The Commerce Department reported that consumer spending fell for the second straight month since April of this year in its November print. For the months of October and November 2020, consumer spending fell .1% and 1.1%, respectively. Retail spending was 7.1% higher in November than this time last year. Markedly, online retailers saw spending increase by 29% from this time last year, while food and drinking establishments saw spending decrease by 17% since last year.

According to the market research firm The NPD Group, impulse buys will be less frequent this year as consumers rein in their spending habits this holiday season. Since would-be customers are avoiding physical stores, there are less opportunities to drop extra items into their shopping baskets. The soaring cases of Covid across the country, stricter government measures and lack of stimulus support from Congress have all contributed to the decrease in consumer spending.


Traditionally, the holiday season is the high point of the retail year when last-minute holiday shopping increases the rate of impulse buying. Elaborate displays and festive decorations herald the start of the holidays, regaling customers with new product releases and eye-popping doorbusters starting on Black Friday. Holiday-themed products and "stocking stuffers" are promoted as easy holiday gifts to toss into shopping carts to help celebrate the season. According to a 2018 Google/Ipsos study, 1 in 3 purchases during the holiday season are previously unplanned purchases made on impulse, which includes in-store purchases.

With 2020 being the year of the unexpected, shoppers have largely taken visiting stores out of the equation. Retailers who have been tasked with complying with health guidelines were keen to start the holiday shopping season as early as Halloween in an effort to avoid crowds at stores. When Amazon (AMZN  ) held its Prime Day in October, Target (TGT  ), Best Buy (BBY  ) and Walmart (WMT  ) announced their respective Black Friday deals. Between shoppers largely avoiding brick-and-mortar stores and this year's longer shopping season, long hoped for impulse buys haven't panned out. NPD notes that impulse shopping normally makes up one quarter of holiday retail sales in a given year. In 2020, that figure will likely hover between 18% to 20%. Those lower estimates point to between $5 billion to $7 billion in losses for retailers.

Already hard-hit small businesses are especially feeling the brunt of the lackluster holiday shopping season this year. Those that are able to respond by shifting sales online are offering options such as curbside pickup or delivery. Small retailers don't always have the ability to quickly pivot to online sales, and not being able to participate in holiday fairs and markets this year has added further economic stress. In a survey of small business owners, American Express (AXP  ) reports that 62% of small businesses are warning they cannot stay solvent unless consumer spending returns to pre-pandemic levels.

If the decline in spending month-to-month continues, the fallout going into Q1 could result in further acceleration of the bankruptcies that were seen this past spring for retailers, large and small. Store brands who are able to craft a seamless shopping experience from in-store to online most effectively will continue these efforts to streamline ecommerce experiences. Walmart is touting "Last Minute Deals" that can be picked up in time for Christmas. Brands utilizing ecommerce will gain sales by offering more of a community experience for a quarantine-weary public. With shoppers spending more time on social media during the pandemic, retailers will be reaching out to customers via newsletters and games to promote their products.

Regardless of the path retailers take in navigating lower than expected sales, choosing a strategy may prove to be a make-or-break decision going into Q1 2021.