NPD Report Says Wary Consumers to Reduce Holiday Spending
By Gary Symons
TLL Editor in Chief
The NPD Group predicts that Christmas stockings will be a little less full, and the stack of presents under the tree a touch smaller this year.
The NPD’s annual report on retail, 2022 US Holiday Purchase Intentions, says consumers generally plan to spend less this year than in 2021, although spending is expected to be close to the level experienced in 2020, the first year of the COVID-19 pandemic.
(Editor’s Note: Click HERE to read the original report from NPD)
Much of that spending will also happen later in the holiday season, as consumers say they will likely hold off on purchasing gifts until they can see family and friends in person.
As well, NPD says fewer consumers plan to ‘self gift’ while holiday shopping, meaning there will be more limited opportunities for revenue from impulse spending.
While the research puts a bit of a damper on the holiday season for retailers, manufacturers and licensing companies, the news could have been far worse.
The negative side of the analysis comes from the caution consumers are showing as they grapple with inflation and an uncertain economy, particularly the steep drop in global stock markets and predictions of a recession in 2023.
However, the picture brightens somewhat as consumers also feel the country is emerging successfully from the pandemic, which means travelling is back on the table, and there’s an increased interest in spending on clothing, jewelry, and other items that are typically associated with going out for work or pleasure.
This year 52% of consumers said they are less concerned about COVID-19 compared to a year ago, an increase of 20-points from last year’s results. So, according to NPD, more consumers will be getting decked out so they can celebrate with family and friends in person, roughly 40% intend to travel over the holidays, and 55% plan to host family and friends at parties over the holiday season, a jump of eight points.
For those reasons, sectors like travel, restaurants, and location-based entertainment are all expected to see an uptick when compared to the past two holiday seasons.
The report’s numbers indicate 54% of consumers plan to buy fashion-related products like clothing, footwear and accessories, and 39% are planning to specifically buy new clothing as a gift. An additional 28% said they planned to buy beauty products.
Tech products are also high on the agenda, with 36% saying they will buy electronics, and entertainment has surged back in these post-pandemic times with 29% saying they will put some of the holiday budget into restaurants, movies and the like.
By contrast, sectors that increased their sales during the pandemic, like toys and children’s products (29%) or home products (28%), are less dominant this holiday season. During the pandemic, consumers stocked up on toys and other items to keep their children entertained during pandemic lockdowns, and also increased spending on items for the home, particularly products for the kitchen, since they could spend less time going out to restaurants, nightclubs, or movies.
One sector expected to drop significantly this year is the area of subscription services. During the pandemic, when in-person entertainment options had declined, consumers responded by purchasing subscriptions to services that can be enjoyed at home. That included TV streaming services like Netflix or Disney+; online fitness classes or software; and annual video game memberships.
In 2021, 25% of respondents said they planned to gift a subscription service—an historically high number—but that dropped seven points this year to just 18%.
It all bakes down to an ‘in-between year’ for holiday shopping in 2022. When respondents were asked what they plan to spend on gifts this year, the mean average response came out at $760.
That’s just slightly less than the $785 reported in 2021, but much better than the $691 reported in 2020.
BLACK FRIDAY GETS EARLIER EVERY YEAR
The NPD report included two seemingly contradictory conclusions about when retailers can expect revenue to start hitting the cash register.
On the one hand, consumers said they plan to buy gifts later, and specifically closer to the time they plan to see loved ones during the holidays. On the other hand, continuing changes to the way Black Friday sales are rolled out continue to expand the Christmas/holiday shopping season, which now extends well into September!
According to NPD, a stunning 39% of shoppers plan to start their gift shopping in September or even earlier, while 31% said they would start in October. That means 70% of American consumers now start their gift shopping before November, an increase of 3% over last year.
As well, an additional 25% said they would start present shopping in early November as the first pre-Black Friday sales roll out, and just 4% said they would start shopping over the week of Thanksgiving.
In what now seems like the distant past, it was the weekend of Black Friday that really kicked off holiday sales, but that’s no longer the case. NPD’s data shows that only 14% of consumers plan to start their shopping on Black Friday, and another 4% will start on Cyber Monday.
That makes those who do all their shopping in December look hopelessly old fashioned, as only 13% of shoppers said they would wait until early December, and an additional 4% of consumers planned to “wait until the last minute,” which usually means their loved ones are getting a pack of air fresheners from the gas station, wrapped in an old newspaper.
The conclusion is that NPD expects 18% of all consumers to start their shopping earlier than in past years.
One of the drivers of this behavior is the creation of Prime Day, the Amazon version of Black Friday that has driven much of the early buying among holiday shoppers.
Black Friday is still considered the best day to get deals on gifts, with 22% of respondents say they believe the best deals are available on the day itself. However, Prime Day is becoming a growing force, as 19% consider that event the best time to get holiday gift deals. In fact, 73% of people who plan to do some of their shopping early said they would do at least some of that shopping during Prime Day in October.
That’s great news for Amazon and Jeff Bezos, but other trends, not so much. NPD’s survey data indicates that online shopping will see its first major decline this year. In fact, if behaviour adheres to the survey answers, in-store purchases will once again surpass online spending.