The holidays are just around the corner, and while there is a sense of holiday spirit in the air, news around inflation and recession is likely to curb the enthusiasm with which consumers spend this holidays. According to the 2022 Deloitte Holiday Retail Survey, inflation is likely curb holiday shopping habits as holiday spending is flat year-over-year with an average US$1,455 per household in the US. Overall consumers plan to purchase fewer gifts (nine gifts versus 16 gifts in 2021) for family and friends.
As consumers aim to keep the holidays festive, they will likely pull back on non-gift purchases (down 12% year-over-year), and shift spending to experiences (up 7% year-over-year). Interestingly, while low-income earners plan to spend 25% more than last year, high-income earners plan to cut back 7%. The continued impact of inflation and a shift in consumer priorities are set to define the 2022 holiday season, said Deloitte. Consumers feeling the pinch may be evaluating how they spend money overall - between socialising, gift-giving, and travel.
An earlier report by Gartner also echoed similar sentiments adding that with inflation remaining top-of-mind for consumers, price (65% of respondents), value (53%) and free shipping (51%) were the top three identified factors amongst holiday shoppers for their gift decision making this season.
When it comes to what specifically consumers are shopping for, holiday shoppers identified gift cards as their top category for gifts, followed by apparel and accessories, toys and games and food and beverage. Over 75% of holiday shoppers expect to see fewer, or the same amount, of discounts as last year’s holiday season.
What’s the scene like in Asia?
According to Rainal Lu, regional head of growth at Atome, unlike the US, where holiday season is packed towards the year-end, Asia has other festive periods such as Hari Raya and Lunar New Year on the calendar, which are spread out across the calendar. These periods also serve as good shopping periods for many people who celebrate those occasions. Secondly, depending on the types of items they want to buy, consumers may wait for particular sales periods. For example, in Singapore, consumers usually wait for the IT/Tech sales fairs such as COMEX to buy electronics and gadgets.
“For Atome, overall Gross Merchant Value (GMV) has held steady in the markets we operate in, and we expect this trend to continue as we approach the holiday season,” he said.
Travel is also a huge part of the Holiday experience in many Southeast Asian countries. As more travel restrictions are lifted, Lu shared that there is an upward trend in terms of transactions when it comes to travel-related expenses, which typically are large ticket items to spend on, such as flight bookings and experiences.
Smaller basket sizes
Daniel Hagmeijer, CMO of Bodyshop Indonesia shared that due to the ongoing recession, consumers are likely more careful with their spending this holiday season. This does not necessarily mean that they will choose the most inexpensive present; rather, they will look for presents that are within their price range and have a story behind them. “Retailers who play it smart may see their average unit retail decrease, but their basket sizes increase as lower-priced gifts with stories become more important,” explained Hagmeijer.
If you are the one giving the gift, you may be able to get away with a slightly less expensive item if you can clearly explain why it is the best choice, he said, adding:
It's not so much about the present itself as it is about the story that goes along with it.
Sojao, an organic luxury bedding store born out of Singapore, said the company anticipates a 20% dip in average order value, but nonetheless, remains optimistic that sales will still continue to remain steady given the trends seen across the year.
“I think the general mood in Singapore is one of uncertainty. With inflationary pressure and GST rate hike looming, consumers are starting to be more discreet in their overall spending. They might be holding back on purchases they deem as luxury,” said Priscilla Tan, co-founder of Sojao.
When it comes to consumers in Hong Kong, Gian Chan, associate director of Sanrio Hong Kong added that nearly a third of its customers are planning to spend less this holiday given the impact of COVID-19 restrictions that has lingered on. “In view of COVID-19 pandemic impact, consumers interacting with brands across multiple channels and expect unique experiences. We apply synergy strategies to expand the Mr Men Little Miss brand and maximise its exposure in the marketplace with bespoke creative concept of pop up experience, food and beverage, crossover products and digital promotion in holiday season,” she shared.
Impulse buying taking a hit
Local jewellery brand By Invite Only founder Trixie Khong shared that while the current basket size is still on par with previous years, the looming news of recession and mass layoffs definitely has affected the mood of shoppers. She added that fashion and jewellery shopping are ‘feel good’ activities even when there is money in the bank. Currently, with fuel prices increasing, mortgage interest rates going up and food costs shopper's disposable incomes have undoubtedly been impacted.
Thinking beyond the festive period, Khong shares that the brand is focused on building loyalty with customers as well as ensuring product quality and customer service is top notch. “We've also moved to retail higher cost products as people who are shopping for a more premium product or gift are less sensitive because they know that they're buying into the brand and a good experience,” she added.
Retail sentiment is generally conservative, shared Freda Kwok, marketing director AKINN. While buyers are still willing to spend, they are generally more mindful of returns - which means limited impulse buys. "Though we are expecting buyer activity to pick up during the festive season, as it traditionally is peak retail period with Christmas, bolstered by an early Lunar New Year in 2023, this overall downward trend is likely to be observed across Asia," she said. Doubling up as a brand consultant, Kwok adds that while traditional sales promotions and deals will be hygiene factors to attract spends, it might become a point of parity.
"To set a brand apart and drive longer term, more sustainable marketing that will tide through market volatility, it's important for brands to stay true to their DNA and convince based on value," she shared.