It's Beginning to Look a Lot Like an E-Commerce Christmas

By Markets Fool.com

The bad news keeps on coming for traditional bricks-and-mortar retailers.

Continue Reading Below

A new survey of more than 5,000 consumers in the United States conducted by Deloitte shows that 50% of Americans plan to shop online for holiday gifts, spending nearly half of their budget (47%) online. In addition, the research company's 31st annual holiday survey of consumer spending intentions and trends shows that physical stores can expect less traffic.

The number of respondents planning to visit physical stores dropped overall with pretty similar numbers across the major types of stores. Standalone big-box retailer stores will see traffic drop from 63% of consumers in 2015 to 59% this year, according to the survey. Malls will fall from 53% to 50% and independent stores not located in malls will go down from 42% of the shopping public to 38%.

Overall this may not be bad news for bricks-and-mortar companies with a robust online presence, specifically ones that integrate physical and digital shopping. That may mean companies including Wal-Mart (NYSE: WMT),Target (NYSE: TGT), and Best Buy (NYSE: BBY) make up for a drop in in-store traffic with digital sales while companies like Sears and Costco that have less-developed digital operations suffer.

Best Buy is one of the chains that is well-positioned to profit from a mix of digital and online sales. Image source: Best Buy.

Shopping trends are changing

Continue Reading Below

For the 2016 holiday season, the internet has become the shopping destination of choice, beating out all other options. That was true last year as well, but the lead has increased with 50% of consumers saying they will buy holiday gifts online while the No. 2 category (discount/value department stores) came in at only 43%.

But just because people are going online to buy holiday items does not mean physical stores are no longer important. The Deloitte report found that there are lots of shoppers looking in stores and buying online and a surprising number doing the opposite -- looking online, but buying in a store. That's whyDeloitte Vice ChairmanRod Sides believes the way people shop online will have a profound impact on holiday spending this year.

"Retailers must cater to that digital mindset long before someone walks into a store," he said in a press release. "If retailers treat online and in-store shopping as mutually reinforcing rather than competitive forces, they can create more opportunities across the business. Customer expectations are being shaped as much by the digital experience as the in-store experience. As a result, retailers should map digital features that matter to the consumer to their brand."

Showrooming versus webrooming

For years, retailers -- specifically Best Buy, but also Wal-Mart, Target, and other players -- complained about "showrooming," the practice where people did their research in stores before buying online. That's still a problem, but Deloitte found that things go in both directions.

The company's research found that 50% of shoppers will showroom, but an even bigger number (66%) will "webroom," that is look at an item online then buy it in a store. In addition, 43% of those surveyed say they expect to take advantage of retailers that let you purchase online and pick up in a store (another good sign for Wal-Mart, Target, and Best Buy, which all offer that feature).

Consumers are generally confident

Despite the contentious presidential election, the survey found that most households surveyed remain positive about the U.S. economy's prospects and their own finances. Nearly 90% reported that they expect the economy to improve or remain the same in 2017 while 75% indicated their their household financial situation is the same or better than last year. That's a big increase from the 58% who felt that way five years ago.

Holiday shoppers, Deloitte found, will buy an average of 14 gifts in 2016, similar to last year, spending an average of $426 (a number that includes gift card purchases). Overall, consumers expect to spend $998 on the holidays this year, trimming their non-gift spending to $572. That makes 2015 the first down year in that category in the last five years as people are showing more caution when it comes to holiday travel and dining out, entertaining, non-gift clothing, holiday furnishings and decorations, and other miscellaneous holiday purchases.

"We saw a lot of replenishment in non-gift categories over the last few years, and that may be starting to cool off a bit," Sides said. "As people find lower costs for expenses such as travel, they may choose to hang on to those extra savings. Several years of extended and highly competitive holiday promotions among retailers have also reinforced consumers' expectations that they don't have to pay full price."

10 stocks we like better than Wal-Mart Stores
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Wal-Mart Stores wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of October 3, 2016

Daniel Kline has no position in any stocks mentioned. He shops mostly online and more or less ignores the holidays. The Motley Fool owns shares of and recommends Costco Wholesale. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.