Holiday spending takes on new strategies

It's 65 days away, meaning standard households have four to five paychecks left for the holiday season. Until then, budgeting is top priority for many Americans. But a survey reveals while consumers are mindful of household budgets, holiday spending is expected to stay strong. And instead of pulling back, shoppers are changing strategies. For more on the findings of consumer survey by accounting firm KPMG, Dilip Rodrigo of KPMG joins us now with much more on this. Thank you, Dilip, for joining us this morning. Andre, good morning. Thank you for having me. And you're right, shoppers aren't pulling back despite worries about budget pressures and inflation. We're expecting holiday spending to be up by about 5% this year. 5%? All right, so the survey, what is it telling you about consumers heading into the season? Why have they not changed their habits, considering what we've heard about the economy as of late? Well, Andre, you were right. Like 80% of the consumers are telling us that they're worried about inflation. But however, consumers are also spending smarter this year. They're trying to figure out how do I use technology? How do I spend change my spending habits? Where do I cut costs? And how do I spend smarter to be able to accommodate for my holiday shopping? And speaking of that, we have higher interest rates making credit card debt more expensive. How are shoppers altering those payment habits, and how are tools like Buy Now, Pay Later factoring into all of this? We're certainly seeing a change in terms of spending habits from last year to this year. Last year, shoppers were using more credit cards, and this year they're shifting away to more debit cards. They're trying to avoid that January debt hangover that's coming through. And of course, yes, we are seeing buy now, pay later, you know, being used more and more for holiday shopping. And we think that that will be a trend this holiday season. Why is it? Is it because the the cost of that is less than using a credit card, perhaps? That's exactly right. I mean, especially with debit cards. And if you can pay off those those balances, you know, in a timely manner, you should be able to kind of avoid the longer term credit card hangover that you typically see. And Andre, the other thing that shoppers are doing is they're using AI more and more to be able to shop smarter this holiday season. How are they doing that? What kind of tools or what are they asking the AI? Explain how that's working. Yeah, there's three ways that shoppers are using AI this holiday season. The first is to compare prices. They're also using AI to find promotions, and they're also using AI to find product reviews about what they should buy and what's the quality of those products. So by being smarter in the way they shop, you know, shoppers and consumers are really leveraging this technology to be able to find the product that they want at the price point that they want. You know, they say necessity is the mother of all invention. Of course, that's what people are doing. They're like, hey, how can AI help me save some cash, right? On the travel front here, Dilip, people are choosing longer stays and premium experiences despite tight budgets. What does this reveal about where consumers draw the line on value versus luxury? So when it comes to travel, I would say that the mindset for shoppers right now is that I'm going, you know, I'm going on this trip. And what it tells me, it tells us about sort of the luxury aspect is that we start seeing this trend that consumers want more experiences and that they will continue to invest in those experiences. And a couple of things that you just mentioned. One is we are seeing that these trips are getting longer, so they're staying longer when they go on these trips. And second, you know, that that top end of that consumer that especially when we talk about this K-shaped economy, that top end of that consumer is looking for more luxury travel and they're willing to spend more on their stays as they as they travel this season. Over half of consumers say they plan to buy gifts for themselves this year, a trend continuing for the fourth year. in fact is self-gifting taking budgets away from like traditional gift giving or is this in addition to overall uh spending here yeah self-gifting also has been a trend over the last few years so if you find yourself you know buying a gift that says to me from me well you're you're you're you're in good company about 50 to 60 percent of our uh consumers that we surveyed said that they are going to be um you know self-gifting and those self-gifting numbers are going up uh a little bit as well year over year and the other thing that we're seeing is when we ask consumers so why are you self-gifting we see two reasons for it one is that you know they want to reward themselves a little bit or sometimes are being a tough year and they're looking for those moments of joy that they can capture by buying a gift for themselves and the second is they do expect really good deals happening this year. So as you look at sort of promotional deals happening during the holiday season, you may be getting something that you want for yourself anyways, something that you really need. You know, and they're probably rewarding themselves for shopping smarter too, right? Rodrigo, KPMG's U.S. sector leader for consumer and retail. Thank you so much for joining us and providing your insight this morning. We truly appreciate it. Thank you for having me, Andre. Have a great one. Of course, you too.