What is the cost of love?
Of course, love is priceless. But, in all seriousness, how much are people really spending on Valentine’s Day this year?
According to NRF data, the cost of love in 2018 is $19.6 billion.
This means consumers will be spending an average of $143.56 on Valentine’s Day, whether it’s for their significant other, family members, friends, or for themselves.
A nice little boost for retail following the holiday season, especially among the popular V-day gift-giving categories such as jewelry, flowers, candy and apparel. Just as consumers search for something to celebrate around this time of year, retailers also capitalize on the day of love to drive some sales.
Following the flurry of Super Bowl spending on decorations, apparel, and food, we’ll see how the romantic holiday will fare for brands and retailers taking advantage of the opportunities to connect with their consumers and meet expectations.
A Look at the Past
This year’s V-Day spending is going to top last year’s spending by $1.4 billion.
While delayed tax returns and an increased desire for experiences drove V-day sales down in 2017, this year’s increase in expected spending could be a byproduct of the current optimism around the economy:
“The underpinnings of the economy are very good and consumer spending is at the center of our outlook. […] The push and pull of forces both external and internal to the U.S. economy will continue to provide challenges, but on balance we expect a good year. And as the retail industry continues to transform, retailers will leverage the new tax plan to invest in their employees, stores and new formats that engage with the ever-evolving and demanding consumer.” - Jack Kleinhenz, NRF Chief Economist
High consumer confidence, low unemployment, and growing wages all factor into expected growth in retail sales for the year.
According to NRF, forecasts predict retail sales to increase between 3.8 and 4.4 percent in 2018.
Love Drives E-Commerce Purchases
If you’re part of the 55% of Americans who do plan to commemorate the day of love, you’ll most likely be gift-shopping online. According to data from Slice Intelligence, 94% of flowers, chocolates, jewelry, and stuffed animals will be purchased online before February 14.
In fact, the biggest category driving online sales is jewelry:
Seems like a safe bet for those shopping around to find the perfect gift for their significant other—or for themselves. :P
Surprisingly, the ladies are driving most of the jewelry purchases this year (perhaps using this holiday as an excuse to practice a little self-love?), which are expected to reach about $4.7 billion in sales:
In fact, females are expected out-purchase males across all major V-day gift categories, except for flowers. In respect to flower shopping, last-minute purchases are to be expected with an influx of shoppers visiting floral delivery sites just days leading up to Valentine’s, like 1-800-Flowers.com:
Those who wait to the very last minute will also be more than willing to pay the price, despite price surges leading up to the big V-Day:
Lessons From V-Day on Opportunities for Physical Retail
As the retail landscape continues to shift and online shopping continues to grow year over year, the role of the brick-and-mortar store will also change.
The consumer demand trends driving V-day sales are just a small fragment of the larger trends re-shaping the industry where digital channels and services, increased online spending, and store closures continue to make an impact.
A recent report by FGRT discusses how physical stores must to evolve to fill in the gaps around e-commerce and provide value for consumers whose “shopping mission” would not be best served through online shopping.
What type of opportunities can physical stores make use of to fill this gap? How can they provide value to this type of consumer?
Convenience is one, as there will always be a need for last-minute purchases in stores.
This could not be truer for Valentine’s Day. As a day filled with last-minute shoppers who will disregard price in the face of convenience, we see a perfect example of this type of scenario playing out where a consumer will swing by the nearest retail store to pick up a quick, thoughtful gift for someone they love.
The report covers additional areas of opportunities, such as collection, where a growing demand for in-store pickup of online orders is also driving change. This means more foot traffic to physical store locations and a need for having the right inventory available for in-store and online demand.
This can be a challenge for retailers, where profits are lost due to overstocking or understocking the wrong inventory. Clearly, many retailers are having a difficult time painting a clear picture of expected consumer demand as most have too much data segmented across departments and rely way too often on inaccurate predictions based on what’s happened in the past to anticipate which products to stock where in the future.
Retailers are essentially making bets on their inventory. The opportunities to meet the consumer expectations go beyond providing collection or convenience but can only be met when retailers can ensure the right inventory is stocked at the right place.