Changing Holiday Shopping Habits: How Retailers Serve Customers

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Changing Holiday Shopping Habits: How Retailers Serve Customers

By Steven Barr - 11/24/2014
As gingerbread lattes make their way to coffee shops across America, it can only mean one thing: the holiday shopping season has begun.
 
But how will this year be different? PwC and Strategy& recently released its 2014 Holiday Outlook, based on a survey of more than 2,200 U.S. consumers. The study found that 84% of consumers plan to spend the same or less than they did in 2013. Consumers remain cautious over personal finances and the feeling that the economic environment is the same or worse than in 2013, challenging retailers to be extremely strategic not only during the holiday season, but into the New Year and beyond.
 
First, timing is everything during the holiday period, which is starting earlier and ending later. Shoppers concentrate their holiday spending during four periods: pre-Thanksgiving (accounting for 21% of shoppers' holiday spending), the week of Black Friday (21%), the mid-season spending frenzy (50%) and post-holiday (8%). The timing of consumer spending is primarily driven by available cash and the attractiveness of deals. Targeting shoppers with the right quality, value and offers at the right time will go far in influencing purchase decisions.
               
Second, there is a clear bifurcation of American shoppers into two distinct groups: "survivalists" and "selectionists." The first group represents a significant 67% of American shoppers (up from 65% in 2013). Survivalists earn less than $50,000 per year and the constraints of their daily cost of living require them to focus on affordability for all their purchases. The report projects that survivalist households will spend $377 on average this holiday season. The second group – the selectionists – represents 33% of American shoppers (down from 35% in 2013). Earning more than $50,000 annually, selectionists make careful decisions about how to spend their disposable income. Their average household holiday spend comes in at $978.
 
Retailers will need to think carefully about how to best serve both of these key markets. Since survivalists are driven by price, retailers should have a continuous flow of well-priced merchandise in easy-to-find places throughout the store. To appeal to selectionsts, retailers should be focused on special attributes of gifts, things like one of a kind boxed sets work well; gifts with unique qualities are most appealing to these shoppers.
 
The rising importance of the omnichannel—the ability to shop seamlessly via smartphone, desktop computer, bricks-and-mortar stores, and catalogs—is a third trend to watch. Omnichannel shoppers are falling into three distinct profiles: tradeoff shoppers (39% of the holiday shopping population) shop around extensively to compare prices and buy online when cheaper, transitionalists (29%) do some online shopping but would rather go to a traditional store and digitalists (32%), who shop online most of the time. Ease of movement across channels will provide shoppers multiple options to choose from, while providing retailers visibility into inventory and pricing.
               
What does all this mean for the store? The more product knowledge retailers can provide to customers, the better. Also, retailers need to make online shopping a seamless experience, providing customers with various options such as in-store pick up and insights into store availability and price.
 
The holidays are largely a time for traditions, but with new emerging shopper segments and unique ways to engage consumers, retailers need to select the right strategies to survive and thrive this holiday and into the future.
 
Steven Barr is U.S. retail and consumer sector leader with PricewaterhouseCoopers.