Healthy retail spending expected through year-end

It looks like the year-end holiday season will bring plenty of joy for merchants, and by extension, merchant services professionals. Two separate reports—one from Mastercard, the other from Fiserv—project a notable retail sales bump between mid October and late December, including purchases of luxury items and gift cards.

Mastercard, in a recent press release, said it's gearing up for "what's anticipated to be the most wonderful holiday season on record." According to Mastercard Spending Pulse, U.S retail sales, excluding auto and gas sales, during the months of November and December are expected to jump 7.4 percent over 2020 sales and 11.1 percent over the same two-month period in 2019.

Both Mastercard and Fiserv agree the shopping season will be in full swing by November, with Mastercard dubbing October 11 through December 24 as the "75 days of Christmas."

Fiserv's consumer research revealed that 56 percent of consumers plan to start their holiday shopping before November, and 61 percent won't complete shopping until December. Some of the early shopping may stem from anticipated supply chain and labor shortages. Because of these factors, "retailers are expected to offer omnichannel promotions early on – particularly in the heavily-gifted electronics, apparel and department store sectors," Mastercard said.

Building on strong growth

Mastercard said it is already tracking strong spending growth across retail sectors. Retail sales (excluding automotive and gas) rose 8.1 percent in August, compared to August 2020, and 7.7 percent compared to August 2019. Online sales grew 8.1 percent and 82 percent, respectively. Overall, Mastercard said, some of the strongest growth, by vertical, has been luxury retail and jewelry, adding that this trend "is anticipated to continue through the holidays."

Spending Pulse is Mastercard's periodic assessment of the market. It measures overall retail sales across all payment types, including cash and checks. While ecommerce sales are expected to continue to chart continued steller growth during November and December—by 57.3 percent over 2019 and 7.6 percent over 2020—anticipated sales increases at brick-and-mortar outlets (excluding auto and gas) aren't too shabby at 8.9 percent over 2020.

Fiserv's research found 26 percent of consumers expect to spend more than they did last year during the year-end holiday gifting season. Sixty-four percent said they plan to do at least some gift buying in-store.

Mastercard expects the following verticals will register the largest sales growth this holiday season:

• Apparel, 45.9 percent over 2020 and 17.8 percent over 2019
• Department stores, 14.8 percent and 5.2 percent
• Electronics, 13.2 percent and 17.9 percent
• Jewelry, 59 percent and 52.9 percent
• Luxury items (excluding jewelry) 92.8 percent and 55.8 percent

The gift that keeps giving

Fiserv's research also offers noteworthy insights on a growing favorite gifting idea: gift cards. According to that research, 58 percent of consumers like giving traditional, plastic gift cards during the holidays (as opposed to digital gift cards), up from 42 percent who stated that last year. The same percentage said they prefer to receive plastic gift cards during the holidays, up from 39 percent in 2020.

As for how much value they are willing to put on gift cards, Fiserv found 20 percent of respondents plan to put $40 to $50 on cards they gift, up from 16 percent who said so last year. Twenty-three percent will put between $50 and $100 on the cards they gift this holiday season, up from 18 percent in 2020.

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