Recent research by The NPD Group suggests that consumers are looking to splurge on their own needs in an effort to deal with the guilt of missing in-person celebrations this holiday season. NPD’s annual holiday purchase intentions study reveals that three in ten holiday shoppers are planning to spend more than last year because they have fewer expenses related to activities like dining out and travel. In addition, 40% of consumers indicated that they would be “guilt gifting” as a result of COVID-19. In other words, consumers are looking to buy more gifts to bring joy during these challenging times.
Canadians Justify Practical Splurging This Holiday Season
In Canada, “practical splurging” and “guilt gifting” are also emerging as holiday sales drivers across several key industries. Perhaps nowhere is this trend more evident than in the video game industry, where sales are up +23% year to date. Sony and Microsoft both generated a lot of excitement with the launch of the new PlayStation 5 and Xbox Series X respectively in mid-November. However, anyone who didn’t preorder these new consoles was shut out, as supply didn’t come close to meeting demand. As a result, consumers flocked to older systems in an effort to stay connected with friends and family and to keep entertained during long periods of isolation.
TVs are another category that has experienced a “pandemic lift” this year as consumers looked to upgrade to larger screens with more functionality and connectivity. This year retailers actually sold -15% less TVs than last year but thanks to an 18% increase in average price, dollar sales were up +4%. One reason for this is that sales of 32 inch TVs, which have traditionally performed very well, declined by -52% vs. 2019. TVs with screens larger than 70 inches saw a 2.5x unit increase compared to 2019. In fact, two thirds of the growth in this segment was driven by 75 inch TVs suggesting that when it comes to screen size, Canadians are committed to going big in 2020.
And while consumers are spending more time online than ever before, it’s no surprise that many are also looking to upgrade their connectivity. Sales of mesh routers increased in importance for the week of Black Friday compared to the prior 6-weeks. During the same time period the average sales price of mesh routers also increased by $14 suggesting a shift to the premium segment of the router market.
Canadians are also turning to apparel in an effort to boost their holiday spirits. In a recent study we asked consumers “what influenced your decision to purchase clothing or footwear during the past 3 months?” The number one response among 18-44-year olds noted “the need for something new”. We also asked “what best describes how you currently purchase clothing or footwear?” the second top answer among the same age cohort was “something trendy that makes me feel good.”
Consumers Embrace Guilt Gifting as a Form of Retail Therapy
From toys to beauty products and even kitchen appliances, “guilt gifting” has become a way for consumers to deal with the stress, isolation, and loneliness associated with the pandemic.
One of the most “giftable” categories tracked by NPD is fragrance. Over the past three years, fragrance has been the top selling beauty category during the holidays, capturing 17% of total sales in November and December. While we anticipate sales to continue to improve this holiday, spend has also shifted to products that promote wellness, self-care, and pampering. Skincare sets, face cream and hair products are among the top selling items in Canada suggesting that consumers are buying for themselves while also shopping for others.
Another very giftable category is home appliance, which has seen an increase in sales of +12% since the beginning of the pandemic. In 2019, 37% of annual sales were made during Q4 as consumers looked to finalize their holiday shopping. According to NPD’s Economic Recovery Forecast, we can expect growth of +12% for the home appliance industry in Q4 indicating that purchasing of appliances earlier in the year will not negatively impact holiday purchasing.
While this holiday season will be anything but normal, Canadians are clearly looking for ways to get into the holiday spirit and to connect with their friends and family members. While we may not be able to celebrate in person this year, consumers are committed to finding ways to bring joy during this difficult period.