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12 Predictions of Christmas: 2020

How, where and what are shoppers spending on Christmas this year?

What does a smaller, more special Christmas mean for retailers?

A global pandemic. National lockdowns. One of the deepest recessions ever seen. Record store closures. An increased shift to online. Retail in the UK has seen its fair share of challenges this year. But with positive news around vaccines, mass testing and relaxing of measures over the festive season, what might we see as we head towards Christmas and the New Year?

As we once more emerge from lockdowns or increased restrictions, non-essential retail can re-open having been forcibly closed in some or all of the Home Nations. We saw consumer sentiment significantly impacted by these lockdowns, but fully expect sales to bounce back as they did in June. And just in time for the anticipated Christmas spending spree.

While online and click and collect have been saviours for many retailers, the reopening of non-essential stores is critical at this time of year. Not only do they provide logistical relief, given delivery infrastructure not set up to cope with Christmas peak, but they’re important for inspiration. With only 37% of shoppers knowing  exactly what they want, people need to browse. And of those who research presents in advance, 28% prefer to do so in stores.

Much like the rest of the year, Christmas 2020 is unlikely to be ordinary. Smaller family gatherings and lockdowns will have an effect on how much we'll spend, what we'll buy and where we buy it. And given all we’ve already been through, consumers aren't leaving anything to chance - they want Christmas to be special this year.

Read on to see what we think shoppers will buy, where they'll buy from and how they'll buy this Christmas, as well as how much they'll spend. If you're interested in certain predictions, use the navigation bar on the right to jump to a specific section.

1. Christmas will be different

Unsurprisingly, we expect Christmas to look a little different this year across the UK. Regardless of how the outlook or restrictions evolve over the next few weeks, households are planning smaller, more intimate celebrations. In a survey taken before the government announced ‘Christmas bubbles’, nearly half of us (46%) are intending to stay at home with immediate family rather than host or visit extended family - it’s a figure that’s more than double that of ‘normal’ years. This is the key trend that will affect how much we’re going to spend, what we’ll buy, and how we’ll buy it in the run-up to Christmas.

As well as smaller gatherings, people intend to travel less or visit fewer households over the festive period. And all these factors will have an impact on how we spend.

Average spend on Christmas

2. How much will we spend? 

Naturally, with fewer people expected around the Christmas dinner table, there are fewer things to buy. And for many of us, that means spending less this year. We expect a slight decline in average spend (to £384 in 2020 v £412 in 2019) across all age ranges and all regions this year, apart from in the 25-34 year old demographic.

That’s roughly £1.5bn less to be spent compared with last year (-7%). But even with this decline, it’s still an important event: we expect spending on presents and celebrations for Christmas 2020 to be around £20bn.

3. Who will spend the most?

Christmas spending always looks completely different to Black Friday, and this year it’s no different. Spending will be first and foremost directed at the family, rather than for ourselves, and women spend almost 10% more than men (£400 vs £368). The 25-34 year old category is the only one not expecting their spending to decline, even this year, as they divert lockdown savings into a big Christmas celebration. While the highest spenders are 45-54 year olds, who are most likely hosting the rest of their families (76%).

4. What's the impact of a smaller Christmas?

In such a strange year, many are looking to Christmas as an escape. Generally, people seem keen to treat their families and themselves. 

Only one in five of us are actively looking to reduce what we spend this year. And of those, less than half (43%) are spending less because they have less money or because they’re less confident about personal finances (31%). The predominant reasons for spending less are because Christmas celebrations will be smaller and cosier this year: we’re seeing fewer people, entertaining less at home (34%) or have fewer gifts to buy (29%).

Answers varied considerably between demographics and regions. For older people and those in the South and Yorkshire, for example, it was much more likely to be because of seeing fewer people or entertaining less.

5. Many households to spend the same, or more than last year

While average spending is down 7%, nearly 80% of people are planning to spend the same as last year or more. This year, it’s clear that many people are looking to treat themselves and their families. With a smaller, more intimate gathering on top of a difficult year for many, it’s little surprise that households will look to embrace a little extravagance. A quarter (25%) of those spending more this year want to make Christmas an even more special occasion than usual, and 40% want to buy more gifts. A significant minority (23%) also wanted to treat themselves, with a third of under 25s indicating they would do so this year.

Those that are comfortable spending more this year either have the same or more money than last year (34%) or they’ve saved money from not going on holiday or going out (24%). These ‘forced savings’ we’ve referenced in previous insights are now giving shoppers extra disposable income.

Annual change in footfall

6. A smaller Christmas means different categories 

Changes to the way we celebrate Christmas this year have affected what we’re looking to buy. Those that have children or pets will look to treat them this year, prioritising pet gifts, children’s clothing, toys and stocking fillers, showing a significant rise in importance from last year

Smaller gatherings have also led people to spend less on food and drink, homewares and Christmas dinner this year. Usually the top priority almost every year, Christmas dinner and food and drink may still be an important focus for many. But with fewer people to cater for this year, we’ve seen a (perhaps expected) decrease in spending, particularly in the over 55s. Smaller gatherings also mean fewer people to entertain or impress, which has affected homewares, too.

Elsewhere, fashion remains the only category yet to have recovered to pre-pandemic levels, with sales declining as recently as October, when all other categories showed growth. This year it is at the bottom of the category spending list - a result of fewer special occasions or events to attend - last year it was second. 

7. We don't always get what we want 

While adult fashion struggles, several retailers have noted the success of children’s clothing sales this year. As we’ve predicted for the last couple of years, practical gifting, kids' clothing, presents for pets and health and beauty will remain popular. Health and beauty, in particular, has seen strong sales throughout the year, as people look to treat themselves (and others) and escape the reality of a pandemic for a while.

