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 retail season.
According to the 13th edition of Deloitte’s annual Retail Holiday Report, Australians are planning to slash their spending by almost 20% this holiday season, prompting retailers to find ways to offer more value as they look towards a more positive 2025.
The report assesses retailer sentiment towards the all-important holiday trading period, identifies key sector trends into 2025 – and, for the first time, has surveyed 1,000 consumers on their spending intentions and shopping expectations.
Key consumer findings
According to the report, consumers are planning to spend $1,002 on average this year, down 18.9% from 2023. In addition:
- 76% are cutting back on spending overall, but 67% are still looking to make small splurges
- 48% expect to buy fewer goods and services
- 95% are seeking the best deals as their first priority
- 32% would walk away without some sort of discount.
“As they usually do, many consumers are still looking to splurge here and there, but they’re also telling us they expect to buy fewer products and services,” said Deloitte Retail Wholesale and Distribution partner, Damien Cork.
“When they spend, nearly everyone will be seeking the best deals. 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.”
Key retailer findings
According to the report, only 51% of retailers expect sales growth, down from 57% in 2023 and 67% in 2022. In addition, 40% believe consumers won’t pay full price.
“Both retailers and consumers expect plenty of activity during the November flash sales events of Click Frenzy, Black Friday and Cyber Monday, a sign of the growing influence of US trends on Australian sales campaigns,” said Mr Cork.
“But retailers should keep some powder dry for the traditional season from early December up to Christmas and Boxing Day, which will remain the dominant sales period,” he said.
The report also finds that consumers are continuing to flock to in-store experiences. While social and search constitute the first step of 58% of customer journeys, sales transactions through online channels are likely to decline these holidays.
“To make the most of this dynamic, retailers must firmly on integrating digital and in-store experiences so their customers can shop when, where and how they please,” Mr Cork said.
Optimism for 2025
While the road ahead for Australia’s retail industry may be challenging, and household budgets will remain stretched for now, there is a strong case to make that brighter days lie ahead, says Deloitte Consumer Products & Retail Sector Leader Elise Sharpley, with more than 40% of retailers anticipating an improvement in consumer confidence over the next 12 months.
“More than half of retailers expect growth in sales over the next 12 months, and some even anticipate a double-digit rise,” she said. “The share of retailers anticipating a decline in consumer confidence has also plummeted – from 61% to 26% – indicating we may currently be at the bottom of the business cycle.”
Ms Sharpley says businesses should focus on what they do best to entice consumers to start spending again: “providing exceptional customer experiences, great after-sale service, and integrated digital and physical offerings”.