Holiday spending set to increase amid rising prices

The 2020 holiday season was anything but ordinary. People spent less, travelled less, and worked more, saving their resources for when things returned to normal. But 2021 doesn't seem to be that year. While rising vaccination rates have eased restrictions in many places, pandemic-related concerns are impacting how people plan to celebrate the holiday season. To better understand these perspectives, the IBM Institute for Business Value (IBV) surveyed more than 13,000 adults in 9 countries (Brazil, Canada, France, Germany, India, Mexico, Spain, the United Kingdom, and the United States).

Amid the ongoing Covid-19 pandemic, the year-end holiday gifting ritual has remained a constant amongst Indian shoppers. However, consumers' approach towards traditional gifting has significantly shifted, with 68 per cent of surveyed shoppers willing to purchase gift cards that give back to causes and 91 per cent intending to send gifts to people who've experienced hardships.

The supply chain disruptions that started early in the pandemic have not yet subsided - and holiday shoppers see the writing on the wall. To increase their chances of getting everything on their wish lists, more than 1 in 4 (27 per cent) global consumers started shopping in September or earlier. And, compared to last year, twice as many plan to start in October (16 per cent). This means just under half (44 per cent) of consumers plan to jumpstart holiday shopping before November, weeks earlier than the traditional "Black Friday" start date in the US.

While holiday shopping budgets are still 13 per cent lower than they were in 2019, they did increase 30 per cent year over year. The highest budget jumps were in the Middle (+37 per cent) and Mid-High (+35 per cent) income groups, across India (+42 per cent), and among Millennials (+36 per cent). In addition, 87 per cent of consumers say they will shop for the holidays this year, up from 81 per cent in 2020.

The Indians surveyed are expected to spend 89 per cent of their holiday gifting budget on gift cards, with fashion and health and beauty being the most popular gift card categories. Additionally, 84 per cent of Indian shoppers surveyed said they do not want to deal with the hassle of returns or exchange of gifts. Interestingly, 62 per cent acknowledged that they receive at least one bad gift every year.

This changing perspective towards gifting presents a new opportunity for retailers to connect with their consumers, as both retailers and shoppers seek newer ways to navigate the challenges that the 2021 year-end holiday season has to present. The report also revealed that almost 96 per cent of Indian respondents want to gift digitally in the upcoming holiday season.

"In India, year-end gifting has become a big trend as it is an occasion to gift friends and family. The past year, we've seen a growing preference for gift cards among Indian shoppers owing to convenience, choice, and safety. Our research reveals that consumers are planning to spend more money on buying gifts this year than they did in 2020. However, consumers' preferences and priorities have notably changed. This shift has posed unique challenges for retailers and businesses to engage and delight customers. Year-end 2021 opens new windows for retailers to align their strategy to meet the expectations of shoppers," said Head of Global Marketing and Corporate Brand of Blackhawk Network, Theresa McEndree.

According to Blackhawk Network, a branded payments provider, 2021 Global Holiday Shopping Forecast report, the digital shift is here to stay this year-end holiday season. The acceleration of all things digital has made Indians turn to digital and contactless payments, digital wallets, digital gift cards, and QR codes as the pandemic reshaped consumer behaviour. India has emerged as a forerunner in mobile commerce adoption in comparison to its global counterparts.

This digital shift is expected to continue in the upcoming holiday season as Indian shoppers plan to use mobile wallets to pay for holiday gifts. A total of 94 per cent of surveyed Indian Gen Zers are more likely to find digital gift cards appropriate, further reaffirming the digital shift headed by the younger generation.

"This year's holiday season will be more expensive for consumers than 2020, perhaps 30 per cent more as some predict, but despite that, people are still shopping and spending," says Jonathan Silver, CEO and founder of Affinity Solutions, which tracks credit and debit card data. That's a good sign of a strong economy as we move into the new year.