2014 HOLIDAYS - CHANGING LANDSCAPE AND ATTITUDES 2

About This Report

No two holiday seasons are the same, whether it’s an economic swing, unexpected weather or a shift in

gas prices — retailers must be prepared for the consumer response. The 2014 holiday season was by

most accounts a successful season for the retail industry. With a strong national economy and individual

economies, consumers felt confident in shopping for gifts and décor and retailers were prepared with

deals and customer services.

This report provides a brief look at what happened during the 2014 holiday season in retail with

consumer research and economic statistics. Whether you work in the industry or are simply interested

in the trends, you can use this report as a guide to planning for the 2015 holiday season.

The research within in this report can be found in the NRF Foundation’s Retail Insight Center, which is

made possible by KPMG and contains thousands of consumer data points that can be drilled down into

demographic-specific charts. This readily available information is valuable for use in planning and trend

tracking.

For the purposes of this report, “holiday months” refers to November and December, unless otherwise noted.

2014 HOLIDAYS - CHANGING LANDSCAPE AND ATTITUDES 3

Pre-Holidays: Optimistic Retailers & Consumers

In October, NRF forecasted holiday sales to increase 4.1 percent to $616.9 billion, higher than 2013’s

actual 3.1 percent increase during that same time frame. This was welcome news for the industry after

witnessing an often volatile 2014 thanks to weather and wavering consumer confidence.

Economic indicators for consumers were also looking strong. When asked in October if the state of the

U.S. economy would impact their holiday spending plans, four in 10 (41.4 percent) said yes, down almost

20 percent from last year and the lowest amount since NRF first asked in 2009. This continued

throughout the holidays as only 35.6 percent said yes in December. Consumers were feeling positive

about their wallets and about the shopping season ahead of them.

According to NRF’s Holiday Consumer Spending Survey, the average person celebrating Christmas,

Kwanzaa and/or Hanukkah planned to spend $804.42, up nearly 5 percent over 2013’s actual $767.27. The

survey found consumers were planning to spend an average of $459.87 on gifts for their family, up 6.5

percent from $432 in 2013, and $80 on gifts for friends, up from $75 in 2013. Those celebrating the

holidays were also planning to spend more on gifts for their co-workers ($26.23 vs. $24.52 in 2013), and

others like babysitters and even pets ($30.43 vs. $26.65).

Source: NRF Holiday Consumer Survey, conducted by Prosper Insights & Analytics. Asked only those who indicated that they plan to spend on the upcoming holiday shopping season.

2014 HOLIDAYS - CHANGING LANDSCAPE AND ATTITUDES 4

Retailers Retailers Retailers Retailers responded to the expected higher consumer traffic with a push to hire more seasonal responded to the expected higher consumer traffic with a push to hire more seasonal responded to the expected higher consumer traffic with a push to hire more seasonal responded to the expected higher consumer traffic with a push to hire more seasonal

employees.employees.employees.employees. NRF’s holiday employment forecast called for 725,000 – 800,000 new positions. Here are

just a few of the expectations retailers had for their number of seasonal job openings:

86,000

25,000

35,000

45,000

60,000

>67,000

70,000

up 8,000 workers

from 2013

up 17,000 workers

from 2013

2014 HOLIDAYS - CHANGING LANDSCAPE AND ATTITUDES 5

They Either Shopped Early, or They Shopped Late

When consumer confidence in the economy is uncertain, discretionary purchases, such as clothing and

dining out, are often the first to be cut. Since 2009 there has been a shift in how consumers cut back;

men and women differ on what they’re adding to their “do not buy” list of items.

Consistent with 10 years of survey findings, there were plenty of early-bird shoppers in 2014. In an

October survey, four in 10 (40.4 percent) consumers reported they had either already begun or would

start their holiday shopping before Halloween, while 40.9 percent planned to wait to begin in November

(up slightly from 38.8 percent in 2013); 15.5 percent said they’d begin in the first two weeks of December,

which is flat with 16 percent in 2013.