There have also been booms in traditional games and crafts, likely driven significantly by lockdowns, restrictions and isolations. But what we’re buying for our children isn’t necessarily what they want. With a couple of exceptions, the most wanted presents this year are technology-based: games consoles, phones or tablets. Conversely, our Black Friday insight showed that we’ve decreased our spending on tech.

Proportion of Christmas present spending by channel

8. Sustainability doesn't matter this year

In our 2020 Retail Outlook, we’ve noted a growing trend of sustainable gifting and products. However, whether it’s linked to COVID-19 or just indifference, it’s something that few are considering this year. Although more than half of those under 35 would consider sustainable gifting, interest drops significantly into the older age groups. There are also big regional variations, with 53% of Londoners taking into account sustainability, compared with only a third in the East of England and Northern Ireland.

9. Not a time to experiment

With people keen to make Christmas extra special this year, shoppers are not willing to take any chances. The majority (86%) will buy from retailers they know and trust, with 65% buying mostly from the same shops. Some will go further, only buying from those shops - whether that’s because they trust those retailers on price points, value or delivery. 

The picture is similar across the country. Those in the East of England and North East are the least adventurous (93% and 92% mostly buying from the same shops), with the West Midlands the most adventurous (20% mostly buying from new shops). Nationally, a minority of young people (25%) say they’ll mostly be buying from new shops and brands.

Shopping from the same places vs new places
Restaurant and pub chain annual sales growth

10. Traditional retailers to miss out?

Sticking to the known and the reliable extends to the type of shops people are buying from.

When asked what proportion of spending would be through different categories of retailers, the largest single answer was “online only retailers (e.g. Amazon, Asos and Very)”. That’s over double the share of more traditional multichannel or high street retailers, both instore or online.

Online only retailers were particularly popular amongst men (44% of shopping spend) and 45-54 year olds (45%), with convenience and time-saving key differentiators. Regionally, Scotland (36%) and Northern Ireland (33%) are least likely to use online only retailers, where non-essential shops were open at the time of our survey. Conversely, Wales was the most likely to use online only (46%), where essential shops were not allowed to sell non-essential items during its firebreak. 

Echoing our findings during the first national lockdown, over a quarter of shoppers expect to buy Christmas presents at local or independent retailers, either in store or online. There are two reasons for this: shoppers are keen to support small businesses that have been harder hit during the pandemic, and have also rediscovered local retailers in lockdown, particularly on smaller high streets deserted by the national chain retailers, something we first discussed in our store openings research earlier in the year.

11. Taking no chances with presents this year 

Determined to make this Christmas special, most shoppers are refusing to leave anything to chance. And for almost a quarter (21%) of consumers, that means shopping earlier than normal compared with only 8% shopping later than usual. There was already evidence of early Christmas shopping in our Black Friday survey.

While 54% claim they’ll shop at a similar time to previous years, we predict half of all shopping will have been completed by the end of November, regardless of lockdowns, firebreaks and restrictions.

The main reason for this? Not fear of another lockdown (33%) or concern over Christmas crowds (29%), but because consumers want to be certain of delivery times (41%).

How will your Christmas festivities change this year?
Christmas shopping by channel

12. A mainly online Christmas

Will there be crowds in stores this year? Shops will still account for 30% of present shopping this year, so they’re more important at Christmas than Black Friday, where even in previous years less than a quarter of shopping was done physically.

However, 30% is lower than the 40% last year, and 47% in 2018, highlighting the accelerating shift online driven by COVID-19. Even among those 65-plus, over 60% of Christmas shopping will be done online, suggesting they embraced online much more during the lockdown?

Across the home nations, Northern Ireland (39%), Wales (36%) and Scotland (34%) were the regions most likely to be shopping in store, reflecting the fact that non-essential shops were open in those countries at the time of the survey.

Extraordinary Christmas, extraordinary shopping behaviours

In a highly unusual year, we’re seeing people planning smaller, closer-to-home, and more family-oriented Christmas celebrations. Combined with restrictions on shop openings and general pandemic-related concerns, there's been an acceleration in the long-term shift to shopping online. This all affects how much we’ll spend, what we’ll buy and where we’ll buy it. Consumers are reverting to the brands and retailers they trust to deliver and are not leaving anything to chance. If Christmas is going to be different this year, consumers want it to be special.

Some categories should prepare to see less demand. While fashion is perhaps obvious this year, grocery may also see less demand, despite a bumper year and bumper previous Christmases. Even if people are at home more, they won’t be entertaining in the same way. Certain categories (e.g. children’s clothing and toys) will see more demand and potentially even product shortages as consumers buy must-have products early.

And with a massive channel shift online accelerated by local store opening restrictions, we might see it hampered by insufficient infrastructure - after all, there’s a limit to how much additional capacity can be built this year.

So, how can retailers respond? 

Retailers will struggle to respond to category and channel shifts, particularly at such a late stage in the run-up to Christmas. Their best approach might be to encourage consumers to shop earlier, shop in-store or buy from other categories.

They should also take the opportunity now to make the shopping experience as seamless as possible: improving customer experience online and in-store, revising stock levels and investing in supply chain, delivery and logistics. Because, while we hope we’re starting to see the back of the pandemic, we know that in times of (di)stress in future, consumers will again revert to those brands that served them well previously.

Methodology

The report is based on a nationally representative survey of 2,013 adults from across the UK conducted between 13-17 November 2020.

Contact us

Lisa Hooker

Lisa Hooker

UK Consumer Goods Leader, PwC United Kingdom

Tel: +44 (0)7802 882562

Kien Tan

Kien Tan

Director, Retail Strategy, PwC United Kingdom

Tel: +44 (0)7880 552726

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