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U.S. Consumers Willing to Spend More at Small Businesses — But They’re Just As Likely to Shop at Large Retailers This Holiday Season
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While consumers prioritized supporting their local economies and shopping at small businesses in 2020, this year’s labor squeeze, supply shortages and inflation concerns are now having a greater impact on shopping decisions.
A new survey from New York City-based Union Bank reveals that roughly half of U.S. consumers are willing to spend $10 more on an item to support a small business, while nearly 3 in 4 intend to spend up to 50% of their holiday budget at mom and pop retailers.
Despite this, consumers are equally likely to flash cash at major retailers and at small businesses (77% for both).
Feel-good ways that consumers spend during the holidays
U.S. shoppers seem to have few regrets about doling out cash during the holidays. And among the occasions where Americans feel their dollars are well spent, donating and giving to others in need (90%), finding a great deal on gifts (89%) and traveling to see family (89%) are ranked at the top. Other feel-good ways consumers spend during the holidays include:
- Participating in gift drives or donating holiday food (85%)
- Traveling to see friends (84%)
- Shopping at a small business (83%)
- Dining at a local restaurant (82%)
- Shopping in general (80%)
Looking at some categories more widely, 61% of consumers will spend the same as 2020 in retail, 59% will spend the same on restaurants and 54% will spend the same on travel.
Nearly half of consumers plan to shop earlier this year
Among survey respondents, 45% plan to shop earlier this year, with the majority intending to get it done before mid-December rolls around. (That means the majority of respondents are wrapping up their purchases as we speak.) Here’s a closer look at planned starts:
- Early-to-mid November (35%)
- Black Friday/Cyber Monday (33%)
- Before November (29%)
- Early December (23%)
Reasons for shopping early include:
- Avoiding shipping delays (60%)
- Avoiding crowds (58%)
- Overcoming inventory shortages (57%)
- Avoiding long lines because of staffing shortages (41%)
- Accounting for unpredictability of economy (38%)
- Accounting for unpredictability of weather (17%)
- Other — i.e., sales, spread out costs, COVID-19 pandemic, traveling (3%)
Shoppers have good reason to be concerned. Among small business owners, 44% say they experienced labor shortages, while 42% faced lagging shipping times.
Shoppers plan to spend at online-only retailers
Besides shoppers being equally likely to spend at major retailers and independent small businesses, 74% are inclined to patronize online-only retailers this holiday season. In addition, 70% plan to shop at a large online-only retailer, 62% will shop at minority-only businesses and 57% intend to support small businesses through online-only marketplaces.
According to the survey from Union Bank — which primarily has retail banking locations on the West Coast — consumers get wind of where to shop primarily through word of mouth (56%), while 38% learn about businesses through search engines. They also find out about businesses through:
- Amazon (21%)
- Small Business Saturday website (17%)
- Sites such as Etsy, Redbubble and Society6 (14%)
- Instagram ads or creative posts (11%)
- TikTok ads or creative videos (9%)
- Instagram influencers (9%)
- Yelp (8%)
- TikTok influencers (6%)
Inflation a top financial consideration this holiday season
Nearly 1 in 4 (24%) say inflation is a top financial consideration this year, while 22% say they’re trying to save more money. More than 1 in 5 (21%) express increased expenses being a financial consideration, while 31% say money concerns had zero impact on their holiday spending this year.
To stay top of mind for consumers this holiday season, consumers say one-of-a-kind, exclusive gifts (59%), online ordering (48%) and festive holiday experiences (46%) would make them more inclined to spend at a small business this year.
A divide: What consumers want — and what small businesses offer
Along the same lines, while 46% say a festive ambiance would make them more likely to toss some dollars at a small business, only 32% of small business owners say they’ll put up holiday decor this year. And only 28% of small business owners say they’ll offer free local delivery, while nearly half (49%) want this from their independent, local retailers.
For small businesses to stay competitive, they can consider offering discounts and investing in holiday decor to entice shoppers to step foot in their shops or purchase something online.
Last, small business owners might want to spend money on advertising to widen their reach and remind consumers of the importance of supporting independent retailers and their local economy. To get extra cash to boost these efforts, small business owners could look at SBA microloans or small business financing.
Methodology: Union Bank surveyed 1,000 U.S. consumers and 200 U.S. small business owners between Oct. 5-13, 2021.