Dire Forecast: KPMG Sees Holiday Spending Down 18%

David Moin
·5 min read

Not all the Christmas gifts you expected will be under the tree this year.

At least, that’s according to a holiday shopping report from KPMG LLP, indicating that U.S. consumers plan to spend 18 percent less this year on gifts and buy fewer of them.

Among the more dire findings in the report, released Wednesday, 41 percent of consumers said they are not planning on going to Black Friday sales in person, meaning foot traffic at stores will be noticeably anemic.

“Faced with considerable uncertainty and reduced household income, consumers are spending less this holiday season, focusing on essential purchases for the home and gifts for close family members,” said Scott Rankin, national advisory leader, consumer and retail, KPMG LLP, which is the U.S. arm of KPMG. “Retail customers are forming new shopping habits, which are expected to continue into 2021 and beyond.”

KPMG, which provides audit, tax and advisory services, polled 1,000 U.S. consumers in September on their holiday shopping plans.

Average spending per person this holiday season is expected to decrease to $515 from $627 last year, with 63 percent of U.S. consumers shopping either in October (25 percent) or November (38 percent). No doubt, that’s because many retailers started promoting holiday gifts four to six weeks earlier than a year ago. In addition, Amazon rescheduled Prime Day from July to Oct. 13 to 14 due to the pandemic, inducing other major retailers including Walmart Inc.; Kohl’s Corp.; J.C. Penney Co. Inc.; Bed, Bath & Beyond, and Target Corp. to unleash their own holiday price promotions.

KPMG’s findings seem at odds with rosier holiday forecasts and surveys which have predicted a wide range of flat to midsingle-digit increases holiday retail sales. Deloitte, for example, predicted that holiday sales could play out in either a 0-to-1 percent increase or a more significant 2.5-to-3.5 percent gain.

Customer Growth Partners was far more bullish, predicting a 5.6 percent increase to $749 billion in the November-to-December period from $707 billion a year earlier. Craig Johnson, president of CGP, cited rebounding retail sales, “resilient“ shoppers, a 5.4 percent growth in disposable income, low consumer debt, lower gas prices and employment growth. Digital and direct-to-consumer sales will amount to $189 billion, representing more than 64 percent of the aggregate increase in holiday sales, he added.

And Amazon Prime Day surpassed $3.5 billion in sales from third-party sellers, marking an increase of more than 60 percent from last year’s event, the web behemoth disclosed.

Another positive outlook came Wednesday from the National Retail Federation and Prosper Insights & Analytics’ annual holiday survey. It indicated that consumers plan to spend $997.79 on gifts, holiday items such as decorations, food and additional “nongift” purchases for themselves and their families.

“Consumers have demonstrated their resilience and adaptability throughout these extraordinary times,” said NRF president and chief executive officer Matthew Shay. “Looking ahead to the holiday season, retailers will ensure that their stores are safe for both customers and employees as we all prepare to celebrate family and friends during this special time of the year.”

While overall spending by shoppers in these categories is down by about $50 from last year, $45 of the decrease comes from consumers’ hesitation to use seasonal sales and promotions to buy nongift purchases for themselves and their families. Even still, consumer spending on gifts is closer to on par with last year, decreasing by only about $8, while per-person spending on other holiday items like decorations is actually up slightly.

The NRF said 42 percent of American consumers plan to start their holiday shopping by the end of October and another 41 percent in November.

According to KPMG, as much as 12 percent of American consumers started shopping for gifts as early as August. This year, consumers are motivated to shop earlier for three primary reasons: to social distance due to the pandemic and avoid bigger crowds later in the season; worries over stock outages and not being able to get the gifts they want to buy, and concerns that gifts ordered online will take longer to be delivered due to the ongoing shift to shopping the web.

Most of the nation’s gift-givers — 60 percent — will be giving gifts to as many people as they did last year, while 36 percent will give to fewer people, KPMG said in its survey, which was ominously entitled, “Season of Reckoning: 2020 COVID-19 Consumer Pulse/Holiday Report.”

Black Friday seems far less significant to consumers this year, as KPMG in its survey indicates only 41 percent consider the day after Thanksgiving as their most important shopping event, compared with Cyber Monday or Prime Day.

“In-store retailers hoping for a holiday reprieve may be disappointed,” added Rankin. “The migration to online continues across nearly all retail segments.”

KPMG cited the severe economic impact of COVID-19, indicating:

• Thirty-six percent of consumers claimed a negative impact to income and an average reduction of 34 percent.

• Consumers have become more pessimistic about the length of time it will take for their spending to return to pre-COVID-19 levels.

• Nineteen percent of consumers have become more mindful of their own spending habits.

• Anticipation of reduced spending across discretionary categories like entertainment, restaurants and apparel will be less pronounced in December than it was in April.

• Holiday gift spend on family such as parents, children and significant others is expected to experience the smallest decline (2 to 5 percent); holiday gift spend on friends, coworkers, and school children is expected to experience the largest decline at more than 20 percent.

• Categories where respondents expect the greatest declines are in gift cards (14 percent decline), clothing and accessories (27 percent decline), and electronics (16 percent decline).

• All product categories are expected to be bought more from online platforms in comparison to last year. For example, there may be a 25 percent increase in online spending on clothing and accessories, a 19 percent increase on electronics and a 14 percent increase on computer and hardware.

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