Inflation may be the top-of-mind issue for retail and e-commerce players alike, but a new and surprising trend that should maintain morale and a robust attitude is seeing the sharp decline in store closures in the US and UK. In addition, the holiday season is set to bring increased spending compared to 2020 and 2019, despite an increase in the cost of living and a decline in confidence in the markets. Adobe Analytics expects global holiday season shopping to reach €938 billion this year, making the festive season retail’s favourite time of year. Omnia takes a look at why brick-and-mortar is experiencing a smoother ride versus previous years, and what we can expect for 2022’s holiday spending.
2022 is the year brick-and-mortar rallied
Two years into the global e-commerce boom that has been predicated on Covid-19 lockdowns and stay-at-home restrictions, e-commerce players have been taken aback by the sky-rocketing growth - and matched demand - for shopping online. However, now that most of the world has opened up and lockdowns are a thing of 2020, pent up demand from consumers has resulted in another trend: Brick-and-mortar stores are seeing more openings since pre-pandemic levels in 2019.
Today, store openings in the US and the UK are higher than store closures, showing a surprising reversal in the years leading up to 2020. Coresight Research has tracked retail store openings and closures in the US and has seen a year-on-year 55% decrease in store closures from September 2021 to 2022. Some of the factors include overwhelming demand from consumers to get out and shop; higher demand for premium real estate spaces, such as in Manhattan, and financial incentives for tenants during the pandemic when real estate was floundering. In the US alone, 2022 has seen 5,000 new store openings, including brands like Hermes, Gap Inc and Deichmann. In the UK, PwC reports that store closures have significantly slowed down since 2020 and 2017 with an average of 34 closures per day in the first half of 2022, compared to 61 per day in 2020.
Despite the successes of brick-and-mortar stores this year, the reasons and conditions for its success can’t be expected to last. As consumers return to normal, pre-pandemic life, the desire to shop won’t last, especially since inflation is the highest it's been in the US, UK and the EU in decades. In addition, since demand for high-end retail spaces has reached bidding war levels, rent will increase and financial incentives won’t be on offer anymore.
For the upcoming holidays, e-commerce and brick-and-mortar will receive a welcomed boost among inflation
Retail’s favourite time of year is around the corner, and festive season decorations, deals and promotions are already filling Instagram timelines, shopping aisles and Bol.com carts. With a whirlwind last two years dealing with unpredictable markets and evolving consumer behaviour, one thing remains a sturdy, reliable bench for retail to rely on: Holiday spending. Consumer spending is expected to see an increase in 2022, which bodes well for brick-and-mortar stores as well as e-commerce shops.
PwC reports that consumer spending for the upcoming holidays in December will increase by 10% when compared to the same period in 2019 - the very December that saw some of the very first cases of Covid-19. Spending will increase by 20% versus spending in 2020.
What else can we expect from consumers this festive season?
- An average of €1,472 will be spent this holiday season, which includes gifts, travel and entertainment
- An average of €777 will be spent on gifts; €465 on travel; and €230
- The highest spender is expected to be a young male living in the city
- Consumers will spend more money on themselves this year as well as their families compared to previous years
- In terms of age groups, millennials (approximately 24 - 40-years old) will spend the most, at an average of €1,878 while
- Brands with loyalty cards, programs and credit cards can expect 79% of millennials to use them for their associated brands
- Household annual earnings more than €123,000 will likely overspend on their holiday budget by 15%, taking their holiday spending to an average of €2,840 - double that of the average mentioned above
- A majority of of consumers, 41%, will wait until late November for the best holiday deals
The ever-surprising consumer
If there’s anything retail can learn from consumer behaviour this year, it’s how resilient and robust shoppers are, despite rising living costs and a changing retail landscape. One of the attributes of the improvements and predicted successes discussed in this article are the attitudes and motivations of consumers, which remain unpredictable in the best way possible. As retail heads into the holiday season, and brick-and-mortar store openings remain steady, consumers will be watched closely for the next trend in offline and online shopping.
