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Key findings
- Rising travel expenses are contributing to an increase in holiday spending.
- Physical stores remain a central part of holiday shopping.
Holiday shoppers are considering a brand’s ethics and sustainability performance.
- Second-hand shopping is growing in popularity.
Canadian consumers plan to ramp up their spending this holiday season. Yet they’re determined to find savings, cut back on discretionary spending and creatively stretch their holiday budgets.
They’re thoroughly researching and comparing products, seeking promotions and discounts with greater sophistication. Visiting shops in person is crucial in this process, as consumers consider in-store shopping a central part of their holiday experience.
But consumers covet more than just low prices. They want greater value in return for their holiday dollars. Consequently, they’re seeking higher-quality items, buying second-hand products and expecting brands to embrace sustainability values that match their own.
To better understand what matters most to shoppers this holiday season, we surveyed 1,000 Canadian consumers late this summer. Here’s what they told us.
Consumer spending in Canada: A season of gifts, gatherings and getaways
Canadian consumers plan to spend an average of $1,853 on gifts, travel and entertainment this holiday season, a 13% increase over last year. At the same time, their economic outlook is brightening as inflation and interest rates decline: 65% believe the economy will stabilize or improve over the coming months, up from 48% a year ago.
But the rise in spending intentions doesn’t necessarily mean all consumers plan to buy more. Shoppers are conscious of recent price increases and recognize they need to spend more to obtain many of the same products and services they regularly purchase. Indeed, 81% told us they expect to see higher prices for all items this year.
When examining generational spending habits, we found younger consumers plan to spend the most and increase their holiday budget over last year (see chart). This trend coincides with more Gen Z consumers entering the workforce and gaining additional disposable income. At the same time, many millennials are advancing in their careers and shopping for their growing families.
How holiday spending plans vary across Canada
Younger consumers set to bring cheer to retailers this holiday season
Use the drop-down filter to compare the spending intentions of different age groups. Percentages show year-over-year changes.
Holiday travel expenses plummeted during the pandemic but have jumped 59% over the last two years as consumers spend more to visit friends and family or take vacations together. Spending on gifts also increased over the same period, though by a more modest 9%. A closer look at these gift-buying patterns reveals several emerging trends as younger consumers forge their own distinct holiday shopping habits:
Gen Z starts shopping earlier. Consumers of all ages plan to do most of their shopping between Thanksgiving and Black Friday weekend. But 21% of Gen Z respondents (compared to 11% overall) told us they’ll complete most of their shopping before Thanksgiving.
Gen Z prefers giving physical items over gift cards. Apparel (56%), cosmetics and beauty products (56%), jewelry and accessories (55%), toys (51%) and alcohol (50%) top the shopping lists of Gen Z gift-givers. In contrast, millennials, Gen X and baby boomers rank gift cards as their top or second-most-common gift to buy.
Gen Z is exploring digital payment methods. Credit cards (74%) and debit cards (51%) are the most popular payment methods among all generations. But Gen Z shoppers use digital payment methods more often than other consumers. This includes PayPal (44%, compared to 31% overall), Apple Pay and Android Pay (35%, compared to 14%) and buy now, pay later platforms (11%, compared to 5%).
Shoppers search for savings
Consumers revealed they’d spend more than last year when they added up their estimated 2024 holiday expenses. But at the same time, many want to limit their spending. When asked to compare their spending intentions to last year, 77% said they want to spend the same amount or less. This suggests that while consumers recognize they’ll pay more for many products this holiday season, they'll aggressively try to reduce their expenses.
This cost-conscious mindset has consumers stretching their holiday budgets further (see chart). Many millennials, Gen X and baby boomers said they’d switch to brands that offer more compelling loyalty program perks to get more value for their money—a finding that underscores the importance for retailers and consumer goods companies to explore what differentiates their loyalty program from competitors.
But loyalty programs don’t appeal as much to Gen Z consumers, many of whom are apt at discovering new brands on social media and other platforms. They said they’re more likely to buy higher-quality products that last longer (39%), dip into savings (38%), use retail financing options (33%) and buy second-hand items directly from a brand (33%) to make their holiday budget go further.
Consumers will switch brands to stretch their holiday budget
Question: What steps, if any, will you take to stretch your holiday budget further this year?
As they look for savings and greater value, consumers are also trimming their spending in other areas. Eight in 10 told us they plan to make cutbacks in the coming months, particularly on discretionary items such as dining out and ordering food from restaurants (mentioned by 51% of respondents), clothes shopping (41%) and buying high-value items such as jewelry (36%).
As consumers try to curtail their spending, we’re seeing retailers and consumer goods companies respond by reducing their own expenses. Many are streamlining their operations and removing incremental costs by using generative artificial intelligence and machine learning technologies to automate processes. For example, large chains are automating their transportation planning, inventory forecasting and stock replenishment processes. In other cases, retailers of fast-moving consumer goods are assembling pallets so that all products destined for the same aisle are packaged together.
These companies that reduce their operating costs can better provide the savings that consumers are prioritizing this holiday season. When asked what’s most important when holiday shopping, consumers ranked financial factors—such as prices (75%), free shipping (69%), product quality (62%) and promotions, discounts and sales (61%)—above other considerations such as delivery speed (49%) and positive reviews (44%).
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Learn how our team is helping retailers and consumer goods companies find savings by streamlining their operations.
