Holiday spending: Consumers to fill kids’ closets, update homes

  • By Ken Fireman Special to The Washington Post
  • Friday, October 30, 2015 3:31pm
  • Business

What hasn’t changed: the American consumer swinging into action during the holiday season. What has: the things we’re opening our wallets to buy. (Hint: It’s not just gifts.)

While shoppers say they plan to spend 12.5 percent more this holiday season, they say they plan to shell out just 6 percent more for presents, according to a survey by the consulting firm Deloitte. They intend to spend 16 percent more in the non-gift category, the survey found.

What appears to be happening is that many consumers are taking advantage of holiday deals to do things that have little connection with the season, such as “fill the kids’ closets or update the home,” said Rod Sides, Deloitte’s vice chairman and U.S. retail distribution leader.

They’re also turning the old adage about giving and receiving on its head. Fully 50 percent said they’ll be buying things for themselves this holiday season, up seven percentage points from last year, according to Deloitte, which surveyed 4,009 consumers in September.

“As folks feel better about their personal economic situation, they feel they can do a little more,” Sides said. “More on entertaining, more on reconnecting.”

The holiday shopping season continues to be important to retailers and for the overarching pace of economic growth in the United States. The last two months of the year consistently account for more than 19 percent of total annual retail sales, a disproportionately high level. And with consumer spending of all kinds accounting for about 70 percent of gross domestic product, that means holiday spending packs an economic punch.

“The U.S. consumer has been an Atlas, not only holding up the U.S. economy but also demand for products from abroad,” said Jack Kleinhenz, chief economist for the National Retail Federation.

Overall, projections by Deloitte and by the retail federation both forecast sales of all kinds over the holidays close to those in 2014, if a bit behind. The federation’s economic model projects that retailers’ sales in November and December will grow by 3.7 percent over the previous year, down slightly from the 4.1 percent increase in 2014.

Consumer spending was a bright spot in the generally subdued U.S. economic landscape in the third quarter. It rose 3.2 percent, even as overall growth increased just 1.5 percent, a significant falloff from the pace of GDP in the second quarter, the Commerce Department reported last week. But its not clear if that pace will continue. Consumer spending slowed in September, growing just o.1 percent, the smallest gain in eight months.

Looking ahead, the consumer should help drive a growth pickup to 2.5 percent in the fourth quarter, says Michael Feroli, chief U.S. economist for JP Morgan Chase.

“What we’re incorporating is some tailwind from lower gas prices, pretty good sentiment when it comes to the labor market, and perhaps a little bit better market outlook than a month ago,” Feroli said.

Agreement by a divided Congress to approve a two-year budget deal also eases worries over a potential government shutdown or default on the national debt.

Sides calls holiday spending a bellwether for “the psyche of the U.S. consumer. It’s a test of how we feel about the economy. At the end of the day, it’s how you vote with your wallet.”

This spending is occurring in a retail environment that is highly fluid — and highly competitive. The growth of e-commerce has been well documented, along with its corollary of “show-rooming” — consumers visiting stores to eyeball products and then finding the best deal online. Perhaps less discussed is the mirror-image practice of “Web-rooming,” in which consumers investigate a potential purchase online and then visit a store to look over the item in person before closing the deal.

Deloitte found that Web-rooming is more popular this year, with 69 percent of those surveyed planning to do it while 52 percent expect to show-room.

“Retailers that are likely to come out ahead this holiday season are the ones connecting the dots between their digital channels and their stores, rather than focusing solely on the online ‘buy’ button,” Sides said.

The stakes for retailers in accomplishing this are reflected in the fact that, according to the Deloitte survey, shoppers who combine in-store, online and mobile-app visits expect to spend 75 percent more during the holidays than those who just shop in stores.

Matthew Shay, the president and chief executive of the retail federation, said customers these days are “truly agnostic” about how they buy things. “They don’t care which channel, they just know that when they want it, they want it from the channel they happen to be using,” he said last month.

And what of the storied Black Friday holiday kickoff, the day when merchants traditionally break into the black for the year, and shoppers break into a sprint to scoop up the deals?

Still a factor, but it may be on its way to becoming an “urban legend” as the holiday sales cycle stretches out, Sides said. Fifty-two percent of those surveyed by Deloitte said they won’t rely on Black Friday as much as in previous years.

“Consumers are becoming a little desensitized,” Sides said. “They know they can get deals throughout the cycle. … When I was growing up, the shopping experience started when you walked in the front door of the retailer. Today, that starts on your couch.”

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.