Like everything else this year, Christmas 2020 will be different. It has been a long and difficult year, and at times it was difficult to see anything but gloom – on people’s faces, in the news headlines, and within economic forecasts. However, a couple of recent developments (end of second lockdown and vaccine approval) have turned the mood around just before the holidays. What does the pandemic, but also the recent surge in optimism mean for the commercially important Christmas period?
Let us consider the four broad areas of holiday spending: gifts and non-gift consumer goods purchases (decorations, new outfits etc.), entertaining at home, socialising and entertainment outside of the home (holiday parties, festive shows etc.) and travel. Travel and socialising and entertainment are bound to take a hit this year. Although some culture venues are reopening, capacity is restricted, many are still closed altogether, and potential visitors may still feel uneasy going to a large-scale event so soon after the end of lockdown. On the travel side, some household mixing will be allowed for the holidays, but many families will choose to gather in smaller groups or celebrate at home with immediate family, in order not to put loved ones at risk. Entertaining at home may see a bit of a downtick due to fewer large gatherings, but people will still want to mark the occasion so we would not expect a big change to the usual trends.
That leads us to gifts and non-gift consumer goods, a category in which we expect to see a surge this holiday season. In 2020, we expect the spend in this category to increase as a share of the total festive spend, but also in absolute terms. Many have built up savings over the lockdown period and will be willing to spend, seeing it as a well-deserved treat at the end of a difficult year. The end of lockdown and vaccine news are set to boost consumer confidence, lifting spending intentions further.
As the average amount spent on gifts is set to increase, what we are buying is also evolving. In the last five or so years many, Cebr included, have written about the rise of the experience economy: people’s increased appetite to spend more on trips, events and other activities and less on stuff. This holiday season, stuff is back in fashion. Even with the game-changing vaccine, there is still uncertainty around how long it will take for international travel and various group activities to normalise. So for the time being, it is less risky to buy someone a shirt, than a mixology lesson.
This shift in choice of gifts, along with the fact that some may be using the extra cash saved on treats for themselves like a few new decorations, is set to boost spending on consumer goods providing much needed relief for the struggling retail sector.
The estimates of average total festive expenditure vary but are generally in the region of £500-£1,000 per person. If we take the 2019 estimate from the National Building Society (£725) and scale it up by the number of UK adults, we end up with a cumulative festive spend of £38bn.
Based on a variety of survey and anecdotal evidence available, we can assume that the average Brit will up their gifts and non-gift consumer goods purchases by around 10% while reducing their socialising/entertainment and travel budget by about a third. The spend on entertaining at home is set to stay roughly the same.
With these assumptions in mind, we would expect per person average festive spend to decline 7% from £725 in 2019 to £677 in 2020. Cumulatively, this will represent a drop from £38bn in 2019 to £36bn this year.
While the outlook is not entirely positive, with entertainment and hospitality especially vulnerable, the mood this Christmas will be better than many had anticipated. Some of this cheer will spill into the retail sector, which will be hoping for a Christmas miracle following the recent wave of bad news.
 https://www2.deloitte.com/content/dam/insights/us/articles/6890_holiday_retail/6890_2020-Deloitte-holiday-retail-survey.pdf and https://uk.finance.yahoo.com/news/brits-uk-spend-shopping-christmas-gifts-2020-120252855.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAIdfNGyLStEo0ZT2hG8TzjjHScMFlsyP40WarZzipwdYKtrULpdcMN-WKUblUSc2VRCFkM6I6NqNdJ6pmxzGt5n9yQBQoZJxC-zVpQfNdbo5IIZzxlVTWcUiCJ2nQ76x1MmoGYpOINnF6fgclkLbfRemaD37IJ5jikuR-B0bsAL_
 £677/£725-1= -6.6% (rounded to -7%)
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Nina Skero, Chief Executive