E-commerce spending likely to increase 15-17 percent

November 21, 2017 — With just days to the official start of holiday shopping, ‘tis the season to be jolly: most Americans are feeling more confident than last year¹ as the U.S. economy continues to expand and job growth remains steady. However, stagnant income growth and weak price inflation will likely limit consumers’ holiday retail spending, expected to grow at a moderate 3.5-4.0 percent pace,² according to Visa’s estimates based on the Visa Retail Spending Monitor (RSM), which reports spending on all forms of payment. The biggest boost is likely in online holiday shopping.

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Holiday retail spending, YoY growth, 2012-2017(f)

Source: Visa Retail Spending Monitor (spending on all forms of payment), retail sales excluding autos, gas and restaurants, Q4 

E-commerce is expected to drive holiday spending growth again this year as more shoppers turn to their phones and computers to purchase gifts. Total online spending is expected to rise 15-17 percent YoY,³ below the 19 percent growth in 2016. This marks two years of rapid e-commerce growth, compared to a more modest 14 percent gain in 2015. 

While the shift to online shopping is good news for online retailers, it puts traditional brick-and-mortar retailers to the test. Spending in the first nine months of this year may foretell what is to come this holiday season: Many industry verticals, including clothing—where holiday spending represents a large share of revenue for the year—posted double digit e-commerce growth, while face-to-face declined, according to the Visa Spending Index. 

Other holiday spending highlights this year:     

• Consumers plan to do nearly half of their shopping online (48 percent), according to a Visa consumer survey⁴—a steady increase from 47 percent in 2016 and 46 percent in 2015.  Convenience is Americans’ primary consideration when choosing to shop online, followed by better prices. 
• The average amount consumers say they will spend overall this year has dropped slightly from previous years to $419, down from $433 in 2016 and $442 in 2015—with consumers over 55 indicating they will spend the most, at nearly $472 on average this holiday season.      
• Between November and December, consumers tend to shift their spending from essentials (grocery, warehouse, etc.) to gifts like clothing, sporting goods and jewelry instead, according to the Retail Spending Monitor. The most significant shift in December is the increase in e-commerce shopping—with consumers opting to avoid the long lines and cold weather by staying home and shopping online.      
• Regional economic trends may also impact holiday shopping. Rapidly growing economies along the Pacific coast and throughout the Western Rockies are most likely to lift national spending overall, followed by markets along the Atlantic Seaboard, including New England and economically-dynamic areas of the Southeast.⁵ Weaker economic growth will likely dampen holiday cheer in other regions of the U.S., including the Oil Belt, Great Plains states and the Midwest.
   

¹ Consumer Confidence Index, Conference Board

² Retail sales excluding autos, gas and restaurants (4Q2017)

³ E-commerce indicator, excluding recurring payments, mail order/telephone order transactions, VisaNet (all forms of payment)

⁴ Online survey of American consumers on behalf of Visa by Prosper Insights & Analytics, October 2017

⁵ Visa Business and Economic Insights; Bureau of Labor Statistics; Retail Spending Monitor (spending on all forms of payment), retail sales excluding autos, gas and restaurants, Q4