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2022 Deloitte holiday survey

Increasing reliability and smoothing out the customer experience could be key to making the holiday season bright for the retail and travel industries

Tanya Ott: It’s been a year, hasn’t it? Inflation topped 8 per cent … the masks are largely down, even though COVID is still with us … and the holidays are just around the road and potential recession may be lurking around the corner.

How ya feeling?

If your answer is “a little bit nervous,” you’re not alone.

Josh Mather: Hey, I’m Josh Mather, [a] registered nurse who works in the operating room as a travel nurse.

Jenna Sanders: My name is Jenna Sanders and I’m from Peachtree City, Georgia and I’m a student that works in the restaurant industry.

John Dankosky: Hi. My name is John Dankosky. I live in Winstead, Connecticut, which is in the northwest corner of our tiny little state. I am the director of news and audio for the weekly public radio programme Science Friday, and I live with my wife and four cats and a bunch of bees here in a little country house.

Jan Thompson: Jan Thompson and I live in Birmingham, Alabama.

Jeffrey Schiffman: My name is Jeffrey Schiffman and I live in East Petersburg, Pennsylvania, which is in the heart of Pennsylvania Dutch country, in Lancaster County. I am a college professor.

Olivia Fulmore: I’m Olivia Fulmore. I’m in my early 20s. I’m trained as an economist and I work as a commercial associate at a major bank in Atlanta. 

Josh Mather: My wife and I did not have college degrees when our kids were born. I basically worked minimum-wage jobs and she stayed home to take care of the kids. I graduated nursing school in 2009, my wife in 2014. We have significant student loans and our two older children are in university, but they’re having to manage their own education payments themselves. We are now finally seeing the light at the end of the tunnel as certain loans and credit cards are nearing their payoff dates.

Jenna Sanders: I will be starting to buy gifts starting next week. The reason that I’m starting so early is mostly because I just have to go paycheck to paycheck and buy a couple of gifts for each person per paycheck in order to make sure that I can still afford things like gas and food and whatever else I could need at that very moment.

Olivia Fulmore: I went to go fill up my car yesterday and it was up to US$3.30 and I was like, “Oh, that's 20 cents higher than it was a week prior. I buy bell peppers every week. And so, I see inflation there because they’ve gone from maybe US$1 to a dollar and 29 cents each.”

John Dankosky: I don’t know. I don’t think about this stuff very much. Is that bad? I guess I just assume that when we have less money we’ll spend a little bit less and when we have a little bit more money we’ll either save more or you might spend a little bit more. But our life doesn’t really change having to do with the economy one way or the other.

Jeffrey Schiffman: Really, the biggest concern for me is what’s happening to my retirement accounts. That has taken a pretty big hit over the last, oh, I’d say maybe eight to nine months and that’s concerning for me because I’m thinking about retiring relatively soon and now that may push back my retirement by a little bit.

Jan Thompson: We’re not travelling, but we’re bringing all of the kids here. And we are also hosting my family for Christmas Eve. And that is an experience that you just have to experience, because if everybody shows up, it’s about 60 people. But everybody brings food and drink and all I have to do is clean the house.

Olivia Fulmore: I just came back from a major trip to Spain, so I’m not really planning on travelling anywhere soon. I think I might travel for the holidays a little bit, like go down to my parents’ house for Thanksgiving. And then also I’m not sure where Christmas is going to be held. I’m also going on a bachelorette party this weekend to the beach and to New Orleans the weekend after—I guess that actually is a lot of travelling. (laughs)

Tanya Ott: I’m Tanya Ott. This is the Press Room from Deloitte Insights. And today, we’re talking holiday shopping and travel. Mike Daher is a principal with Deloitte Consulting LLP and serves as the vice chair of [the] US Transportation, Hospitality & Services sector.

Mike Daher: And what that means is [that] I have the privilege of working with some of the best-known travel brands in the industry, across airlines, hotels, cruise and restaurants. And I’m an avid traveller myself.

Tanya Ott: My other guest is Deloitte’s Nick Handrinos, principal and vice chair of the Retail and Consumer Products practice in the US for Deloitte Consulting LLP.

Nick Handrinos: I used to be a retail buyer, so I actually used to be on the industry side. So, I used to select assortments, price them, promote them, advertise them and make sure our inventory positions were correct.

Tanya Ott: Nick and Mike’s team surveyed thousands of people across the US to get an idea of what they’re thinking about holiday shopping, travel and the like. It’s the 37th annual Holiday Shopping survey and when we caught up by phone recently, I asked Nick for the big picture, especially for companies hoping to get the attention of holiday shoppers.