Why do consumers start their holiday shopping before retailers even deck their halls, so to speak? Most

agree it helps them spread out their spending (61.9 percent), half choose to do so to avoid holiday

crowds (51.7 percent), and 51 percent say shopping early helps them avoid the stress of last-minute

shopping. What’s interesting is that these consumers weren’t waiting for the temperatures to drop;

nearly three in 10 (29.9 percent) say they shop for the holiday season year-round, and more than one-

quarter (27.3 percent) say the desire to get their hands on specific items drives them to shop early; 44.744.744.744.7

percentpercentpercentpercent shop early because the deals and promotions are too good to pass up.shop early because the deals and promotions are too good to pass up.shop early because the deals and promotions are too good to pass up.shop early because the deals and promotions are too good to pass up.

2.0%

5.3%

16.2%

27.3%

29.9%

35.0%

44.7%

51.0%

51.7%

61.9%

0% 10% 20% 30% 40% 50% 60%

Other

I am using layaway services

Habit

I don't want to miss out on desired items

I tend to shop for the holiday season year-round

To give me more time to enjoy/celebrate the season

Prices/promotions are too good to pass up

To avoid the stress of last-minute shopping

To avoid traditional crowds

To spread out my gift shopping budget

Why Consumers Start Shopping in October or EarlierWhy Consumers Start Shopping in October or EarlierWhy Consumers Start Shopping in October or EarlierWhy Consumers Start Shopping in October or Earlier

Consumers who Start HolidayShopping in October or Earlier

Source: Prosper Insights & Analytics Monthly Consumer Survey, October 2014. Asked among holiday shoppers who started holiday shopping in October or earlier.

2014 HOLIDAYS - CHANGING LANDSCAPE AND ATTITUDES 6

Online & Mobile Shopping: Not Slowing Down

Holiday shoppers were eager to look online for gifts and other holiday needs: 56 percent planned to shop

online, up from 51.5 percent in 2013 and the most in the survey’s 13-year history. And it’s not just a few

holiday odds and ends consumers are finding online, they’re taking care of a large chunk of their

shopping lists. In fact, the average person planned to do 44.4 percent of their shopping online, the most

since the question was first asked in 2006.

Even if they’re not always checking out their virtual shopping cart, mobile devices are increasingly being

used as a shopping tool: 35.8 percent of smartphone owners claimed they would research products and

prices on their phone, and approximately one in four (23.9 percent) would redeem coupons with their

smartphone. What’s more, during the biggest shopping weekend of the year, millions of Americans took

to their mobile devices to help them find the best deals or scout the best locations to shop.

“Mobile wallet” and “mobile p“Mobile wallet” and “mobile p“Mobile wallet” and “mobile p“Mobile wallet” and “mobile payments” were buzzwords by late ayments” were buzzwords by late ayments” were buzzwords by late ayments” were buzzwords by late 2014. 2014. 2014. 2014. Through an app, a customer

can link a payment service (such as ApplePay or Google Wallet) to a bank or credit account and then pay

for merchandise at a bricks-and-mortar store check-out counter. While this payment option is being

implemented at retail stores across the country, consumers are just as quickly picking up on the

technology: 27.427.427.427.4 percentpercentpercentpercent of of of of average average average average consumers said they would be somewhat or very comfortable consumers said they would be somewhat or very comfortable consumers said they would be somewhat or very comfortable consumers said they would be somewhat or very comfortable

using a mobile walletusing a mobile walletusing a mobile walletusing a mobile wallet;;;; and when broken out by age,and when broken out by age,and when broken out by age,and when broken out by age, 41.1 percent of 25 to 34 year olds are somewhat or

very comfortable using their device to pay for items at the register.

How Comfortable are Consumers with Mobile Payments?

Source: Prosper Insights & Analytics Monthly Consumer Survey, October 2014.

