47% Indians and 40% Americans to spend less on Christmas; UK too wary with fresh restrictions imposed.
Amidst all social distancing measures and fear of lockdowns getting imposed anytime, as the second wave of the pandemic sweeps across the US and Europe, consumer behaviour is undergoing a fast change and with it are changing the spending habits. The new normal is affecting the retail scenario in many ways, and with the onset of the festive season, the reality is sinking in that it is definitely not going to be same this time – whichever part of the globe one is residing. Diwali, Black Friday and Christmas are going to be no exceptions.
In a survey conducted by Finder on 2,515 Indian adults, a massive 47 per cent of them said that they would be spending as much as 28 per cent less on Christmas this year. In simpler terms, Indians were expected to spend Rs. 15,000 (US $ 202.91) in the 4 months from September to December this year – which includes 2 major festivals – Diwali and Christmas. Now, 28 per cent less means the amount to be spent will come down to Rs. 10,824 (US $ 146.42). Importantly, reduced spending is expected to hit retailers a combined Rs. 852 billion.
The below table, studied and analysed by Finder, distinctly states that while 10 per cent of Indian adults will be spending 50 per cent (and more) less, there’s still a substantial 16 per cent who plan to spend only 5 per cent less this Christmas. So, it may not be all that bad!
|Will you spend less this Christmas?||% of adults|
|More than 50% less||10%|
Another notable highlight of the survey is that 50 per cent of young Indians in the age group of 18 to 24 intend to bring down their Christmas expenditure, while 48 per cent of those in the age group of 35 to 44 years too are not in favour of spending money on Christmas gifts. 46 per cent of those in the 45 to 55 year group are third in the line. Interestingly, 47 per cent of men and women have clearly expressed their desires to spend less during Christmas.
And where’s India standing? As far as reducing costs on Christmas is concerned, India is at the 3rd spot jointly with Hong Kong (47 per cent), with UK and US not far behind at 41 per cent and 40 per cent, respectively. New Zealand (39 per cent) and Australia (37 per cent) are at bottom of top 10 countries.
Spending may continue to be less in the UK too; fresh restrictions imposed
In another study conducted by Rakuten Advertising, among 8,673 adults across the globe, 87 per cent stated that they will be shopping for Christmas. 57 per cent said they will be out purchasing during holiday season, especially Black Friday – this despite 40 per cent talking about decrease in their household income. The same study says that 42 per cent of shoppers in the UK have distinctly shared that they would be spending exactly the same on Christmas as they did last year.
If the Finder survey says that 41 per cent of people in the UK want to spend less this Christmas, as per Rakuten, 49 per cent of UK consumers, since the pandemic outbreak, have brought down their monthly expenditure and shifted their investment away from non-essential purchases to essentials. Now that’s quite a cautious position compared to other European nations like France (33 per cent) or Germany (28 per cent).
Also, the research highlights that consumers across the UK reduced their spending on travel the most (81 per cent), with apparels (59 per cent) too not far behind as far as less spending is concerned. And not much may change this Christmas in the UK!
Cases have been spiking sharply in the UK in recent weeks. It has already crossed 3,94,257 – at the time of writing this piece – and Prime Minister Boris Johnson has now even made wearing face masks mandatory in England. In fact, a second lockdown cannot be ruled out, and if at all it happens, it will not only lead to store closures, but also in all likelihood impact the psyche of consumers.
And even if lockdown doesn’t happen, concerns over health are still very high. Almost one-third of shoppers (32 per cent) have said they want to avoid large crowds, with 73 per cent of UK consumers saying they would prefer buying products online during the peak holiday seasons. But the crux of the matter is that when the psyche is down, there is no spending at all. Christmas spending will be surely hit this time in the UK.
It’s tough in the US too!
According to the US-based e-commerce firm eBay, the financial insecurity could lead to shoppers making more thoughtful purchases this Christmas. 37 per cent of those surveyed stated that inconsistent income or financial security was a major factor that will influence what they decide to buy or how much they spend on gifts in the run up to Christmas.
