New report tracks two distinct groups emerging from economic realities – “survivalists” and “selectionists” / Roadmap for retailer success this holiday season unveiled
New York, October 7, 2014 – The 2014 holiday shopping season will be characterized by cautious spending, while economic realities bifurcate the American holiday shopper. These are two of the 10 big trends that are expected to drive the 2014 holiday shopping season, according to a new report from PwC US and Strategy&, titled 2014 Holiday Outlook: Top trends, consumer behaviors and implications for retailers, based on a survey of more than 2,200 shoppers nationwide.
“The upcoming holiday shopping season will look very similar to 2013 as shoppers remain cautious on the economy and are concerned about disposable income, the rising cost of living, and insufficient salary, leading surveyed participants to project an average household spend of $684, down from $735 in 2013,” said Steven Barr, PwC’s U.S. retail & consumer practice leader. “The spending divide among shoppers is widening, creating two distinct groups that we are tracking – survivalists and selectionists – and retailers must cater to both segments. And with shoppers coming to expect a seamless omnichannel experience, deals to woo them into stores and having no tolerance for another season of data privacy invasion, it’s a complex retail landscape that retailers need to master – or they risk losing loyal shoppers.”
PwC and Strategy& outline 10 big trends that are expected to drive the 2014 holiday shopping season:
- Shoppers will continue to spend cautiously overall, but there will be a new intensity to their online spending. Shoppers express strong overall concerns about holiday shopping, as they remain cautious on the economy with 72 percent believing a same or worse environment when compared to the year before. And these shoppers are reluctant to increase spending, as 84 percent plan to spend the same or less than in 2013. The key economic drivers influencing their holiday shopping decisions include: limited disposable income (64 percent); the rising cost of living (61 percent); and insufficient salary (37 percent). As a result, household spend levels are projected to slightly decrease in 2014.
- America’s economic conditions have reached holiday shoppers who will bifurcate into two distinct categories during this season: survivalists and selectionists. The 2014 holiday shopper is segmenting into two distinct groups: survivalists and selectionists. Survivalists – those generally making under $50,000 per year – represent 67 percent of American shoppers (up from 65 percent in 2013 and 63 percent in 2012). They are constrained by daily cost of living and apply the lens of affordability to all purchases. The average household holiday spend for this group is $377. Selectionists – those generally making more than $50,000 per year – represent 33 percent of American shoppers (down from 35 percent in 2013 and 37 percent in 2012). They make careful decisions based on their disposable incomes. This group’s average household holiday spend in 2014 is $978.
- Most purchases will have to pass the test of affordability as shoppers carefully prioritize their spend and look for the best value. Spending drivers are clearer than ever this holiday season. Eighty-four percent of shoppers cite best prices as the main reason for choosing a place to purchase gifts (up from 74 percent in 2013). Deals rank second, with 43 percent of shoppers saying they will shop based on frequency and quality of seasonal deals. In addition, the share of online will continue to grow as shoppers seek convenience and value. Fifty percent of spending is projected for physical stores (down from 55 percent in 2013), with 43 percent of spending done online (up from 42 percent in 2013). Fifty-eight percent of spending will be on gift cards, the hottest category next to clothing this year.
- Expect more channel fragmentation as shoppers budget for not only dollars, but their time. Giving consumers the right omnichannel experience is essential. That means allowing shoppers to move easily across channels, giving them many options to choose and buy, while providing retailers visibility into inventory and pricing. Omnichannel has come of age this holiday season and 2014 could be the turning point when consumers make online pre-planning an integral part of their holiday shopping tradition. Forty-one percent of shoppers plan to increase online spend in 2014 over 2013. This season, three distinct omnichannel shopper profiles will emerge: tradeoff shoppers (39 percent) will shop around extensively and buy online if it’s cheaper; transitionalists (29 percent) will shop online a bit, but generally prefer traditional stores; and digitalists (32 percent) will make online the “go to” channel for most discretionary and planned shopping.
- It will be important to understand the cash/credit position of shoppers during the entire season. Spending will be concentrated during four periods: pre-Thanksgiving, Black Friday, Mid-Holiday and Post-Holiday. The 2014 holiday shoppers are planning their holiday spending in four very distinct waves. Wave one includes the early holiday shoppers, where 21 percent of all holiday spend will occur from now through the Thanksgiving weekend. Survivalists plan to spend $86 in this wave, while selectionists plan to spend $202. Wave two encompasses the Black Friday period – 21 percent of spend will occur over the week of Black Friday. Survivalists plan to spend $84 in this wave, while selectionists plan to spend $205. Wave three includes the mid-season spending frenzy, where fifty percent of the holiday spend will happen between Thanksgiving and Christmas with a significant portion of that spend in the last ten days before Christmas. Survivalists plan to spend $184 during this period, compared to $489 for selectionists. Wave four is post-season deal seeking, with eight percent of holiday spend projected to be after the holidays as shoppers continue their “affordability” journey. Survivalists plan to spend $23; selectionalists plan to spend $83. Getting promotions well-timed and relevant to shopper spend profiles is critical.
