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Consumer holiday spending is likely to return to pre-pandemic levels this year: KPMG

Matt Kramer, KPMG National Sector Leader for Consumer and Retail, discusses the new survey which shows consumers are ready to spend more on holiday shopping than they did last year.

Video Transcript

SEANA SMITH: Adam, let's turn to the retail sector and talk about what we could expect this holiday season. KPMG is out with its consumer pulse survey report ahead of the season. And it looks like consumers are ready to spend. So we want to bring in Matt Kramer. He's KPMG's national sector leader for consumer and retail.

Matt, it's good to see you. I'm looking at these findings here. 83% of respondents whose employment was impacted by COVID, they are back at work right now. About a third of respondents say that their spending has returned to pre-pandemic levels. So how strong of a holiday season should we be expecting this year?

MATT KRAMER: Yeah, I'm so glad you started with the positives because we're certainly thrilled that through our survey-- we've been doing this about every couple of months during COVID-- that it was largely positive. Certainly, the return to work-- and those were for people that were impacted by layoffs or reduced hours or furloughs-- about 83% of those are back. And that's up from 65% the year before.

They're also planning to spend more money, which is a consistent theme. We saw not only the consumers saying they plan to spend about 5% more on gifts, but we surveyed the retail executives, and they're typically a little bit more optimistic. They said they expect about 7% more of retail sales.

And then probably the most exciting is consumers are planning to get out and about during the holiday season. They want a little bit more normal holiday season this year. And they're looking to get back out on Black Friday. We're expecting double the amount of people to participate in Black Friday sales. And then certainly, they're getting geared up to participate in holiday gatherings, whether that's with family or friends. So, about 38% increase in holiday gatherings. So consumers are excited about the holiday season for sure.

ADAM SHAPIRO: There was something else that I wanted to dive deeper with you about, which was that 55% of the respondents report income recovered to pre-COVID-19 levels. An additional 12% claimed their household income is higher than pre-COVID-19 levels. We've had guests on the program. We've talked about the fact that the lowest income quintiles actually benefited from the safety programs that were put in place by the last administration and this administration to help people get through COVID. So it doesn't sound as if those funds have been depleted yet. I mean, is that where this increase is coming from?

MATT KRAMER: Yeah, certainly, there was benefits through stimulus and way more benefit during this downturn versus the financial crisis. But I think what you're seeing is, is there's so many jobs available that retailers and other businesses are really pushing to get those workers back into the workforce. And you're seeing wage rate go up, and consumers are earning more. So although there isn't any expected increase in stimulus or more stimulus this holiday season, people are just earning more and back to work, which is exciting.

SEANA SMITH: Matt, what about supply chain issues? Did you get a sense of whether or not people have started or are planning to start their holiday shopping a little bit earlier this year?

MATT KRAMER: Yeah, this is the one that clearly stands out. And it's grabbing the headlines almost on a daily basis. Certainly, we saw, both in our consumer survey as well as our retail executive survey, concerns about shortages. Consumers are very cued into this. 54% of them said they expect somewhat or significant concern about stock-outs or inventory shortages. Retail executives, even much higher than that-- 82% are concerned somewhat or very concerned.

And it's a really difficult issue. Certainly, what our consumers are saying is that they expect to shop much earlier. About 10% more plan to start in October than the previous year. And retailers are doing everything they can to get the shelves filled. Some of the things they're focused on is certainly adding more safety stock, looking at alternate suppliers.

To the extent they have opportunities in their margins to airfreight stock, they're doing that. They're also reducing their discounting to make sure that inventory stays on the shelf longer. So, a lot of effort, both on the consumer side to start earlier, as well as the retailers to do things to keep the stock shelves filled.

ADAM SHAPIRO: Is there any kind of coordinating body with this issue of panic stocking? When it's just us consumers, it's panic buying. But is there anybody who coordinates to avoid the kind of excesses that take place when you make a panicked decision? Because a lot of waste takes place, and after the holiday season, if they're panicked stocking, get ready for the fireside sales. I mean, January and February are going to be cheap.

MATT KRAMER: Yeah, that's starting to be talked about quite a bit, is, when traffic dies down [AUDIO OUT] the calendar year after the holiday season, what are retailers planning to do. I do think they've been very in tune with their supply chain and if they have the opportunity to cancel shipments that clearly aren't going to arrive on time, that are very seasonal in nature, they're making those efforts to do that.

But there still is risk that your visibility around your supply chain is so depleted compared to previous years that you're going to get things, even with all the diligence you've done, later than you expected. And therefore, in the calendar year, you're going to see certainly discounts on anything that's left over and certainly opportunities for consumers to take advantage of that.

SEANA SMITH: And Matt, when we take a look at how people are planning to spend, last year was all about people spending more and more online. Is that going to continue, do you think, to be the case this year?

MATT KRAMER: Yeah, yeah, for sure. Here's where you get a double positive. Certainly, the in-store traffic is going to be much higher this year than last year. It's not quite up to the 2019 levels. But people participating in Black Friday, people eager to get out and socially interact are going to increase your store sales, your store traffic.

But the thing that probably wasn't as noticeable before we did the survey is digital continues to march on. It's amazing. This year, we're seeing about 60% of the consumers expecting to shop online. That's about eight points higher than the prior year. And when you think of what the prior year brought us, it was a completely unvaccinated population. So you would expect a heavy, heavy dose of digital sales. Consumers enjoyed their experience last year. They're planning to continue it this year. So digital clearly just marches on.