Online Shoppers Plan to Outspend In-Store Shoppers This Holiday Season

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Not only will more people be shopping online this holiday season, those that that do will be spending more than people who elect to shop in brick-and-mortar retailers.

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In fact, the average U.S. consumer plans to do 40% of their holiday shopping online in 2017, up from about 33% last year, according to a new report from NPD Group's 2017 Holiday Purchase Intentions Survey. On top of that (and to kick more sand in the face of brick-and-mortar retailers) consumers who plan to shop online plan to spend 70% more than those only planning on shopping in physical stores.

How much are consumers spending?

Online only shoppers expect to spend an average of $793 during the holiday shopping season. Their brick-and-mortar-only counterparts plan to spend an average of $467.

"Online is going to play an increasingly critical role in the 2017 holiday shopping season," said NPD's Chief Industry Analyst Marshal Cohen. "Retailers, big and small, recognize online retail's importance and have been turning up the volume on their online strategy this year, which will only intensify during the holidays."

Online is gaining

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Online retailers have benefited from consumers making more digital purchases while their shopping frequency in physical stores has declined, according to data from NPD's Checkout Tracking. During Q4 2016 the average digital shopper placed just-over six online orders, up 12% year-over-year. Brick-and-mortar customers did make significantly more purchases (an average of 18) but that represents a drop in frequency of 4% compared to 2015.

"Home improvement, beauty, apparel, and technology were among the faster-growing categories in terms of e-commerce purchase frequency," according to NPD. "Beauty was one of the few categories which experienced purchase frequency growth at brick-and-mortar stores."

Where are digital consumers shopping?

Nearly 75% of U.S. consumers planning to shop for the 2017 holiday season will do at least some of their shopping online, according to NPD. Millennials and Generation X have an even higher likelihood of spending at least some of their holiday budget online.

Amazon (NASDAQ: AMZN), eBay, and Etsy were named by 66% of respondents on the 2017 Holiday Purchase Intentions survey. After those three digital destinations, the next-most popular choice was the website of discount retailers, followed by national chains and department stores.

What does this mean for retailers?

Just because less shopping takes place in brick-and-mortar stores does not mean that all hope is lost for retailers with a large physical presence. The challenge in competing with a giant like Amazon is leveraging that advantage of having a physical presence.

That means investing in creating a true omnichannel shopping experience where customers can buy in-store or online seamlessly. That's something Wal-Mart (NYSE: WMT) has been investing in heavily. The brick-and-mortar chain has been working to make its stores easy pickup locations for online orders while also using them as part of the digital supply chain.

Going forward it's all about convenience. Consumers are going to shop online more in 2017 and that's likely to increase for the foreseeable future, but they are not forgoing traditional retailers. If chains follow Wal-Mart's lead (and Amazon's attempts to add to its convenience by adding real-world locations) then it's possible to compete.

For most retailers, the days of a store just being a store are over. But, if physical locations are part of your strategy along with a robust, well-integrated digital operation, it's possible to thrive in the new retail world.

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Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and eBay. The Motley Fool has a disclosure policy.