High-Income Shoppers To Boost US Holiday Spending 6% This Year
High-income shoppers will fuel holiday spending in the US this year, even as less affluent consumers keep their purse strings tight.
That’s the finding of a survey released Tuesday by PricewaterhouseCoopers LLP. The firm expects Americans overall to increase spending by 6% this season, but those with household incomes below $60,000 will cut their outlays for both gifts and entertainment as they deal with stagnant wages.
“There’s both an intent and ability for the higher-end consumer to spend extra this holiday,” said Steve Barr, US retail and consumer leader at PwC. There are times when shoppers with lower income levels are the growth engine in holiday spending, he said. “But under the current scenario it’s really not possible.”
Last year, US holiday sales grew 4% to $658.3 billion, according to the National Retail Federation. Online sales gains helped offset weak department-store traffic during the period, which spans the final two months of the year.
The National Retail Federation said Tuesday it expects holiday sales to increase between 3.6 and 4% in November and December. This forecast excludes automobiles, gasoline and restaurants, and marks the first time the company has used a range, due to uncertainty about how recent hurricanes will impact sales.
“We all know retail is not dead or dying,” said NRF CEO Matthew Shay. “It’s certainly transforming.”
Most people will combine in-store and online purchases, with almost 90% planning to do some shopping in physical stores, the survey found. Though US consumers won’t defect from brick and mortar entirely, they plan to complete half of their shopping online, saying retail pain points like slow-moving lines deter them, especially during the holidays.
“Companies are trying to ease friction points, bring tech elements into stores and combat some of the challenges of physical retail,” said Liz Dunn, a retail analyst. “A portion of our shopping will continue to shift online, and we’ll see online growth outpace that of physical stores.”
Still, online retailers are finding they have to step up their game to meet consumer demands, for instance, when it comes to delivery, the survey found.
“The e-commerce transformation has conditioned consumers to expect or receive most things in two days,” Barr said. “Now the trends are going more toward same day or even two-hour delivery.”
To make that happen, some retailers have shifted focus from “behemoth distribution centers in the heartland” to “more nimble versions” with smaller footprints, close to population centers, according to the PwC report.
In that vein, Walmart Stores announced plans on Tuesday to acquire Parcel, a business that specialises in same-day deliveries of groceries and meal kits.
In addition to its annual holiday outlook, PwC conducted a separate study of young Gen Z consumers, ages 13 to 16, to analyze their preferences.
While that demographic most often finds out about products from social media, they still enjoy the in-store shopping experience, the survey found. More than half of those shoppers choose the mall as their favorite venue for holiday shopping.
“Consumers told us they would be far more likely to buy a product if an influencer they follow on social media links to a discount, shares a positive review or wears or uses a product,” according to the survey.
Barr said he attributes this year’s estimated uptick in holiday spending to both economic and psychological reasons - at least for more upscale shoppers.
“It’s highly influenced by consumer confidence. But there’s also a psychology here where folks are ready to have a breakthrough holiday and not be encumbered by the difficult times,” he said.