2014 HOLIDAYS - CHANGING LANDSCAPE AND ATTITUDES 7

Thanksgiving Weekend

In retail the spotlight focuses on Thanksgiving weekend. Good prices, great value, unique products and

convenience are just a few of the crowd-pleasers. In 2014, early holiday promotions, the continued

growth of online shopping and an improving economy changed the way millions of people approached

the biggest shopping weekend of the year.

According to NRF’s Thanksgiving Weekend

Spending Survey conducted by Prosper Insights

& Analytics, 55.1 percent of holiday shoppers

were or planned to be in stores and online over

Thanksgiving weekend, down from 58.7 percent

in 2013.

There were a few factors that led to this shift —

and it was not that consumers were just not

shopping. Retailers, recognizing that many

shoppers were not waiting until Thanksgiving to

gather items for the holidays, offered discounts

and promotions earlier in the season. In response, shoppers didn’t feel the pressure to head out to the

stores over the holiday weekend. And, with an improving economy, shoppers also didn’t feel they needed

to brave crowds to save a few dollars.

As a result, those surveyed that weekend said they spent an average of $28 less than they did the

previous year over the same weekend. Total sales for the weekend, according to NRF’s Thanksgiving

weekend survey, showed a slight decrease, mirroring what other industry groups noted as a significant

shift in how and when holiday shoppers want to buy gifts and other merchandise — for both themselves

and others.

Source: Prosper Insights & Analytics, asked among consumers over Thanksgiving weekend.

48.3%

52.1%53.0%

56.0%

58.7% 58.7%

55.1%

45%

47%

49%

51%

53%

55%

57%

59%

61%

2008 2009 2010 2011 2012 2013 2014

Thanksgiving Weekend

Shoppers

Consumers Who Hador Planned to ShopThanksgiving Weekend

2014 HOLIDAYS - CHANGING LANDSCAPE AND ATTITUDES 8

The 2014 consumer The 2014 consumer The 2014 consumer The 2014 consumer waswaswaswas confident in confident in confident in confident in

shopping online and shopping online and shopping online and shopping online and knew knew knew knew that any day that any day that any day that any day

couldcouldcouldcould be Cyber Mondaybe Cyber Mondaybe Cyber Mondaybe Cyber Monday, , , , whether theywhether theywhether theywhether they wewewewere re re re

shopping for jeans or groceries.shopping for jeans or groceries.shopping for jeans or groceries.shopping for jeans or groceries. According to

the National Retail Federation’s Cyber Monday

Expectations Survey, 126.9 million (52.3

percent) holiday shoppers planned to shop

online on Cyber Monday, which was down

slightly from the 131.6 million who planned to

participate in 2013. When asked how they

planned to shop on Cyber Monday, 19.3

percent said they would use their mobile

device, and eight in 10 (84.5 percent) would use

their home computers to shop online.

Cyber Monday may not be holding the same novelty draw as it once had. Online shoppers can shop any

day of the year, and usually find great prices and value-add associated with that experience. Walmart, for

example, reported seeing their highest-ever online traffic and sales during the three-day stretch from

Thanksgiving Day through Saturday. Target, with their free shipping offer through December 20, also

saw record online sales levels throughout the season.

The Results

With retailers prepared and consumers set

to shop, overall holiday retail sales

increased to their highest level since 2011.

According to the National Retail According to the National Retail According to the National Retail According to the National Retail

Federation, total holiday retail sales, Federation, total holiday retail sales, Federation, total holiday retail sales, Federation, total holiday retail sales,

which include November and December which include November and December which include November and December which include November and December

industry sales, increaindustry sales, increaindustry sales, increaindustry sales, increased 4 percent to sed 4 percent to sed 4 percent to sed 4 percent to

$616.1 billion,$616.1 billion,$616.1 billion,$616.1 billion, in line with the projected

forecast of 4.1 percent growth.

Additionally, non-store holiday sales, which

is an indicator of online and e-commerce

sales, grew 6.8 percent to $101.9 billion.

Source: Prosper Insights & Analytics Monthly Consumer Survey, November 2014

Source: U.S. Department of Commerce, retail sales for November and December, does not include automobile sales or gasoline station sales.

