7 ways COVID-19 has changed holiday shopping

November 6, 2020 9:00 AM

Last year, Americans spent about $730 billion on holiday purchases during November and December, which was a 4% increase over 2018 sales, according to the National Retail Federation (NRF). Online and other remote sales amounted to over $167 billion, or about 23% of the total retail sales. During the rest of the year online sales typically account for about 10-11% of retail sales, according to the U.S. Census, but recently have been tracking at 16% in the second quarter of 2020 due to the COVID-19 pandemic.

And it's not just payment habits that are changing, but the very nature of what people are willing to buy one another. Coinstar’s Annual Holiday Survey found that the among the most popular gifts to fill this year’s Christmas holiday stockings will be hand sanitizer (40%), face masks (38%), and disinfectant wipes (23%).

Going into the year-end holiday season, most shoppers are cautious about spending money they don’t have.

High unemployment rates, past due bills, poor federal and state coordination on enhanced unemployment insurance and a March CARES Act stimulus that has already been spent leave little extra money for surplus spending over the next few weeks.

According to a DailyPay Holiday Survey conducted September 30-October 1 by The Harris Poll, 70% of U.S. adults are struggling to pay bills. Additionally, one third (36%) of those employed reported that they rely on financial assistance programs from their employers for financial guidance and advice. About half (47%) of those surveyed stated that they were taking steps just to make ends meet, including 22% working more hours and another 18% taking on seasonal jobs.

In a separate DailyPay survey, one quarter (27%) of workers earning less than $40,000 were always or very often running out of money between pay periods, and 13% of those earning between $40,000-$60,000 were experiencing the same financial shortfall. It’s hard to imagine buying gifts or decorations if just paying daily bills is a struggle.

The day after Thanksgiving, also known as Black Friday, has traditionally been when retailers launch massive sales in an effort to lure consumers to their stores for their holiday shopping. And based on data from a Piplsay Black Friday 2020 Survey, just over half (52%) of adults are excited about Black Friday shopping this year. Despite the challenges, Black Friday has continued to be a strong draw for consumers.

According to Fiserv’s Black Friday 2019 SpendTrend Holiday Snapshot Report, last year’s Black Friday saw sales at brick-and-mortar stores grow by 4.2% compared to 2018’s sales volume. The five most active shopping cities that year were New York, Los Angeles, Chicago, Philadelphia and Las Vegas.

The Piplsay data found that at least half of consumers still want to shop on Black Friday despite COVID-19 concerns of being around other people, as the daily and weekly virus infection rates reach all-time highs.

Among those who plan to shop on Black Friday, more than one third (37%) said their shopping budget for the event would be less (20%) or significantly less (17%), based on data from a Piplsay Black Friday 2020 Survey. Another 28% stated that their Black Friday shopping budget would be the same as last year, while 20% said that they would increase their budget.

Probably most telling of the Piplsay data is the high number of respondents who are still unsure about their Black Friday budgets — 15%. This is an indication of a large number of consumers taking a wait-and-see approach as to how the economy is treating them, just up to the time when they embark on Black Friday shopping.

For those who plan to shop Black Friday, electronics (mobile phones, computers, gaming and music) is the top category where consumers are most looking forward to deals, at 28%, followed by home appliances and smart speakers, at 16%. The final categories rounding out the top five include clothing and fashion (15%), toys and games (13%) and home and kitchen (9%).

Holiday spending is expected to fall this year, given the dampened mood caused by the pandemic and resulting recession and job losses.

According to the 2020 Holiday Survey from the National Retail Federation (NRF), consumers plan to spend about $998 on gifts, holiday items such as decorations and food, and additional "non-gift" purchases for themselves and their families. This is roughly a 5% decrease from 2019’s $1,048 figure and about 1% below 2018’s $1,008 spend level.

The NRF survey found that the bulk of the spending will be on gifts at $650, followed by $230 on food and decorations and then $117 on non-gift items. It’s the last spend category of non-gifts that will take the biggest hit this year, as gifts will fall by just $9, food and decorations will track closely to 2019’s level.

Another indication of the somber holiday mood, which will impact spending, is that fact that fewer people plan to travel for the holidays, and those that do will stay closer to home. A recent Travelocity poll found that almost 60% of Americans are not traveling this holiday to see family or friends, and that nearly a third stated that they won’t celebrate the holidays at all.

Among those in the Travelocity survey who stated that they will travel during the holidays, 80% said that they would drive and just 20% said they would fly. Two thirds of holiday travelers plan to go 250 miles or less this season.

Online shopping is expected to rise to new levels this holiday season, with 71% of consumers reporting that they plan to digitally shop for gifts and other items, up from 51% in 2019. According to a Creditcards.com Holiday Shopping Poll, almost three quarters (74%) of millennials will use the online channel this year for holiday shopping, along with 70% of Gen Xers and 70% of boomers. That translates to a roughly 40% increase in digital shopping penetration overall and in each age category.

“While COVID-19 has clearly accelerated the shift to online shopping, it’s hardly the only reason,” said Ted Rossman, industry analyst at Creditcards.com. “Shoppers are also gravitating to e-commerce because of evergreen benefits such as convenience, lower prices and better selection. I think this trend is here to stay.”

Rossman’s comments resonate with many other payment categories that have been jolted by COVID-19, such as contactless cards and mobile wallets. Further, once a change in payments habit has been adopted, it’s difficult to go back.

The most vulnerable population to COVID-19 — the elderly — is the least concerned about avoiding human interactions when it comes to choosing not to shop in-stores. For them it’s all about convenience.

According to a Creditcards.com Holiday Shopping Poll, the top reasons for consumers wanting to shop online instead of in stores was “convenience” at 69%, followed by “wanting to avoid human interaction” at 52%, then “better deals/prices” at 46% and finally a “wider product selection/inventory” at 44%.

The silent generation, aged 75 and older, were the least likely to state avoiding human interaction was an important reason for them to stay away from stores. In contrast, Gen Z, aged 18-23, were the most likely to state that skipping in-store shopping was due to the interest in avoiding human contact.

In reality, it’s all about convenience across all ages, with the silent generation reporting at 83% that they are avoiding stores and shopping online due to the convenience.

“Shoppers can play it to their advantage by utilizing online shopping portals, price comparison sites and other discounting strategies,” said Rossman. “I also think the hybrid approach of ordering online and picking up at the store will have legs even beyond the pandemic.”

The shopping season has already started in full force and will be practically over by the end of November.

A holiday study by Tremor Video in partnership with Unruly conducted in September 2020 found that 10% of shoppers had conducted the bulk of their holiday shopping before October, and another 15% expected to complete it by Halloween. Half of those surveyed expected to complete the bulk of their shopping in November, with a significant portion being conducted around the period of Black Friday through Cyber Monday.