A Christmas like no other?

Michael Worledge - Head of Financial Services Research

The content below is based on data from Wave 11 of our 2020 Consumer Barometer Study, with interviewing taking place between 1-6 October 2020.

Throughout our barometer, we have observed how sentiment amongst UK consumers towards personal finances has developed during 2020:

  • The proportion of consumers planning to save more money for a rainy day once the pandemic is over rose steadily from an initial 26% at wave 1 to 44% at wave 8 but has since stabilized, with 41% stating this in our latest wave
  • More recently, there has been more of an increase in intention to budget better once the pandemic is over, rising from 28% at wave 7 to 37% in our latest wave.

With a third (33%) of UK consumers worrying more about money than they did before the pandemic, what does this mean for how they are approaching Christmas?

Half (49%) of consumers agree they are expecting to spend the forthcoming holiday season differently this year, and they also appear to be thinking differently about money.

The financial impact of the pandemic is evident in how people are feeling towards paying for Christmas, with 18% feeling very concerned (rating 8-10 out of 10) about being able to afford the holiday season.

40% expect to use or will consider using credit (credit cards, retailers’ own brand credit accounts, PayPal Credit, Klarna etc) to delay payment of shopping for the holidays and spread the cost over time.

With increased levels of disposable income being deposited into savings accounts this year, 24% of consumers have been able to save more for the cost of Christmas. Yet a similar proportion (18%) have saved less than last year.

Even though similar proportions have saved more and less, consumers are generally expecting to spend less on typical seasonal items:

  • Pre-holiday festivities & socialising, 42% expecting to spend less on this
  • Presents/gifts, 30%
  • Sales over the holiday season, 28%
  • Food, 27%

Among those expecting to spend less on gifts this year, changes to their financial situation and uncertainty around what the future holds are key reasons given:

  • More concerned about the financial situation, 43%
  • Want to save money due to the uncertainty, 40%
  • My personal finances have changed this year, 39%

On the other hand, among those who are expecting to spend more on gifts, the main reason is ‘looking to make Christmas extra special this year given the pandemic’, 42%.

How people think they will go about shopping this year is also likely to change. Unsurprisingly, 40% of people are expecting to buy more gifts online this year.

November is the month when the largest proportion of consumers (40%) expect to do most of their shopping, with a further 19% expecting to do so in October.

Perhaps not wanting to spend as much or simply because they may not be seeing as many people over Christmas, many consumers (39%) are planning to be more selective about who they choose to buy gifts for.
The gift categories that most people are planning to buy are:

  • Fashion/clothing, 34%
  • Fragrances, 34%
  • Cosmetics/beauty, 33%
  • Gift cards, 32%
  • Technology/electronics, 24%

This Christmas though, many consumers are also looking for something a bit different in the sales, with 30% planning to review where their money is saved over the holiday season.

The pandemic will impact consumer spending this Christmas, with some not able to afford as much and others choosing to spend less because of increased uncertainty.

Many consumers will take the opportunity to take stock of their financial situation, and the extra burden of Christmas spending will mean they need similar reassurance and support to that which was very visible in the early weeks of lockdown. It remains important in these times to ensure the tone and content of messages resonates with consumers.

With interest rates on savings accounts at very low levels, financial providers will need to find alternative ways to appeal to customers and their savings. Ensuring propositions are optimised for the target audience’s needs and the ‘next normal’ is key.