The evolution of in-store holiday shopping
Consumers still consider in-store shopping an important part of the holidays. Nearly one in five (17%) told us they shop in physical stores more often during the holidays. This segment of shoppers is important for retailers, as these consumers intend to spend 9% more during the holidays than the average Canadian consumer.
To be sure, many consumers also shop online. One notable trend is the growing use of brand and retailer websites. Consumers told us they increasingly use these websites for researching products (cited by 46% of consumers, up from 38% last year), comparing items (48%, up from 31%) and purchasing goods (33%, up from 22%). This creates valuable opportunities for brands to build trust and direct relationships with customers, especially since Canadian consumers prefer to research products using search engines such as Google over Amazon and other online marketplaces (51% versus 44%).
But consumers told us that visiting physical stores is integral to their seasonal shopping, especially as the holidays draw closer (see chart). Visiting stores in-person is a top method for discovering gift ideas (cited by 60% of consumers), comparing items (51%) and purchasing products (65%).
%
of consumers will search for holiday deals by browsing in-store.
What draws consumers to shop in-store? The festive spirit is one part. Nearly a quarter (23%) mentioned holiday displays and atmosphere, and 15% said they make an event out of their holiday shopping trips. But those draws were overshadowed by opportunities to see and touch products (51%), the ability to purchase items on-site (41%) and promotions (40%). Many consumers also believe they can save money by visiting physical stores: 44% of consumers say they look in-store for offers and deals.
The evolving role of in-store shopping lets retailers reimagine their physical storefronts. For example, retailers often no longer need to stock every item in-store, provided the inventory is still readily available. Employees with the right digital tools can find items for customers and have purchases delivered to the consumer's preferred location—be it the store, their home or other designated pickup location.
This lets retailers reconsider their square footage requirements, experiment with small-format stores and repurpose space to create new experiences for consumers. Retailers that rethink their fulfillment strategy and strategically place their inventory across the right mix of central distribution centres, stores and other locations close to customers can operate more efficiently. They can also use their physical stores to engage customers in new ways, including through new retail technologies.
Consumers specifically highlighted the importance of in-store digital services that streamline the payment process. These include self-checkouts (46%), digital receipts (46%) and mobile payment solutions (40%). But many consumers—particularly younger shoppers—also underscored the value of technologies that create a more tailored in-store experience. These include a store or brand app (cited by 45% of all consumers and 77% of Gen Z) and real-time, personalized offers sent to their smartphone (37% overall and 65% among Gen Z).
These technologies are the starting point for retailers to enhance their relationships with consumers through clienteling—a personalized customer service approach that uses customer data to offer a tailored shopping experience. Retailers that create customer profiles that incorporate purchasing history and insights collected by store associates—such as a preference for straight-cut jeans over baggier styles, for example—can send consumers more relevant offers. They can also provide more meaningful in-store experiences based on the customer’s individual interests.
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How to meet consumers’ sustainability expectations
Our previous research shows Canadian consumers care about sustainability—and will pay more for it. This holiday season, 73% of consumers said ethical business practices are an important factor when choosing the brands they buy from. That’s the highest-ranking environmental, social and governance (ESG) factor after product safety and quality (81%).
Brands can earn consumers’ trust by making sure that ethical practices are upheld throughout their supply chains. This is a business imperative for many companies. Canada’s modern slavery rules require many organizations to disclose how they prevent and reduce the risk of forced and child labour in their operations and supply chains. Looking beyond primary suppliers and focusing on raw materials and ingredients—such as how organizations process cotton for t-shirts or harvest tomatoes for pasta sauce, for example—can help retailers and consumer goods companies reduce modern slavery risks in their supply chains.
A notable number of consumers also shared sustainability concerns when discussing their holiday grocery shopping plans. Granted, value and cost savings are still top of mind: consumers prioritize product quality (cited by 62% of respondents), low prices (59%) and special offers and discounts (55%). But when we analyzed the data closely, we found four distinct personas of holiday grocery shoppers—each with unique preferences:
Holiday shoppers’ sustainability priorities
Question: How important are each of the following when choosing the brands or retailers you purchase from during the holiday season? (Figures show respondents who said very or moderately important.)
Consumers also told us about the need for value and sustainability elsewhere in our survey. For example, we saw a notable increase in intentions to buy resale, upcycled or used products (42%, up from 31% last year) and shop with retailers that offer rental programs (29%, up from 16%). These options are even more popular with Gen Z and millennials: 59% will shop for resale items and 50% will visit retailers with rental programs this holiday season.
This interest may stem from consumers’ search for value as much as the growing emphasis on responsible consumption: 28% told us they’d buy second-hand or refurbished products specifically to stretch their holiday budget further. Nevertheless, it shows the growing market for various circular business models.
Many consumers believe that not every product they purchase needs to be brand new. And they expect the brand-new products they do purchase to last, particularly as the right-to-repair movement gains further momentum. Retailers and consumer goods companies can capture a share of this market and add value through services such as product authentication, product repair and curated collections that let them charge a premium over similar items sold through peer-to-peer platforms or charity stores.
Manage your supply chain risks
Transform compliance into a source of long-term value
Building brand trust and loyalty beyond the holidays
Retailers and consumer goods companies can use the holiday shopping season to gain deeper insights into the preferences, behaviours and priorities of their customers. This understanding lets them engage in meaningful trust-building efforts rooted in brand building, responsible practices and solid performance. Ultimately, this can give retailers a competitive edge by helping them earn the sustained loyalty of Canadian consumers that extends beyond the holiday season.
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