Following the money on Valentine’s Day: 5 key insights

February 13, 2019 9:23 AM

While consumer spending on Valentine’s Day doesn’t approach that of the larger holidays, certain retailers — such as jewelers and florists — benefit more than others, while restaurants, bars and other dining establishments tend to see significantly more traffic for those couples who want an evening out. Increasingly, it’s also a special day for pets.

However, it’s a holiday that is not intensely celebrated outside the U.S. For example, an Insights West study from 2018 found that four in five Canadians in a relationship dismiss the holiday as a “commercial enterprise,” yet three-quarters of them had planned to celebrate it anyway.

Fewer U.S. consumers are expected to celebrate Valentine’s Day this year, but those who do are spending more. According to a 2019 survey of 7,384 U.S. adults by the National Retail Federation, those polled reported that they would spend $162 this year, up 13 percent from the $144 spent in 2018. It also tops the record spend level set in 2016 of $147 and continues an upward trend making the holiday more expensive.

While increasing spending is good for retailers, only 51 percent of adults plan to celebrate Valentine’s Day this year, down from 55 percent in 2018. Almost every year has seen flat to declining consumer activity for the holiday. The peak participation number recorded by the NRF was 63 percent in 2007. Further compounding the issue is that the holiday focuses on couples who are married or dating, which excludes a large portion of the population.

Valentine’s Day is also battling a growing generational challenge: millennials. According to the U.S. Census Bureau, Americans are putting off marriage until later life, when they’ve established themselves in their careers and are more financially stable. The average marriage age in 2018 was 29.8 for men and 27.8 for women. Compare this to 26.1 for men and 23.9 for women in 1990 and 22.8 for men and 20.3 for women in 1950. Marrying later means dating later in life, so the pool of consumers celebrating Valentine’s Day shrinks.

When it comes to paying for Valentine’s Day gifts, dinner out on the town and just about anything else to celebrate, consumers are increasingly reaching for plastic.

Based on two different Valentine’s Day surveys conducted 10 years apart by Discover Financial Services, wherein consumers listed the different payment methods they would use for Valentine’s expenditures, consumers reported moving away from using cash. In 2016, 44 percent of consumers said they would use cash to pay for Valentine gifts, down from 61 percent in 2006. Taking the throne from cash in 2016 were credit cards, rising to 49 percent usage, up from 39 percent in 2006.

In the 10-year span, debit card use had also grown at the expense of cash, going from 38 percent in 2006 to 43 percent in 2016. Interestingly making the list in 2016 were credit card rewards at 10 percent. Since many credit cards offer the ability to redeem rewards for gift cards which can be used at dining establishments and clothing retailers, it’s no surprise that rewards have finally made the list of favored payment methods.

Additionally, credit card companies often have exclusive deals with merchants to boost points for dollars spent using their card at that merchant as well as discounts. For example, American Express is offering its cardholders who spend $50 at Teleflora a $15 cash-back reward.

U.S. consumers will spend a record $20.7 billion on Valentine’s Day gifts and entertainment this year, up 6 percent from the $19.6 billion spent in 2018 according to the NRF. The 2019 spending is also expected to break the previous record of $19.7 billion, which was set in 2016 when the average spend per person was $147. Not to be left out of the Valentine’s Day celebration are pets, which are expected to rake in $886 million in gifts.

Consumers will make purchases on a variety of goods and services with no single category dominating spending, yet jewelry and dining establishments top the list with a combined 36 percent share of all purchase volume.

Roughly $3.9 billion will be spent on jewelry, $3.5 billion on the dinner date, $2.1 billion on clothing, $1.8 billion on candy, $1.3 billion on gift cards and $933 million on greeting cards. To illustrate the size of the Valentine’s holiday, the NRF reports that Americans spent $2.6 billion on candy and $400 million on greeting cards for Halloween in 2018. Also, the NRF reported that consumers had planned to spend a record of $18.2 billion on Easter celebrations in 2018, making Valentine’s a bigger holiday.

Valentine’s Day in the U.K. is a much more muted celebration in comparison to U.S. activities, and men tend to spend more than women for the event. Based on a survey from U.K.-based online insurance aggregator Bobatoo.co.uk, of almost 3,000 consumers in 2018, over half of women (51.9 percent) expected to spend less than £10 (about US$ 13) for Valentine’s Day compared with just 33.1 percent of men who had planned to spend that amount. On the more expensive side of things, 13.4 percent of men and 8.7 percent of women had planned to spend more than £50 (about US$ 65) on Valentine’s gifts and dinners.

It should be noted that there are significant regional differences in what people had planned to spend, with Londoners being the stingiest. The survey found that 48.6 percent of Londoners planned to spend less than £10 (about US$ 13) for Valentine’s Day, compared with 37.3 percent of Scots, 36.4 percent of Welsh and 28 percent of Northern Irish. The biggest spenders, those who had planned to spend more than £50 (about US$ 65), were the Northern Irish coming in at 24 percent. The lowest number of people spending above the £50 (US$ 65) threshold were those living in Greater London, at 9 percent.

Thirty-five percent of consumers expect to shop at a department store for Valentine’s gifts, while 32 percent will shop at a discount store and 27 percent will shop online. according to the NRF.

While many retailers will benefit from an omnichannel sales approach to Valentine’s Day, the biggest winner in e-commerce is likely to be Amazon, based on its dominance in digital commerce. A report from eMarketer posted on CNBC in 2018 stated that Amazon was slated to expand its U.S. e-commerce market share to 50 percent, up from 44 percent in 2017. So effectively one out of every two dollars spent on e-commerce purchases for Valentine’s Day is likely to make its way to Amazon.

According to 800florals.com, more than 100 million roses are sold on Valentine’s Day and it’s the top sales day for cut flowers. Men make 64 percent of floral purchases, with women making the remaining 36 percent. When it comes to who receives the flowers, there are significant differences based on the gender of the person buying. Men give 84 percent of their floral purchases to a wife or significant other and only 5 percent to their mothers. Meanwhile, women give 24 percent of their floral purchases to their mother, 19 percent a husband/significant other, 13 percent to a daughter and 12 percent to a friend.