With the holidays quickly approaching, retailers are busy preparing for the biggest shopping season of the year. The National Retail Federation (NRF) predicts this holiday shopping season will be especially busy. The NRF recently “revised [its] annual forecast for 2021, anticipating that retail sales will now grow between 10.5 percent and 13.5 percent to more than $4.44 trillion this year as the economy accelerates its pace of recovery.”

Here are the major trends that will impact the 2021 holiday shopping season.

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INCREASED CONSUMER SPENDING BY HIGH INCOME HOUSEHOLDS

The average consumer is expected to spend $1,463 on “gifts and other holiday items this year.” That amount is up 5% from 2020. Almost 75% of consumers are planning to “spend more or significantly more” during this holiday shopping season. Consumers cite “higher prices” as a top reason for their increased shopping budgets. Overall, 68% of Americans expect to experience higher prices while shopping. With inflationary pressures mounting, this holiday season highlights a growing divide between high and low income households.

Growth in most major gift categories is being driven by wealthier households since they are in a better position to weather increased prices; meanwhile, many lower-income families are actively contemplating spending less on the holidays. “Of those planning to skip shopping, 65% are from low-income households.” More importantly, 50% of families planning to change their holiday spending habits cite increasing food costs as the primary reason. That number is up a staggering 19% percentage points from 2020.

SUSTAINED DEMAND FOR ALTERNATIVE SHOPPING METHODS

Consumer behavior has been permanently reshaped by the global pandemic. Retailers have seen a sustained demand for new alternative shopping methods like BOPIS and curbside pickup. 33% of consumers listed BOPIS/curbside as their preferred method of holiday shopping this year. For brick + mortar holiday shoppers, top destinations will continue to be major department stores and national chains, but roughly “one-quarter of consumers also plan to shop specifically at a local or small business.” Brick + Mortar sales will account for roughly 30% of the average consumer’s holiday spending in 2021.

While in-person has made a significant recovery this year, e-commerce will continue to be the dominant method for holiday shoppers. 55% of consumers plan to purchase holiday items online this year. In response to this trend, roughly 40% of retail executives “expect double-digit online channel growth” this year.

THE GROWTH OF THE HEALTH, CLOTHING, AND ELECTRONIC GIFTS

Clothing and electronic gifts are expected to be massive holiday categories. Top electronic gifts this year will include highly elusive items like Sony’s PS5, which has experienced severe shortages due to supply chain issues. Top 2021 holiday clothing segments will include athleisure, which has recently seen a dramatic rise in popularity as companies across the country permanently settle into remote or hybrid work schedules, which has decreased the demand for professional office clothing. In both cases, the growth in these expensive categories is largely being driven by high-income households who can afford price markups. According to a recent industry report, clothing and electronic gifts alone will account for 36% of holiday gift budgets in 2021.

Stemming from a newfound health consciousness brought on by the pandemic, health and wellness is another gift category experiencing tremendous growth. This is a wide-ranging and diverse category includes products that help increase individual “health, fitness, nutrition, appearance, sleep, and mindfulness.” The average consumer is expected to spend $156 on health-related gifts this year, which is a 22% increase from last year. In total, 55% of consumers plan to purchase gifts in the category this holiday shopping season.

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SUPPLY CHAIN ISSUES

Unsurprisingly, the biggest issue facing retailers this holiday shopping season is supply chain. Shortages are being felt across the country in countless industries. In response to widespread concerns over stock-outs, 49% of Americans are predicted to start shopping for holiday items early.

Some retail experts say the resulting shortages might actually inspire more creativity in gift-giving this year. Etsy Trend Expert, Dayna Isom Johnson, thinks that “this Christmas, customers will be looking to shop with intention. I expect to see shoppers opting for extra thoughtful gifts that create long-lasting memories – like handsewn quilts, custom cocktail cards, and personalised chess sets”.  

The issue has actually served to educate the broader public on product sourcing methods. As a result, more consumers are also interested in locally sourced and/or sustainable gifts for family and friends. 63% of consumers say they prefer shopping at “retailers that adopt sustainable practices” 42% of consumers “prefer shopping at local retailers more than national retail chains.”

The supply chain is also effecting retailers’ ability to entice customers with discounts. 60% of “consumers say getting a great deal is the top attribute for retailer selection.” Historically, the holiday season has been an incredible opportunity to snag great deals on a wide range of products, but many experts say companies this year will be offering fewer deep discounts because inventories remain so low. “Companies have less of a reason to put items on sale, as supply chain snafus tighten inventories. Instead, promotions will likely be strategically placed on goods that retailers have in excess stock. And that might not be something on top of your holiday wish list.”

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The CASTUS Team has a cumulative 40+ years of experience in retail. To keep up with holiday shopping season trends in the retail industry, subscribe to our newsletter.