The 2019 holiday season: Shoppers are ready to spend but retailers need to personalize

It’s that time again when shopping shifts into overdrive. The holiday season is responsible for as much as 30 percent of a retailer’s sales for the year,¹“Winter holiday FAQs,” National Retail Federation, 2019, nrf.com. and that’s likely to go up. Our research shows almost a third of shoppers expect to spend more this year than last—with millennials and Gen Zers showing the greatest desire to increase their budgets.²Periscope by McKinsey Consumer Survey, August 2019.

With the stakes so high, it’s worth taking a moment to understand what customer expectations are. For many retailers and consumer goods manufacturers, the focus has been on digital—and with good reason. Plenty of print has already been used to document the digital revolution in shopping behavior. What we’ve found, however, is that some important trends and shifts can be missed because of all the focus that retailers put on becoming more digital.

To better understand some of these changes in holiday shopping, we’ve expanded our traditional focus on Black Friday to encompass more of the shopping season (across Canada, Germany, the United Kingdom, and the United States). Our 2019 Holiday Season Shopping Report³In August 2019, Periscope by McKinsey conducted online research of consumers in Canada (500), Germany (501), the United Kingdom (501), and the United States (1,020). Respondents were between 18 and 69 years old and expressed interest in participating in winter shopping events. Their responses were selectively evaluated by age category and gender. highlights significant consumer behaviors and uncovers some emerging trends with big implications for retailers:

• Shoppers are looking for help. The number one concern of shoppers? Not knowing what gift to buy (47 percent of respondents). This lack of certainty is also reflected in the fact that many consumers don’t have a defined budget for their shopping—a significant minority of shoppers (13 percent in Canada; 13 percent in the United Kingdom; 12 percent in Germany; and 10 percent in the United States) say they don’t have a holiday shopping budget this year.
• Omnichannel shopping behaviors are increasingly prevalent. The majority (62 percent) of consumers plan to head both online and in store to make their festive purchases. While researching and buying happen online in significant numbers, most shopping happens in stores. However, shoppers are increasingly looking to digitally enhanced offline shopping experiences: browsing products from a digital panel (24 percent), self-checkout (11 percent), and offers direct to their phone (10 percent) were top benefits as far as consumers in store were concerned. Meanwhile, “old media,” such as catalogs, flyers, and newspaper advertisements, still retain a strong appeal as valued sources of information and ideas.
• Consumers have clear preferences for what they value. Asked to rank what motivates them the most to participate in their top three favorite winter shopping events, encountering attractive offers was the top reason identified by consumers, followed closely by the convenience of shopping online and finding inspiring gift ideas. They are also looking for free expedited shipping and delivery certainty.
• Shoppers are seriously researching ahead of time. Conducting in-depth research in preparation for the holiday shopping fray, most consumers not only plan specific budgets for the season but also spend time investigating what to buy and/or where to buy it; just 12 percent admit they shop entirely spontaneously.
• Clear consumer segments have emerged. Women continue to drive spending and planning, with women in the United Kingdom (24 percent) and Canada (19 percent) proving the most highly organized in this respect, but men are an increasing part of the equation and an important target for retailers and brands. For women, the focus is on gift purchases for the household and children, while male consumers shop primarily for their partner/significant other (and for themselves).
• Holiday shopping is starting earlier. While Black Friday and Cyber Monday are key shopping days, consumers are stretching the shopping season out. A sizeable minority are shopping before October (14 percent), while most of the shopping is completed before December.

Given these trends, it’s becoming clear that the winners this holiday season will be those retailers who have three specific capabilities to capitalize on these behaviors:

Personalization. As shopping behaviors become ever more granular and unique—a Canadian woman shopping for a household item before October, or a male shopper buying something for his spouse in December—the ability to target relevant offers is increasingly becoming the deciding factor in a retailer’s success. Personalization can boost total sales by 15 to 20 percent, and digital sales even more, while significantly improving the return on investment on marketing spend across marketing channels. (For more, read “The heartbeat of modern marketing: Data activation and personalization.”)

Omnichannel. While distinct channels have important roles—browsing online, checking options on smartphones, buying in store—shoppers are increasingly expecting and actively engaging in omnichannel experiences. Retailers have long recognized the reality that their customers shop in omnichannel ways but have been slower to implement truly omnichannel programs that can follow the consumer across the entire consumer decision journey. (For more, read “Ready to ‘where’: Getting sharp on apparel omnichannel excellence.”)

Consideration. Timing, as they say, is everything. The increasing importance of winning the consideration battle has significant implications for how retailers plan their marketing programs. Retailers are launching promotional campaigns earlier and earlier than before. In previous personalization research, in fact, one of the primary use cases that emerged is that shoppers want relevant recommendations. Providing options early in a shopper’s planning cycle and/or providing curated and easy-to-navigate options for gifting when browsing in store or online is a win. (For more, read “The new battleground for marketing-led growth.”).

While building up these capabilities takes time, there are still plenty of activities that companies can undertake to help win in this holiday season.

The future of personalization—and how to get ready for it

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Consumers are on the lookout for ideas and inspiration

Consumers have a few questions in mind entering the holiday season. Asked what worries them the most, four factors topped the list of concerns for consumers. Not knowing what to buy (47 percent) was the number one issue for shoppers in all territories surveyed, followed by worries about navigating crowds and queues in store (38 percent), budgeting for purchases (35 percent), and being unable to find the products they want (32 percent) (exhibit).

Consumers want guidance and inspiration on what to buy, and those retailers that help them cut through the clutter and make confident choices will be well positioned to convert undecided consumers and secure sales.

To ease the shopping experience for customers, retailers need to make it easy to search and locate products, conduct careful stock planning, and initiate in-store strategies that alleviate customer frustrations around queuing to pay or getting assistance at peak shopping times.