The Holidays: America’s $1 Trillion Industry
This article is part of a series of insights into what an Average American life really looks like.
When it comes to Christmas, Americans are the world’s biggest spenders. Overall, American consumers will spend more than $1 trillion for Christmas this year, during the four weeks between Thanksgiving and Christmas Day. A significant chunk of that spending will take place digitally this year, with the National Retail Federation expecting online and other non-store sales to increase between 20% and 30% year-over-year to an all-time high of between $202 billion to $218 billion.
The total cost of festive celebrations per household, including food and drink, will be close to $1,500.
Holiday retail spends surpasses the $1 trillion mark
In 2019, total retail spending was up 3.7% to $1.007 trillion, marking the first-ever trillion-dollar holiday season. Brick-and-mortar sales grew 2.4% to $869.40 billion, while ecommerce posted a more respectable growth rate of 13.2%, reaching $137.55 billion.
Credit cards and Christmas spending
Many people open new credit cards during the holiday for two reasons: first, there tend to be more offers to choose from. And second, consumers often need a larger line of credit to keep up with Christmas-related expenses.
A survey conducted by Ascent on behalf of the Motley Fool examined the types of credit cards people were opening:
· 5.1% opened a cash back or rewards card,
· 4.8% opened a new credit card with a 0% introductory APR,
· 4.8% opened a store card,
· 3.2% opened a balance transfer card, and
· 1.7% opened a travel card.
Post-Christmas debt
The uptick in spending many consumers experience during Christmas can all too easily result in debt. And that’s a troubling way to kick off the new year.
According to the research done by the Motley Fool, 21.5% of Americans racked up holiday debt in 2019.
As far as paying off that debt goes, 27.5% of people who went into debt have no idea how they’ll go about it. Meanwhile, 15.6% will rely on a 0% intro APR card to knock out their debt, but it’s important to note that getting approved for one of these cards generally hinges on having good credit to begin with. The same holds true for the 13.8% of consumers who expect to pay off their holiday debt via a balance transfer.
On the other hand, 13.4% of people think they’ll turn to a personal loan or other financial product to pay off their debt. Finally, 29.7% of those who came away from the holidays with debt in 2019 are relying on a tax refund to pay it off. The IRS generally starts accepting tax returns in late January, and those who file early could get their refunds much sooner than the average American, thereby minimizing the interest they rack up on their debt.
What to expect this year
One thing we do know is that COVID has led to a shift in holiday-spending priorities. The NRF predicts that one in five (19%) holiday shoppers who typically travel for the holidays will stay home instead this year. Over half (53%) of those who have changed their holiday travel plans will likely spend more on family and friends this year, specifically because they will not be traveling. With a new round of stimulus checks on the way, we may indeed see another $1 trillion holiday this year.
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