- The 3 S's of shopping — searching, showrooming, and selection — have become permanent. A new Thanksgiving ritual of shoppers going online to prepare their “holiday shopping plan” has emerged and may be the most significant shopping pattern change this season. As affordability and disposable incomes become major considerations, there will be a lot of planning around where and what to buy and how much to spend over the Thanksgiving weekend. Forty-nine percent of shoppers plan to search, showroom and purchase on Thanksgiving morning. Fifty percent of all shoppers plan to shop during Thanksgiving / Black Friday to grab the best deals. The “early bird tradition” continues with 75 percent of Black Friday shoppers going to stores. The Black Friday channel choices of these shoppers include mass merchants (80 percent), department stores (68 percent), and major online retailers (70 percent).
- Shoppers are clear about what they will spend their holiday dollars on, making it critical for retailers to differentiate within those categories. These five categories are at the core of the holiday 2014 wish list for both survivalists and selectionists: everyday clothing (61 percent), gift cards (58 percent), traditional toys (39 percent), personal electronics (36 percent) and media and entertainment (31 percent).
- Shoppers recognize that experiences are beginning to count just as much, or more, than gifts. Holiday family get-togethers and family occasions will continue to grow in importance. Thanksgiving dinner tops the list of 2014 holiday eating occasions with 76 percent of Americans planning some type of celebration (up from 68 percent in 2013). Christmas and Hanukkah celebrations are second, with 73 percent of America celebrating (up from 69 percent in 2013). Family and friends’ in-home parties rank third in holiday celebrations, with 53 percent of America celebrating (up from 46 percent in 2013). Out-of-home formal parties are projected to drop to 32 percent, down from 41 percent in 2013, as Americans return to entertaining in the home. Spontaneous get-togethers are projected to increase as Americans (especially millennials) celebrate the holidays. According to the report, millennials may well value experiences over gifts; fifty percent will celebrate the season with holiday events.
- Shoppers plan to shop at multiple stores as well as websites. Mass merchants, department stores and major online retailers are at the top of their planned destinations. The 2014 holiday shopper will “travel” to stretch every dollar. For survivalists, 53 percent plan to visit two to three stores/sites and 23 percent plan to visit three to four stores/sites. For selectionists, 47 percent plan to visit two to three stores, and 28 percent plan to visit three to four stores.
- Retailers have significantly upped their game in planning for and investing in improved in-store and omnichannel experiences. In addition, extensive weather planning is part of ensuring holiday success. Unlike last year, if bad weather comes, retailers are more prepared to deal with wintery conditions by having beefed up their omnichannel capabilities. Online transactions will replace in-store visits and retailers will be ready to manage the high volume of transactions, providing the customer service and convenience shoppers desire. In addition, in-store retailing is expected to turn holiday shopping into a much more memorable and entertaining experience for shoppers with the additions of cheerful décor, popular music, artisan foods and kid-friendly attractions. Further, efficiency and smart logistics will be key to ensuring a hassle-free experience for shoppers who do visit stores. Expect to see retailers roll out efforts such as traffic engineering, parking assistance, valet services and shuttles from transit stops.
“With consumers having ever higher demands for their shopping experience – no matter the channel – we conducted this survey to better understand how retailers can meet the needs of their shopping habits this holiday season. What we learned was that to compete effectively at retail this year, it demands a new level of organizational and operational excellence, which we outline in our report. Retailers have been cautioned about the two distinct groups emerging from today’s economic realities, and we’re offering ways on how to appeal to both groups and have a winning holiday shopping season in 2014,” added PwC’s Barr.
Expected strategies from retailers to be competitive this holiday shopping season:
- “Shout out” your holiday banner promise
- Invest in differentiating your in-store experience
- Make sure your omnichannel experience is at least market comparable
- Remember: Deals are critical for driving traffic
- Focus promotional strategies – get “up close and personal” on everything communicated
- Where possible, increase attention on your most loyal shoppers
- Ensure that your cybersecurity capabilities are “best in class”
- Align your entire organization around “how we win this holiday season”
2014 Holiday Outlook: Top trends, consumer behaviors and implications for retailers was commissioned by PwC and Strategy& and conducted online by an independent research organization between July and August 2014. The survey polled more than 2,200 consumers nationwide, spanning all demographics and income levels. This survey is projectable to the entire U.S. population. The core thought leadership team who completed this research and analysis is comprised of Steve Barr, PwC’s U.S. retail & consumer practice leader; Byron Carlock, PwC’s U.S. real estate practice leader; and Thom Blischok, Strategy&'s chief retail strategist.
About the PwC U.S. Retail & Consumer practice
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