3.8%

6.9%

14.5%15.8%

18.9%19.3%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

2009 2010 2011 2012 2013 2014

Cyber Monday Shoppers Using

Mobile Device to Shop

Cyber MondayShoppers

$527.050

$503.810$506.300

$533.120

$558.800

$574.940

$592.660

$616.110

$450

$470

$490

$510

$530

$550

$570

$590

$610

$630

2007 2008 2009 2010 2011 2012 2013 2014

Total Holiday Retail Sales

Total Sales, in Billions

2014 HOLIDAYS - CHANGING LANDSCAPE AND ATTITUDES 9

What You Need to Know for 2015

• Consumers still want a deal, but they’re not going to fight over it. Consumers still want a deal, but they’re not going to fight over it. Consumers still want a deal, but they’re not going to fight over it. Consumers still want a deal, but they’re not going to fight over it. With the economy

improving, gas prices low and unemployment still ticking downward, consumers are a little less

likely to hold out on purchasing an item if they need or want it right now. That’s not to say they

don’t need a promotion to convince them to purchase: 26.6 percent of women and 17.7 percent

of men report they only purchase clothes if they’re on sale.

• It’s official: the IIt’s official: the IIt’s official: the IIt’s official: the Internet has changed the game for the holiday season. nternet has changed the game for the holiday season. nternet has changed the game for the holiday season. nternet has changed the game for the holiday season. Consumers are

becoming increasingly comfortable with making purchases online and on their mobile devices.

These shoppers are not waiting for the weekend to hunt for gifts; they’re watching for

promotions in their inbox and ordering gifts on their own time.

• Smartphone owners are comfortable using their phone as a shopping companion Smartphone owners are comfortable using their phone as a shopping companion Smartphone owners are comfortable using their phone as a shopping companion Smartphone owners are comfortable using their phone as a shopping companion — even if even if even if even if

they’re not on they’re not on they’re not on they’re not on board (yet) with mobile payments. board (yet) with mobile payments. board (yet) with mobile payments. board (yet) with mobile payments. The 2015 consumer is in the habit of

keeping her phone in-hand (or close by), and retailers who optimize their mobile site or app for

a greater in-store experience might gain an edge over the competition.

Retailers not fully on-board with mobile might be missing out, but most are eager to meet

consumer demand: Nearly seven in 10 (69.1 percent) retailers polled in Shop.org’s eHoliday

survey said they had invested in optimizing their mobile websites prior to the 2014 holiday

season.

• There is no shopping seasonThere is no shopping seasonThere is no shopping seasonThere is no shopping season — consumerconsumerconsumerconsumers like to shop early, and late s like to shop early, and late s like to shop early, and late s like to shop early, and late — and even in and even in and even in and even in

between if the deals are good enoughbetween if the deals are good enoughbetween if the deals are good enoughbetween if the deals are good enough.... Both consumers and retailers are breaking the tradition

of keeping holiday shopping and promotions to the days between November 1 and Christmas

Day. With nearly half of those celebrating the holidays shopping before November and the other

half waiting until Thanksgiving weekend or later to start their shopping, retailers are planning

their promotions accordingly. Several companies benefited from front loading their holiday

promotions in late October and early November, while others pushed the limits by offering

unique shipping and online promotions in the final hours to attract procrastinators.

• Seasonal employees are critical to a successful retail holiday season. Seasonal employees are critical to a successful retail holiday season. Seasonal employees are critical to a successful retail holiday season. Seasonal employees are critical to a successful retail holiday season. Holiday hires help

ensure that retail stores are adequately staffed for the influx of customers, especially when

consumers are fiscally ready to hit the stores. In the digital age there is an added level of

importance to a well-staffed store. Retailers must be prepared to exceed expectations on in-

store customer service. Part of the focus in recent years during the holiday season has been

adding sales force to manage traditional holiday lines and crowds with mobile check-out options.

Some companies even up their staff in warehouses and distribution centers, not traditionally

recognized by actual shoppers but crucial nonetheless.