This year we’ve seen a big drop in consumer spending. With more people indoors, you’d expect holiday shopping to take a large dip. But according to eMarketer, we’re likely to see a small bump of 0.9% in spending this year. This is down from the average 2-6% increase that we’ve seen in the last few years. It also represents a huge shift in where people will be buying their holiday gifts. Like the other big changes we’ve seen in everything from online grocery shopping to telemedicine, this will be driven by a massive jump in ecommerce. Ecommerce is expected to grow by 35% this year, compared to the average growth of 12-17% in previous ones. This compares with a drop in brick-and-mortar retail of 5% vs. its previous anemic but positive growth of 1-4%.
Customers are more cautious with their holiday spending. Morning Consult’s “How COVID-19 is Changing the Holiday Shopping Season” survey finds that 8% fewer consumers (50% to 42%) will spend more than $300 on holiday gifts this year. Many people are concerned about their finances and looking to save money. However, consumer confidence throughout the pandemic was far beyond the great recession of 2008 and continues to get better. But equally important is the elimination of various times to give gifts. This year there won’t be any holiday parties or secret Santa exchanges. Many people won’t even see their relatives for the holidays.
With the shift to online shopping for the holiday season, that means that one vendor becomes the big winner, Amazon. Amazon pulls in 39% of all e-commerce sales, bringing in $310B of revenue to its bottom line. While Amazon will have the largest increase in dollar volume this year, big brick-and-mortar retailers like Walmart, Target, Best Buy are expected to have a larger percentage growth. This shift to online shopping had also added a new shopping word to our vocabulary “Cyber Five.” Like much of 2020, everything has been blurring together, so the five days between Thanksgiving and Cyber Monday have now been christened the Cyber Five. This move online also might have to do with Amazon moving Prime day from July to October, kicking off the holiday shopping season.
The biggest concern for consumers this holiday season isn’t the economy but product availability and on-time delivery. According to CommerceNext’s survey “Holiday 2020 – The impending shipping nightmare,” almost 50% of respondents are concerned about out-of-stock items and late ecommerce deliveries. This may drive customers to use one of their coronavirus shopping techniques like curbside or in-store pickups. It’s not just consumers who are worried, it’s also retailers who are concerned about limited shipping capacity and possible surcharges. The holiday season is already the largest shipping season of the year and it’s unclear if shippers will be able to ramp up the excess capacity. So if you want to make sure to get your holiday gifts by Christmas, make sure you order them early.
These are our best guesses for the holiday season. This has been a year with enormous amounts of change, but change is what Midas does best. Midas partners with you to chart a new path forward. Working with Midas can help you find new and innovative ideas and provide incremental value through creative investment approaches.