PwC: Engage Key Consumer Segments To Drive Holidays

The majority of consumers will likely spend the same or slightly more this holiday season compared to last year, PricewaterhouseCoopers International stated. Yet, in its "2015 Holiday Outlook," the company emphasized that an important opportunity that retailers should consider is relationship building in the year-end promotional period.

Those retailers who strategically engage Millennial shoppers and "selectionists," PwC stated, have an advantage if they can provide them with compelling brands, experiences and innovative products. Retailers serving consumers PwC identifies as "survivalists," with household incomes less than $50,000 per year, may make the best of the holidays by placing an emphasis on value through strategic pricing, discounts and promotions.

PwC noted that survivalists continue to face a challenging economic environment and have indicated that they will be spending less as the year ends. Millennials, a term now covering 75 million consumers, plan to spend a larger share of their holiday dollars on experience-related purchases, while selectionists, with household incomes of more than $50,000 annually, look for distinctive brands and innovative products.

Steven Barr, PwC U.S. retail and consumer leader, stated that the outlook pointed to consumers spending an average of "$1,018 during the 2015 holiday shopping season."

PwC's holiday outlook highlights key trends:

• Consumers are cautiously optimistic this holiday season with 53% indicating they will likely spend about the same as last year and 32% indicating they will likely spend more than last year. Of all age groups, young Millennials ages 18 to 24 seem the most optimistic.
• Survivalists, who have felt little benefit from the improving economy, will likely spend less, want the best deals and have a preference for gift cards. Selectionists, planning to purchase a bit more online this year, are more likely than others to buy travel, entertainment and the latest in personal electronics with a focus on health and wellness, athletic, leisure and innovative products.
• Millennials, ages 18 to 34, could increase spending to $63 billion this holiday season, with 52% of the payout going to experience-related purchases such as travel and entertainment versus 39% for older shoppers.
• 90% of survivalists said that price is the number one factor influencing their holiday shopping decisions, while nearly 60% of selectionists indicated quality merchandise as the major draw for their holiday shopping.
• A significant majority of consumers, at 86%, will likely only shop brands they trust, with Millennials twice as likely to seek out brand leaders than are older shoppers, energized by the thrill of innovation. The brand awareness rating of up and coming Generation Z is high, at 80%, in categories that are important to them, including entertainment, computer, mobile, gaming and social media.
• Because they want to see, touch, and try merchandise, nearly 60% of consumers will likely shop in-store this holiday. Some previously online-only retailers have established a physical store presence as a result even as leading bricks and mortar operations improve their in-store experience to impress customers.
• 66% of retailers plan to increase their digital investment in the next 12 months and 77% expect a 16% increase in digital revenues this holiday season the year over last. PwC added that it anticipates that leaders in online shopping will likely experience 40% to 50% increase in digital revenues.
• Although retailers are investing in digital operations, mobile technology, advanced logistics and enhanced purchase methods such as buy online and pick up in-store, consumers draw the line at using their phones for payment, with 61% preferring to use a traditional payment methods such as cash, preferred by survivalists, credit card, preferred by selectionists, debit card, gift card or personal check.
• More than 40% of consumers said news of a security breach in the last 12 months would likely affect their holiday shopping at a particular retailer with Millennials, at 52% versus 38% for consumers on average, being most concerned.
• Based on consumer concerns, 70% of retailers and 60% of manufacturers are shoring up measures to address cyber security.
• In terms of online shopping attractions, 83% of consumers said standard free shipping would make them extremely likely to make a purchase while 67% reported that returning online purchases in-store is an appreciated benefit.
• Holiday shopping begins earlier, with 29% of shoppers completing their purchasing before the start of Black Friday week as compared with 26% during the period.

In an interesting note, Millennials ranked online lower on their list of preferred channels than department stores, mass merchandisers and specialty stores as compared to older shoppers. The result, said PwC, is in keeping with the Millennial thirst for experiences including the ability to see, touch and feel the merchandise.