The economics behind the 'new norm' of holiday shopping
When it comes to the economy, there’s no question that millions of people have had their share of the good, the bad and the ugly. Years of stubbornly high unemployment, fluctuating home values, stagnant income growth and unpredictable retail sales continue to drive the conversation.
Last holiday season food and apparel prices were higher than most were accustomed to and jobs were scarce. This year, it’s much of the same. The cost of gas, food and other items are throwing a wrench in people's discretionary budgets, and the uncertainty of the fiscal cliff is weighing heavy on consumers’ minds. In NRF's recently-released holiday spending survey, just over half - 52.3 percent - of those polled said the state of the economy is impacting their holiday spending plans, but that's down from 62.2 percent last year. So what's changed? Today’s lackluster economy has become the new norm, and consumers and retailers are adjusting accordingly. Shoppers are smarter than they've ever been when it comes to maintaining their family budget, and as a result, retailers have had to work even harder these last few years to attract new customer dollars.
Here’s what we’re seeing in this new reality.
Early-birds are the new procrastinators. When it comes to holiday shopping, consumers have learned how to spread out their spending and take advantage of retailers' promotions all year long instead of rushing to get their shopping done last minute. According to our research, more people this year planned to shop for holiday merchandise in October - the highest percent we've seen in the survey's 10-year history. We also saw this with back-to-school shoppers when nearly half of those with children in grades K-12 said they would begin shopping for school merchandise three weeks to one month before school, up from 42.4 percent who said so the previous year. Retailers are responding, too. Perhaps to capture the attention of those early-bird shoppers, or to navigate around the media craziness of the November elections, Target came out in October with their first holiday advertisement of the year, turning quite a few heads.
The savvy shopper. The economy hasn't changed everything for the worse. Consumers today are smarter than ever before when it comes to how they shop. Mom and dad now know where to score the good deals, find free shipping offers for their online purchases (and boy will there be a lot this holiday season), how to maneuver around the internet to compare prices, read peer reviews on products, research product information, use mobile shopping apps that offer coupons and loyalty points for "checking in" to a location, and so much more. But it's more than just researching prices and using coupons. It's seeking value. We've seen this the last few years in everything from shopping for gifts to everyday discretionary purchases. Because people already expect low prices, especially during the holiday season, more factors play into their purchase decisions. Retailers are responding by upping the ante when it comes to their customers’ shopping experiences. From price-matching to layaway and even the amount of steps it takes to complete a purchase on their mobile phone, retailers continue to find new ways to provide value for their shoppers.
The mobile equation. There's no question about the role that mobile has played in retail the last few years. For consumers, it's quickly becoming a favorite way to shop. This year nearly two-thirds of shoppers plan to use their tablets to shop for holiday merchandise. Specifically, three in 10 plan to make a purchase via their tablet. And the trend isn't going to change anytime soon. In the few short years that mobile shopping has existed, Shop.org and Forrester Research estimate that retailers are already seeing about four percent of their total e-commerce sales derive from smartphone and tablets.
For retailers, this means answering the call. From in-store kiosks that provide access to a company's entire inventory to QR Codes that let shoppers in the store buy the item via their phone and have it shipped, retail will be more digital than ever this holiday season. Some are even saying this could be the first holiday season we see integrated shopping experience for their customers. In fact, Macy's just announced their Black Friday promotions will be available exclusively for those who download their app a full week before the big event. Though slowly becoming the norm for retailers, for shoppers, mobile is now everything.
The economy has impacted many things, including retailers' business practices and consumer's spending trends. The tremendous shift in how, when, where and why people shop shows us that over the last four years, consumers have adopted ways to better their finances and their families, and because of this they are now better prepared for any future economic uncertainties. The new normal for shoppers is also the new normal for retailers as they too adjust and move forward.