Nick Handrinos: It’s a little bit different based on where you sit on the value chain. Essentially, if you’re a consumer-products company that’s making products, marketing them and selling them to retailers, you’re still working with a lot of supply chain volatility. You’re still working with a lot of cost volatility. You’re largely trying to manage your margins through pricing and you’re hoping to continue to stimulate consumers to want your products and what they offer.

If you’re a retailer who’s buying those, you’re trying to get your inventories right. And I think if you look at the last quarter or so, you’ll see that some very well-known retailers have been struggling with their inventory management control because of all that volatility I talked about. And essentially, as we go into the season, inflation continues to be a pretty big pressure item for the consumer and the shopper. If you do the old PxQ, price times quantity, we think quantity is going to go down a little bit because prices are going up, roughly arriving at the same total spend that shoppers will be outlaying for holiday [shopping].

The other thing we’re seeing is a bit more of an increase in spending on gift cards, such that they aren’t making a commitment to the price of a product but leaving that in the gift receiver’s hands to do. So those are the broad-based brushstrokes and issues that seem to be dominating the environment as I look at it.

Tanya Ott: Mike, when we move over to the experience for travel and other things like that, what [are] the broad strokes there?

Mike Daher: Well, I think it’s helpful to put this year’s holiday travel season in context to last year’s. Last year was the first holiday season where we had high levels of vaccine adoption. People were really ready to go out and celebrate the holidays with loved ones, so that was a really strong domestic travel season. It was constrained by international travel due to government regulations on COVID testing, which weren’t lifted until summertime.

What we’re seeing for this holiday season is a decline in consumers who are planning to travel. Last year was up at 42%. This year will be down to 31%. And most of that is driven by concerns around their economic situation. One of the bright spots, though, for this holiday season, will be international travel. We are expecting an uptick at 17% of travellers versus 10% last year.

Tanya Ott: I know that every year you survey Americans about what their plans are in terms of shopping, travel, those other things. And obviously, the economy is a big issue. Are you hearing specific things within that? Is it inflation? It’s costing them more to buy things at the store. Is it [that] they’re worried about a potential recession?

Nick Handrinos: We’re seeing four real themes emerge. One is that there are sacrifices that families are making in order to make sure their holiday still remains special and a priority. There is a tradeoff happening and so there’s going to be a reduction in spend in other areas to try to maintain, if you will, the holiday spirit, more holiday cheer. The shopping window timing looks a little more accelerated and shrinks the shopping window, so we think some purchasing is going to happen earlier. And with the inventories that I talked about earlier, there may be some silver lining, promotional discounting that could help offset inflation a little bit. We’re not sure how that’s going to play out exactly. But essentially shopping will be, I think, earlier than ever.

Another counterintuitive thing that we’re seeing in our data is that some of the lower-income segments of our shopper communities seem to be feeling more confident going into the holiday season. And you might ask yourself, why would that be? Everywhere you turn and look, it looks like it’s tough times ahead. We’ve peeled the onion back a little bit on this and the thinking is that a lot of those wage increases that have happened in the labour force are happening at the lower-income, entry-level job segments. And so, people are enjoying some wage growth there and we think that’s spurring some of their optimism. Those are some of the key themes that the data are suggestive of as we go into this season.

Tanya Ott: I want to follow up on that idea of how long the shopping window is, because this year you’re anticipating it’s going to be shorter than it has, say, last year. I talked with a number of people about their plans for the holidays and one in particular stood out to me. She’s a college student. She works a restaurant job right around minimum wage, maybe a little bit over. And she said her window’s going to get a lot larger because her money’s not going as far. And she’s going to have to spread out her gift-buying over a longer period of time in order to still be able to pay for food and rent and things like that. So set that next to the spending among lower-income shoppers increasing, you know, it seems a little a little counterintuitive.

Nick Handrinos: I’m sure there are individual examples that will challenge some of these themes. I think as we aggregated across, we were still surprised that the lower-income segment specifically in our data plans on spending 25% more than they did last year. Now, last year was a very, very tough year for that segment, so you’re talking about a low baseline to start from and then the wage inflation we’ve seen over the last year. That’s really what drives how we came to our conclusion on the low-income segment. In terms of the shopping window and whether you spread it or not, our data suggests that it’s going to be about one fewer week that shoppers will spend shopping. So that’s the window shrinkage I’m talking about and the fact that it’ll happen earlier.

