2017 Holiday Retail Outlook: Piper Jaffray and PwC Read the Signs

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Brands are getting into the year-end US holiday period (Halloween, Thanksgiving, Christmas/Hannukah and New Year) by looking at consumer behavior, including what has changed in the previous year.

teensOne cohort they’re scrambling to understand is the teens of Generation Z. After all, teens are the future of retail, even if they don’t have the spending power—yet. “From a spending perspective, they are millennials on steroids,” Marcie Merriman, executive director of growth strategy and retail innovation at Ernst & Young, has told Business Insider.

PiperJaffraySnapchat still leads the social pack for U.S. teens, despite increased competition from Instagram and Facebook (Twitter, teens are just not that into you). According to the latest research from Piper Jaffray, which surveys American teens about their media habits every spring and fall, 47 percent of those surveyed prefer Snapchat, up from 39 percent in the spring.

“For the first time in years, we’ve seen Nike’s share moderate as a preferred brand,” stated Erinn Murphy, Piper Jaffray senior research analyst, of the 34th annual teen survey. “Offsetting this weakness, we’ve seen an unexpected rise in trends like streetwear with Vans and Supreme gaining momentum. In addition, other brands such as adidas, Puma and New Balance have been capturing more mindshare as teens gravitate towards that 1990s retro look.”

Teens’ spending overall was down 4.4% year-over-year, while parental contribution to teen spending is 67%, just below the long-term average of 68%. Fall 2017 saw a slight decrease in spending on video games, a slight uptick for clothing and moderate downtick for food. In fact, food dropped from 24% in spring 2017 to 22% in fall 2017, but remains larger than clothing at 20%.

Piper Jaffray teen research 2017

Piper Jaffray 2017 teen research

Apparel:
• Athletic apparel is cooling off somewhat, led by a dip in Nike even as it held onto the top spot in apparel and shoes, but there is no slowdown in athletic footwear. Apparel brand preference is shifting towards streetwear with brands like Vans and Supreme.
• Nike, Ralph Lauren, Steve Madden, UGG, Fossil and Michael Kors saw the largest declines among major brands.

Technology Spending & Behavior:
• Snapchat is the preferred social media platform for 47% of teens using the platform – up 12% year-over-year.
• 82% of teens expect their next phone to be an iPhone, up from 81% in spring 2017, the highest ever seen in this survey.
• Teens who expect less than 50% of their future video games to be digitally downloaded increased to 50% from 45% in spring 2017 and 37% from two years ago.
• Streaming continues to gain teen video share as preference for linear TV declined 2% since last fall.
• Only 35% of teens listen to Pandora radio (versus 49% last year) as on-demand services such as Spotify, YouTube and Apple Music continue to gain share.
• 23% of teens prefer to shop specialty retailers, which is down 3% year-over-year, while pure-play e-commerce tied its spring 2017 peak at 17%, which is up 2% year-over-year.
• Teens increasingly prefer Amazon as their favorite website at 49% share – up 9% year-over-year.

The composition of the teens studied:

Piper Jaffray 2017 teen study


In a separate new study, PwC’s 2017 Holiday Outlook shows that among Gen Z’ers aged 13-16, 81% choose stores as their single most preferred way to shop with 40% planning to shop exclusively in stores. They like going to the mall to shop, and are comfortable paying for products in-store via smartphone or a wearable device.

One overarching theme: eliminate the annoyances. Shopping should become more convenient than ever this holiday season. And nearly 90% of consumers said they will still shop in stores, while almost 20% will use their smartphones to pay for purchases made once they are in the store.

Key findings from PwC’s 2017 Holiday Outlook include:

Make It Easy On Me: From product discovery to payment to shipping, consumers are in the driver’s seat. 84% of consumers PwC surveyed said they will shop online this holiday season, and they are projected to spend more on travel and less on gifts than last year. And as always, spending on family constitutes the largest chunk at 57% of their total budget.

All year long, a community of commerce: The store is morphing into a more contemporary version of its former self as retailers create a welcoming environment where shoppers enjoy spending their time as much as they enjoy spending their money.

Holiday generational preferences: Young consumers enjoy travel; older consumers like dining out. Consumers over 35 plan to spend more than 60% of their holiday budget on family. While travel ranks high on millennials’ wish lists, Gen X consumers and Boomers are more likely to buy gifts of travel for themselves.

Young Gen Z consumers forge their own path: Visual social networks dominate product discovery. Almost two times as many of young Gen Z’ers preferred the option of laptop or desktop and more than three times the smartphone. 40% will shop solely in stores. They will look for gift ideas primarily on Instagram and YouTube.

Generous millennial dads put family first: Early tech adopters lead shopping via smart home devices. Millennial dads will spend more on their families (63%) than all others consumers (57%). They are also three times more likely than consumers over 16 to shop via smart home technology.

Home for the holidays . . . or maybe not: Consumers will spend close to 30% of their holiday budget on travel, slightly more than they did last year. Most will visit family (50%) or take a vacation (42%) while a small portion (11%) will do both.

Alexa, where’s my stuff? More distribution centers closer to population centers mean fewer last-mile snags. Consumers already do about half 50% of their holiday shopping online. Most of them expect two-day delivery; some are even more impatient. In response, retailers have shifted their focus from behemoth distribution centers in the heartland to more nimble versions with smaller footprints close to population centers.

Goodbye traditional advertising, hello influencers: Consumers want the unvarnished truth from their peers. For consumers under the age of 35, brand loyalty matters less than it does to older consumers. They trust friends and family the most — and have little use for traditional advertising as a source of product information. They are looking for real insights about products and they have no patience for stories that don’t speak directly to them.

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