Yahoo Finance

While inflation remains a concern, shoppers are feeling more optimistic and plan to increase their spending by 8% year over year, according to Deloitte's annual holiday survey. Here with more insights into this spending season, we've got Brian McCarthy. He's the principal of Retail Strategy and Transformation at Deloitte. Great to have you here with us. All right. So just take us into the year-over-year growth first that you're anticipating, even with some of the inflationary and price pressures that consumers have cited as well.

Yeah, Brad, thanks very much for having me. Um, so really we're seeing after this year of frugality and restraint, consumers are feeling a bit more optimistic about the economy. They're planning to have a very festive holiday season. Um, this 8% year-over-year increase means we're going to be seeing a record high of $1,778 of spending. Um, the reason holiday shoppers are going to spend higher this year is driven primarily through a rosier economic outlook. We're seeing about a 9 percentage point increase in positivity towards the future of the economy. Um, and then the perception of just higher prices is 70% of shoppers still believe their prices for gifts this year will be higher than last year. Uh, we also talk to retail executives, who also very optimistic about the upcoming season. 80% believe that they're going to see stronger sales both online and in store.

Brian, with all of this in mind, there's an interesting brand loyalty crisis that's been pointed out as well here. Consumers looking for for deals and not just going to go back to the same brand if they don't feel like they're getting a valuable purchase or getting valuable, uh, value from the dollars that they are spending. Walk us through that brand loyalty crisis and who it might impact the most.

Yeah, absolutely. Um, I mean, to your point, right, at the end of the day, consumers seek quality, they seek value, and they seek a variety when they go holiday shopping. And with the perception of higher price is still top of mind, consumers are really caught between trying to stretch their wallets and being festive. Um, and so this really means they're torn between seeking value and remaining loyal. They've actually indicated to us that they're really looking for deals this year. So two thirds are going to be willing to switch their brands if they find the prices are too high, and half of shoppers this year are even willing to switch to the retailers that they shop most frequently if they feel the price are too high. Uh, again, when we talked to retail executives, we're also seeing that they believe private label sales are going to grow faster than national brand sales this year. So if you're a retailer, you really want to make sure you're focused on providing that good quality, good value price point, um, and a variety of selection that's, you know, in line with what shoppers are looking for this year.

What what are some of the categories that you expect to make to remain hot or to year over year, at least show some improvement, and then categories that might underperform?

Yep. Uh, so some of these won't be that surprising, right? Clothing and accessories is the largest spend category we see. Uh, though the largest growth category we're seeing this year is going to be within food and beverage. Uh, part of this we think is because through the, you know, the pandemic years, people have really loaded up on a lot of the the materials, electronics, gifts that they really wanted at home. And so now there's an opportunity to lean more into experiences and give people food and things that enable them to share the holiday season with others. Um, the biggest decrease category we're seeing this year is gift cards. Um, we're seeing about a 12% decrease in gift card spending this year, and we believe, again, the primary reasons for this, partly due to gift cards are very strong category last year, and people don't always like to give that two years in a row. Uh, another is with the inflationary environment, the buying power of that gift card might not be as much as it used to. So that $50 gift card isn't as meaningful of a gift as before we saw as much inflation. Um, and the last is this growth of wishlists. Uh, we're seeing about 50% of shoppers this year indicating the use of wishlists. Um, this makes it easier to share with others things that are top of mind for you. So that aunt or uncle who tends to give you that gift card may be now more confident and able to get you something you actually wanted.

You know, Brian, just lastly while we have you here, uh, one of my favorite kind of viral trends is shoppers who go into a store, and they'll pull back like a sale sign, and there will still be the old sticker behind it or the old price behind it, and they'll say, "You're actually not getting a deal. They're just putting some fresh creative, some fresh kind of, um, you know, fonts on the the ultimate price tag there." And so how can people know when they are actually getting a deal and making sure that, you know, if there's a percentage threshold, they should be looking for to understand when they're actually kind of going into a store, shopping online, and there's been a significant markdown on a price.

So, I guess you need to be clever in that instance, right? Like shoppers are encouraged to explore multiple retailers to look for a competitive deal or a price point that they think is going to work for them. Um, I have found AI is a really interesting thing to start asking for where you may find particular products or promotional deals so you can use technology to be a bit more savvy that way. But I really think at the end of the day, it's an individual decision when you know there's a certain product that you're looking for, uh, what is the value to you that you're looking to pay for for that product? And I think that value is not just the price point, but there's also, you know, value for time. Do you have a seamless smooth experience? Is the checkout process easy? Uh, do you have an enjoyable time if you're shopping in store or smooth one if you're shopping digitally? I think that all matters towards a meaningful value experience.

Great point. Brian McCarthy, who's the Deloitte principal of retail strategy and transformation joining us here today on Yahoo Finance. Brian, thanks so much for the time. Appreciate it.

Yeah, thanks, Brad.