Shoppers to slash holiday spending by 20%, Deloitte reveals
The big four company has said retailers need to offer more value in the upcoming holiday season as consumers continue to tackle the cost-of-living crisis.
Deloitte has revealed in the most recent annual Retail Holiday Report that Australian shoppers battling in the current economic climate plan to slash their spending by almost 20 per cent this holiday season.
It recommended retailers find alternative ways to offer more value before looking towards a more positive 2025.
The report included retailer sentiment and key sector trends as well as the spending intentions and expectations from 1,000 consumers.
Deloitte consumer products and retail sector leader Elise Sharpley said the last 12 months have “brought little joy” to retailers as inflation, interest rate rises and weak demand have weighed on economic growth.
“Cost of living pressures and the associated belt-tightening are driving consumer spending intentions and actions and this is set to continue into the 2024 holiday season,” Sharpley said.
“On the back of real retail turnover per capita now growing since mid-2022, consumers are planning to spend $1,002 on average this year, down 18.9 per cent from 2023.”
“Against this backdrop, consumers are changing the way they shop, how much they purchase and the type of products they buy, so we’re looking at a more frugal holiday period ahead.”
Key retailer findings in the report revealed only 51 per cent of retailers expect sales growth, down from 57 per cent in 2023 and 67 per cent in 2022.
Forty per cent of retailers believe consumers won’t pay full price and 41 per cent anticipate an improvement in consumer confidence over the next 12 months, up from 10 per cent in 2023.
Sharpley said these results will encourage retailers to work hard “to entice these consumers to open their wallets as the silly season heats up.”
From the 1,000 consumers surveyed for the report, 76 per cent said they are cutting back on overall spending, but 67 per cent are still looking to make small splurges.
The results highlighted that 48 per cent of consumers expect to buy fewer goods and services, 95 per cent are seeking the best deals as their first priority and 32 per cent would walk away without “some sort” of discount.
Deloitte retail, wholesale and distribution partner Damien Cork said in line with usual consumer behaviour, some plan to “splurge here and there” yet also plan to buy less overall.
“When they spend, nearly everyone will be seeking the best deals,” Cork said.
“As a result, discounting wars will intensify as retailers understand consumers won’t pay full price and many consumers tell us they will walk away if a discount isn’t on offer.”
“Retailers are adapting by lowering prices, as well as focusing on affordable and value-driven products, creating better in-store experiences and embracing innovation to attract new customers.”
Based on the report consumer findings, sale periods will be significant for retailers and consumers as this is when the most profit will be made from the expected limited spending.
Cork said consumers are continuing to choose in-store experiences over online channels, despite social and search contributing to 58 per cent of customer journeys.
“To make the most of this dynamic, retailers must be firm on integrating digital and in-store experiences so their customers can shop when, where and how they please,” Cork said.
“Close to 90 per cent of consumers also consider trust a key factor in their purchasing decisions, so making fair and transparent pricing and delivering great service are important considerations for retailers.”
Post Christmas, Deloitte predicted the start of 2025 to remain challenging for the retail industry.
However, with more than 40 per cent of retailers expecting an increase in consumer confidence over the next 12 months “brighter days lie ahead.”
Sharpley said the economy may be at the bottom of the business cycle as the number of retailers expecting a decline in consumer confidence has dropped from 61 per cent to 26 per cent.
“Businesses should focus on what they do best in providing exceptional customer experiences, great after-sale service and integrated digital and physical offerings to entice consumers to start spending again.”