You may have seen or noticed that Amazon offered a two-day Prime event that happened for their Prime membership to get out in front of things. We would still stand by that, but that doesn’t negate what any individual’s experience might be or how their happenstance may require them to shop across it. Thematically, however, I think the takeaway for retailers and consumer product companies is [that] there’s going to be an earlier and shorter window and you’ve got to pay attention to all segments. They’ll be in different spots psychologically [with] what they’re willing to do. The overall spend will largely remain constant year over year, but there’s going to be less purchasing of items, the volume is going to go down and you [will] probably see an uptick in gift cards.

Tanya Ott: Yeah, it looks like the volume is going to go down somewhat dramatically from what was at 16 gifts last year to nine gifts this year.

Nick Handrinos: That’s right.

Tanya Ott: What do you read into that? I mean, are they spending more on nine more higher-quality gifts or ...

Nick Handrinos: They are pulling back on nongift items—in our data—about 12% reduction in spending on that. And they’re largely flat, I’d say, on gifts and increasing on experiences.

Tanya Ott: So, Mike, experiences are up and I talked with a number of people about their holiday plans and it was basically like, “Yeah, we’re going to take a trip. We want to do something fun. We’re setting aside money for this specific thing and we’re not worried about exchanging sort of material things.”

Mike Daher: Right and that’s consistent throughout history with pandemics. People come out of the pandemic and spending time with loved ones becomes a priority. That’s no exception for this holiday season. Now, what we are seeing in the data [is] that for those who are choosing not to travel, their top reason is financial concerns. Folks who are on the lower end of the economic ladder aren’t travelling as much. Also, older Americans are choosing to stay home more this year than last, predominantly due to financial concerns, but also [due to ] still-lingering COVID concerns.

That’s having an impact on how people travel. We’re seeing a decline in road trips for this year, predominantly by those older generations and, likely [for] folks who in the past have chosen to drive, due to financial reasons. Younger travellers are still choosing to fly and extending their trips. It really started last year with this whole notion of hybrid work and what we call laptop-luggers, those folks who go on leisure trips and extend their travel days because they could work remotely. Nick and I grew up in an environment where [for] Thanksgiving week, we were working Monday through Wednesday and then the busiest travel day was the Wednesday before Thanksgiving. Now, with remote work, a lot of younger travellers are choosing, for example, to leave the weekend before Thanksgiving and work remotely Monday, Tuesday, possibly Wednesday, before the Thanksgiving holiday.

Tanya Ott: And of course, people may be travelling, but they might also just be travelling for events, concerts, sports, things like that.

Mike Daher: Certain concerts and events are definitely of interest this year. Spending on certain types of bigger leisure holidays is not as high as it was last year. But ultimately what people are looking for is quality time to connect with loved ones. Sweaters are nice, as I say, but I think the warm embrace of a loved one during the holiday season coming out of the pandemic has definitely been a priority for many.

And we also have to remember that this past summer, there were quite a few service disruptions and the holiday season is a little bit different of a leisure-travel market. When we’re talking about, say, a summer trip where if your flight’s delayed by a day or two, yes it’s annoying and it eats into somebody’s vacation, [but] during the holiday season we’re talking about potentially missing Thanksgiving. It’s a little bit more of a high-stakes travel scenario. Therefore, some people may not choose to fly because they had a bad experience this past summer and it’s still lingering, so there’s some concern on whether they should take the trip at all.

Tanya Ott: We’ve got actually several holidays that we’re talking about. We’re talking about Thanksgiving. We’ve got Hanukkah in there. We’ve got Christmas. We’ve got New Year’s. Are we seeing any marked differences when it comes to travel or events or destination kinds of things for one holiday time versus another holiday time?

Mike Daher: Yeah, Thanksgiving will definitely lead the way with most trips happening during this Thanksgiving period. What we’re seeing that’s interesting for this year, though, is that early January will have a higher level of trips and I think [that] is probably driven by the uptick in international travel. People will use that period between Christmas and New Year’s, when a lot of companies might choose to have a collective shutdown and they’ll extend out the trip to a further destination. Maybe they have family overseas or they just have a bucket-list trip that they want to take during that holiday season. So, we are seeing the holiday season extend.

Tanya Ott: Nick, you’ve got people listening to this podcast who may work in the retail or other sales functions. What is the takeaway? What’s the main thing they need to keep in mind as they’re thinking about rolling into the holidays?

Nick Handrinos: I think if you’re a retailer, number one, you better have your inventories in check. People are going to be coming out early and they’re coming out early because they want to get what they want to get and they’re afraid it’s not going to be there. So, I would focus on that, number one.

