Key takeaways

• Amid waning pandemic anxiety and stabilizing consumer sentiment, holiday spending will average $1,463 per household, up 5% from 2020, with higher-income shoppers driving nearly all gains.
• Digital channel trends are here to stay, but some pre-pandemic behaviors are returning, such as experiences (including socializing, travel and entertaining), which increased 15% from 2020.
• Optimism among retail executives is strong, as 7 in 10 expect consumers to spend more year over year. However, 6 in 10 retail executives are worried about receiving their holiday orders in time.
• Three out of 4 consumers (75%) are concerned about stockouts, motivating consumers to begin their shopping earlier this year.
• Consumers are more worried about inflation than retailers. Seven in 10 consumers (68%) expect higher prices this season. While only 5 in 10 retail executives surveyed expect higher prices, lower income shoppers expect to spend less based on inflation expectations.

Why this matters
As COVID-19 is set to impact yet another holiday season, a return to some pre-pandemic spending levels is expected to bring holiday cheer. For 36 years, Deloitte has been examining consumer behavior and sentiment ahead of retail's crucial holiday shopping season. To gain additional perspective on the changing landscape, supply chain challenges and inflation, Deloitte also added a retail executive survey. This year's report, "2021 Deloitte Holiday Retail Survey," examines what retailers can expect from shoppers as they tackle their holiday shopping. The report is based on a survey of 4,315 consumers conducted online Sept. 7-14, as well as a survey of 30 retail executives across retail categories, 90% of which have annual revenues of $1 billion or more, conducted Sept. 3-16.

A merry and bright holiday season, for some
2021 holiday spending intentions are approaching 2019 levels, signaling a return to our next normal. However, there is a tale of two holiday seasons, with higher-income households planning to spend five times that of lower-income households. Indeed, the majority of this season's gains will be driven by higher-income shoppers who expect to spend 15% more than last year (averaging $2,624 per household). Meanwhile, lower-income groups plan to spend 22% less (averaging $536 per household).   

Moreover, the percentage of overall consumers who do not plan to spend at all this season is 11.5%, more than doubling from 2020 (4.9%). Two-thirds of this non-spender group (65%) are from lower-income households compared to 12% from higher-income households.

• Overall spending will increase across categories with 45% of households planning to spend the same or more on the holidays.

• Spending on experiences, which includes entertaining at home and socializing away from home, is expected to increase 15% year-over-year, to $536 per household, accounting for more than one-third of holiday spending.

• Spending on gifts is forecast to be $501 per household, an increase of 3% since 2020, while non-gifts purchases will total $426 per household.

• Retailers are placing orders with confidence that consumers will be spending, as 33% of retail executives stated that holiday order volumes grew by double digits year-over-year.

• As consumers start to return to experiences, 42% plan to take a trip this holiday season, mostly by car.

Returning to the next normal
As pandemic anxieties decrease, the number of consumers who are anxious about shopping in-store during the holiday season due to COVID-19 fell to 40% versus 51% last year. As a result, a next normal is emerging -while in-store shopping is regaining some lost ground, online shopping is further solidified as a holiday shopping mainstay.

• Consumer spending at nearly all retail subsectors has recovered and is at or above pre-pandemic levels.

• The share of in-store spending is expected to rise to 33% in 2021 (up from 28% in 2020), although this is still below the 36% seen in 2019.

• Despite some recovery to in-store spending, digital continues to see healthy gains, with online spending expected to rise to $924, up from $892 in 2020.

• Retail executives are optimistic about online sales, with 40% expecting double-digit channel growth.

• Convenience preferences from the pandemic are sticking as consumers continue to look for simplified shopping citing online (55%) and mass merchants (51%) as top channels, while digital trends including standard delivery (73%), same-day or next-day delivery (47%), BOPIS (buy online, pick up in store) (33%) and curbside pickup (21%) are maintaining popularity.

• Further, an increased reliance on social media to research products continues, as 28% plan to leverage social media for their holiday shopping, including to browse products (56%), read reviews or recommendations (53%), and discover promotions (50%). In addition, 52% of consumers leverage influencer-generated content for inspiration while looking for gifts to buy.

Key quote
"Retailers will see strong growth this holiday season, even as supply chain issues, inflation and highly bifurcated spending continue to impact our industry. Consumers have adapted to life during the pandemic and even though they are venturing out again, digital engagement shows no sign of slowing. Retailers who remain resilient by offering promotions early, appealing to in-store and online shoppers, and planning their inventories well in advance, are likely to experience not just a robust holiday season, but will be well positioned for continued sales into the new year."

-     Rod Sides, vice chairman, Deloitte LLP, and U.S. retail, wholesale and distribution leader

Supply chain challenges put a drag on holiday sales momentum
Ongoing global supply chain challenges are already having an impact on the holiday season. Both retail executives and consumers are concerned about supply chain issues impacting availability of products. Three-quarters (75%) of shoppers expect stockouts, most commonly within the electronics and accessories (49%), as well as toys and hobbies (35%) categories. With the average shopping period expected to begin earlier this year, the average shopping duration is expected to extend to more than six weeks.

• Almost 4 in 10 (39%) consumers will likely start their shopping earlier this year to ensure timely delivery (49%) and avoid stockouts (47%).

• Nearly half of consumers (48%) are at least somewhat concerned about shipping delays during this holiday season.

• Retail executives are also concerned about the supply chain impact as 43% already expect their ordered holiday inventory to be delayed, and 64% are concerned about receiving inventory in time for the holidays. This is despite 43% of retailers placing their holiday orders earlier than in 2019, even as early as March.

• Overall, consumers will hold delivery companies most responsible for delays (33%), compared to weather conditions (27%), and the retailers themselves (21%).

• As a result, the holiday shopping season has pulled forward with 68% of shoppers planning to shop before Thanksgiving (versus 61% in 2020), and 43% starting before the end of October (versus 38% in 2020). The earlier start to the season is extending the duration of the shopping season to more than six (6.4) weeks, as compared to 5.9 weeks in 2020.

• However, Black Friday events, many of which were cancelled last year, are expected to rebound this year with 31% of holiday shoppers planning to spend on Black Friday (versus 24% in 2020) and another 34% planning to spend on Cyber Monday (versus 29% in 2020).

Fewer promotions expected as inflation drives holiday prices up
When determining where to conduct their holiday shopping, getting a great deal continues to be the top priority for holiday shoppers. However, getting a good deal may be harder this year due to the potential for higher prices and fewer promotions.

• More than two-thirds of consumers (68%) and more than half of retail executives (53%) expect product prices to increase this holiday season.

• Among holiday shoppers who plan to spend less this holiday season, half (50%) said this was due to higher food prices. Conversely, among those who plan to spend more, 39% said this was on account of the generally higher cost of goods.

• In hopes of getting a good deal, more than one-third of consumers (37%) agree that there are better buys earlier in the season. In a bid to woo early shoppers, 36% of retail executives expect to begin their holiday promotions early.

Key quote
"Despite improving consumer sentiment and spending growth, the pandemic continues to influence how the holiday season will play out. Due to ongoing supply chain challenges, consumers will not only need to check their holiday lists twice, but early. We believe those retailers that embrace the next normal and meet these shifting consumer demands will experience holiday cheer in the coming months."

-     Stephen Rogers, executive director, Deloitte Insights Consumer Industry Center, Deloitte LLP

Connect with us on Twitter at @DeloitteCB or on LinkedIn: @RodSides and @StephenRogers.