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Deloitte’s Holiday Forecast Has Bad News for Retail

Many have branded Amazon’s Prime Day as the start to the 2020 holiday season, as retail’s top players followed suit with deals of their own and more merchants sought to alleviate the anticipated November-December fulfillment crunch by pulling demand forward. If recent findings from Deloitte are any indication, Prime Day lived up to its billing and moved the needle on holiday purchases in a major way.

Online sales over Oct. 11-17 jumped 50 percent year over year from 26 percent of total sales to 37 percent of total sales, according to data from Deloitte’s InSightIQ team. In fact, this data shows that among online retailers and traditional mass merchants, online spending increased 83 percent year over year during Prime Week.

Overall, the sales events from large retailers, which also included Walmart’s “Big Save Event,” Target’s “Deal Days” and Best Buy’s “Black Friday in October,” drove a 6 percent year-over-year spending increase for the retail sector across digital and stores for the week.

The October purchases appeared to be a tone-setter for the rest of the season even before Prime Week took place. Online sales during the first and second week of October were up 25 percent and 24 percent respectively, Deloitte said.

Not only did spending increase, but so did the number of people visiting retailers’ digital sites. For the week ending Oct. 17, visits increased 63 percent year over year, and the number of unique visitors rose 47 percent.

“The InSightIQ analysis confirms that retailers’ strategy to accelerate holiday shopping was successful,” said Jeff Simpson, leader, InSightIQ, and principal, Deloitte Consulting LLP. “During Prime Week, major retailers’ online promotions drove the share of digital shopping even higher and helped jumpstart the shopping season this year as shoppers purchased items traditionally associated with the holiday season, including toys, games, electronics and sporting goods.”

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Mass merchants’ year-over-year spending change increased 3X from the week ending Oct. 3 to the week ending Oct. 17, says Deloitte, with the spending change increasing nearly 35 percent after two weeks of nearly 10 percent gains.

While mass retail drove the spending increases throughout the period, the apparel and footwear category, as well as the department category, were marked as some of the least influential on total sales in the period. Footwear and apparel hovered around a 20 percent dip in the week ending Oct. 3, and slowly declined by approximately 22 percent by Oct. 17.

Department stores in total have continued to perform poorly, with year-over-year spending plummeting 32 percent by the week ending Oct. 3, and slightly decreasing over the next two weeks to a 34 percent decrease.

Overall holiday spending could decline 7 percent

Beyond the October data, Deloitte’s InSightIQ team studied overall holiday spending as part of its annual consumer survey. In line with other studies from organizations such as the National Retail Federation and NPD Group, Deloitte expects holiday spending to slightly decline this season.

The firm says shoppers expect to spend $1,387 per household during the holiday season this year, down 7 percent year-over-year. The 38 percent of shoppers who got a head start on their holiday shopping in October are also the largest spending bracket, with an estimated average household spend of $1,602. Those who start in November before Thanksgiving will spend an average of $1,430, per Deloitte’s projections.

Overall, shoppers anticipate shopping in a much shorter period of time, with 2020’s expected average shopping duration checking in at 5.9 weeks, a week and a half shorter than the 7.4 weeks in 2019.

Up to 38 percent of the 4,012 consumers surveyed in September plan to spend less because of concerns around economic instability, which has been a common theme as the Covid-19 pandemic continues to spread and a post-election stimulus deal hangs in the balance. This number is actually the highest since the financial crisis of the Great Recession upended the 2008 holiday season, with nearly 60 percent of shoppers saying they would spend less.

Twenty-nine percent of shoppers say their household is worse off financially than it was last year—an increase from the 20 percent expressed this sentiment at the end of 2019. And this year, 40 percent of households making under $50,000 are concerned about not being able to make upcoming payments.

As expected, dollars spent on travel are down by 34 percent to $260 per household. Between Oct. 1 and 17, spending on travel was down between 56 percent and 58 percent year over year, according to InSightIQ data. People are redirecting their holiday spending towards non-gift items, including furnishings and décor that help keep things festive at home. In total, $435 on average will be spent on non-gift items, a 12 percent increase over last holiday season.

Correlated with the increased online shopping spend and the slight decline in overall spend, shoppers are visiting fewer stores this year. On average, shoppers expect to visit 5.2 physical stores this season, well below the seven recorded last year.

More than half (51 percent) of shoppers say they are anxious about shopping in a store during the holiday season due to Covid-19, while 69 percent prefer shopping at a store closer to their residence. As many as 58 percent said they prefer to travel 10 miles or less to purchase a gift from a retailer.

Deloitte also measured the popularity of buy online, pick up in store (BOPIS), and discovered that while most retailers began implementing the option during the pandemic as a safety measure, the channel has since evolved from primarily a safety consideration into a preference for convenience.

During the past six months of the pandemic, the number of consumers using BOPIS as an alternative to delivery has risen. On April 9, 48 percent of consumers said they used BOPIS because it was safer, yet that number had decreased to 35 percent by Sept. 17. Yet in the same time period, the percentage who used it because it was cheaper than delivery increased from 26 percent to 33 percent, while the number who used it because it was faster than delivery jumped from 23 percent to 29 percent.