Number two, I would focus on your pricing and your promoting. If you are in an inventory-glut position, that early window for discounting can help you work through the inventory challenges you might be facing. Otherwise, really understanding how you’re going to price is going to be a key lever for whether you’re going to have a successful season or not. If you overshoot, even above inflation, you’re going to drive more people into not buying. [If] you underprice, you’re going to miss margin opportunities and inflation and your costs are going to kill you. So, it’s a tough, tough time to be precise about pricing, but that’s really where the action is.

I think number three, you’re going to be very good about what we’ve always called a multichannel or omnichannel experience. People are continuing to use multiple means to understand where they’re going to shop, whether it be social media and getting ideas from influencers or actually shopping online, which is maintaining its strength and consistency over time and [we’re seeing] even a rebound in store. As I talk about having your inventory in check, having your stores ready for the season is going to be important, especially when contrasted to the previous couple of years where people were afraid to come or were using other features like buying online and picking up in store. I think people are looking for a more holistic shopping experience in store.

So quick recap: It’s get your inventories right. It’s price effectively. It’s make sure you’re managing all your channels of communication and commerce with your shopper, whether it be through the social media channels or the actual e-commerce conversion sites. And then four, it’s make sure that that in-store experience is part of that array and that it’s set up to handle the shopping experience that people want early in the season.

Tanya Ott: And then five is you get to sleep in February, right?

Nick Handrinos: (laughs) That’s right. That’s right. And to keep your fingers crossed that everything turned out well.

Tanya Ott: Mike, how about you? For those who are listening, who may work in the travel industry in one capacity or another, whether it’s hotels, airlines, any of the related industries, what are the big takeaways for them? What do they need to be keeping in mind?

Mike Daher: This is our industry’s opportunity to manage reliability at a higher level than this past summer. I think those companies that are really focussed on managing capacity [so] they can handle and provide a great customer experience are going to be well-positioned for the long haul. I think organisations that have a second go at this and have reliability issues, especially during the holiday season when it’s a much higher-risk travel experience for customers, may struggle. So, I would say right-size the networks and the offerings to what capacity you can handle. Issues around frontline workers are not going away any time soon. You know, really put a hug around your employees this holiday season. Make sure they feel appreciated. Also, continue the long-term investments in digital. Most of the travellers [who] will be travelling this holiday season are higher-income earners who are younger and are savvy when it comes to digital tools. That also will help alleviate some of the stressors around frontline workers shortages, which our sector has really been challenged by over the past year and those will likely not go away, even if we are in a recessionary environment as we’re seeing.

Tanya Ott: So final question for you both [is]: What’s one thing or experience that you’re looking forward to either giving or receiving this holiday season?

Nick Handrinos: I’m looking forward to a huge family get-together over the Christmas and New Year’s holiday[s], for sure. It’s the first year we’ve been empty-nesters, so getting everybody back and around the table, that’s going to be huge for us.

Tanya Ott: That’s always really, really nice once you empty-nest and then you get them back. And then you can send them away again.

Nick Handrinos: (laughs) So yeah, it’s kind of a lease model now.

Tanya Ott: Mike, how about you?

Nick Handrinos: Well, this past year, I just moved down to Florida, so I am looking forward to hosting my family down here in Florida for a sunny Thanksgiving holiday. It’ll be the first time that we’ve done this. I’ve spent many years in snowy Cleveland around Thanksgiving and Christmas, and, this year, we’re going to have a sunny Thanksgiving. So that’s what I’m looking forward to.

Tanya Ott: And there you have it, a snapshot of the holiday shopping and travel season this year with Deloitte Consulting LLP’s Mike Daher and Nick Handrinos. You can find their full report with loads more detail at www.deloitte.com/insights.  

We’re on Twitter at @DeloitteInsight where we share the latest news, research and thought leadership from the team. I’m on Twitter at @tanyaott1 where I share business news, the latest on world events and the occasional photo of my latest meal. 

We’ll be back again in two weeks with another show. I know the holidays can get kind of hectic, but if you subscribe or follow the show, you’ll have it dropped directly to your device, so you won’t miss anything. Plus, it’s great listening for that road trip or flight. So, subscribe or follow today and put your ears on autopilot.

I’m Tanya Ott. Thanks for listening and enjoy the rest of your day. 

This podcast is produced by Deloitte. This podcast provides general information only and is not intended to constitute advice or services of any kind. For additional information about Deloitte, go to Deloitte.com/about.

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