In fact, with the expiry of US $ 600 per week unemployment boost on 31 July 2020, the unemployment benefits have slumped by over 65 per cent for the average American. Though Democrats and Republicans have been at impasse over further extending or substituting the scheme, there’s a feeling that slump could be even more.
It is important to note here that the Americans had started receiving the US $ 600 per week benefit as a part of Government’s federal coronavirus relief law. The fall in benefits may vary among different US states. With over 118,000 Americans losing the benefit, not many would be in a mood or financial position to shop for Christmas this year.
Notably, according to the rating firm Fitch Ratings Inc., several chains in hard-hit discretionary categories, like apparels, still see sales go down by 5-10 per cent during the holiday shopping season from what it was in 2019. Fitch is one of the three nationally recognised statistical rating organisations (NRSRO) designated by the US Securities and Exchange Commission in 1975.
As per Deloitte, there could be two possible scenarios: a steady year-over-year sales (0 to 1 per cent) or a more significant surge (2.5 to 3.5 per cent). In the case of first scenario, shoppers would be anxious due to the expiry of unemployment benefit that we spoke about above, uncertainty over when schools would reopen, and importantly, due to insecurity about their jobs. In such a situation, the focus will be on saving more and spending less. The second scenario will happen wherein shoppers would still be confident of vaccine coming out soon, health situation improving, and Government working for the welfare of the people – consumers, in such cases, may spend the money saved on Christmas, though many still feel that is less probable. As of 24 September 2020, over 6.8 million COVID-19 cases have been confirmed by the World Health Organisation (WHO) in the US, and lots of cases, are reportedly, still coming from many states.
In Australia too, 37% plan to spend less this time
As per the data from Finder’s Consumer Sentiment Tracker, 74 per cent of Australians are stressed about their financial conditions. While 51 per cent depend on their current savings for just 2 months or less if they lost their job, around 30 per cent are worried if they would be able to afford daily expenses once the Government help comes to an end.
Now such a psyche, under any circumstance, is not conducive for anyone to enjoy their holidays – forget going out for Christmas shopping.
In another survey by Finder, it is highlighted that 37 per cent of Australians in the age group of over 18 intend to spend less on this year’s Christmas. While in 2019, the average festive spend was US $ 969, it is expected to come down this year to US $ 659 – a drop by a worrying US $ 310.
For retailers, optimism is the key…
Rakuten believes in case there are more restrictions, there isn’t much to worry for the retail sector, as 51 per cent have still said they may not decrease the spending. Despite COVID-19 crisis and a lot of uncertainty around where the world is heading, 54 per cent UK shoppers have said they will not bring down their expenditures in the first half of 2021 too, which will also include Valentine’s Day – always a big hit among youth.
Having said this, there is not an iota of doubt that shoppers across the globe are still prioritising who they are buying the products for and what they plan to buy. Besides, sales and discounts will be the most influential factor (47 per cent) driving Christmas purchases in many countries this year. For retailers, cashback and rewards will continue to be an important tool to lure shoppers to invest.
Prime Day is not far and in a matter of few weeks, one will get a clear indication which direction Christmas shopping is heading to. More on this, Suzin Wold, SVP Marketing, Bazaarvoice, says, “There’s no doubt this Christmas period will be unlike any other, with more online shopping than ever. Retailers must have a holiday-specific plan that gives consumers the confidence to purchase from them. It’s vital that brands ensure their websites offer a seamless shopping experience and make it easy for customers to find the answers they seek through Q&A, reviews and brand response to maximise revenue opportunities.
Yes, some retail bigwigs like Nordstrom and Gap are still bearing the burden of the recent Q2 losses, but then others like Walmart and Target have seen some of their best sales performances in recent times. So nothing is lost! There will definitely be a big reduction in spending this Christmas, but then as Christopher Reeve once said, ‘Once you choose hope, anything’s possible.
Till then, Merry Christmas!