRF reported it expects holiday season sales to increase anywhere from 3%-4% compared to 2022. This rate is “consistent with the average annual increase of 3.6% from 2010 to 2019,” according to the NRF and would put this year’s total ahead of last year’s sales record of $929.5 billion.The expected increase would shake out to anywhere from $957.3 billion to $966.6 billion in sales. “Households are starting the season in decent financial shape and are managing the constraints of their paychecks amid higher interest rates and higher monthly financial obligations as they seek to maintain their mode of living,” according to the NRF.
The biggest changes for 2023 may be around when and why consumers spend their money. Here are five takeaways about what is shaping the holiday shopper of 2023, according to the NRF, and consultancies McKinsey and Deloitte.
- Starting sooner…or not?
Most of us are aware of the slow creep to promote and incentivize holiday shopping sooner and sooner on repeat. This year, some retailers were pouncing even earlier, with holiday promotions rolling out as many people were putting the finishing touches on back-to-school shopping.
“As early as September, retailers started promoting holiday ads on social media, with many more following in October,” wrote McKinsey in Holiday Shopping in 2023, it will Start Early and End Late, its 2023 holiday forecast report. “The race to launch ever-earlier holiday promotions has created one long, continuous year-end promotional cycle, in hopes of capturing consumers who may be trying to spread their purchases out over a longer period.”
Despite retailers pushing for September and October promotions, some 40% of consumers told McKinsey they planned to start their shopping in November. Last year, 35% of shoppers said they’d wait until November.
- All about “me”
In the 2023 holiday retail survey conducted by Deloitte, 72% of respondents expect higher prices compared to last year. To offset some pressure, 66% said they’d look for promotions, compared to 49% last year. Deloitte also found that consumers anticipate buying eight gifts, which is one fewer than last year’s average of nine gifts. “With consumers expecting higher prices, they are making adjustments to stretch their budgets,” wrote Deloitte.
One new person consumers put on the list this year is “me,” meaning more consumers plan to get in on the “gift for myself” trend. Deloitte reports 75% of consumers surveyed admitted they could be tempted to buy a gift for themselves if it fell within specific parameters. For example, if the gift was considered “practical and useful,” 51% said they would justify its purchase. And, if it satisfied a personal passion or hobby, 42% said they’d get in on it.
- Loyalty wins
This year’s holiday shopper wants better bargains and more incentives. Deloitte found 66% of survey respondents will seek out holiday-specific promotional events such as Black Friday or Cyber Monday to counteract the increased prices. In 2022, 49% said they’d do the same thing. Respondents also revealed they’d pay an average of $40 online if it meant they qualified for an incentive like free shipping.
But importantly for retailers, customer loyalty isn’t necessarily affected by the lure of a lower price at a different shop. In this instance, 76% of survey respondents told Deloitte they still plan to often or always shop at their favorite retailer. Holidays are no exception. Favorite retailers include online-only retailers (37%) followed by mass merchants (16%).
- Not splurging as much
Big-ticket and hot items often fuel retail during the holiday season. This year because of additional expenses and higher prices, more consumers reported a willingness to hold off on making bigger purchases. McKinsey found that 79% of survey respondents intended to change their shopping plans or even to do what is known as “trade down” to cover the costs. (Trading down is defined as swapping purchases for cheaper alternatives or completely skipping a purchase altogether.)
One age demographic planning to trade down a bit more this year is younger shoppers, despite their saying that better prices and promotions are slightly less important to them.
- Omni-channel convenience
Because time remains at a premium for most consumers, retailers can expect a mix of in-store, online, and buy online, pick up in person. After several seasons of pandemic-related safety and distance measures, shoppers are ready to get up close and personal this year.
The NRF notes that the “physical store experience still matters,” with 85% of survey participants expecting to purchase “at least one item in-store, while 12% expect to pick up purchases in-store.” Deloitte found that although 63% of its survey respondents prefer an online shopping format, 37% of the consumer budget will still go toward in-store shopping, up slightly from 35% in 2022.