How Consumers Spend Their Money on Valentine’s Day
Every year, on February 14, people from all over the world indulge in this day of love and appreciation we all know as Valentine’s Day. While largely a mainstream commercial holiday, with every year, more people find themselves spoiling their friends and family with gifts, from bouquets of flowers to experiential activities.
Retailers – on and offline – can learn to make the most of this short and sweet holiday but focus on the right channels, price points, and products to maximize their yearly profits. But before they do so, it’s first important to understand the modern consumer and how they spend their money on Valentine’s Day.
How much do people spend on Valentine’s Day?
According to the National Retail Federation, spending for the holiday is planning to hit new records, as shoppers are expected to be adding USD $27.4 Billion to the economy. This is a huge increase compared to the year prior, where spending on Valentine’s Day was around USD $20.7 Billion. For retailers that are selling items catering to this holiday, this remains good news.
When it comes to the economic growth of the US, consumer spending drives almost 70% of the country’s total output, making it the largest driving component (of the four) for the nation’s gross domestic product.
When doing a historical comparison, the continued growth of spending for this holiday shows just how much people are willing to do on a day all about love.
A demographic of consumers for Valentine’s Day
When it comes to the demographic of people spending on this holiday, surprisingly, the highest age category of spenders sat at 35 to 44-year-olds. They were expected to be spending an average of over USD $279, while the 25 to 34-year-olds followed with average spending of USD $239, and 18 to 24-year-olds spending USD $124.
Unsurprisingly, the two age groups planning on spending the least amount on average were people in the age group of 55 to 64 year-olds and above.
In regards to what gender is spending the most on this day, more men than women have stated they will be purchasing gifts for Valentine’s Day. According to Finder.com, 92 million men commented that they would be purchasing gifts compared to 78 million women. Overall, men were found to spend an average of USD $230 or more on their gifts, while women spent an average of USD $98 or more.
Top spending categories of purchases and people
From candies to flowers, Valentine’s Day is a time where people spend their money on a plethora of things. When narrowing it all down, it was found that the top categories consumers spent on Valentine’s Day were jewelry, an evening out, clothing, candy, flowers, gift cards, and greeting cards.
Based on a report by the National Retail Federation, consumers plan to spend about
- USD $5.8 billion on jewelry (given by 21 percent)
- USD $4.3 billion on an evening out (34 percent)
- USD $2.9 billion on clothing (20 percent)
- USD $2.4 billion on candy (52 percent)
- USD $2.3 billion on flowers (37 percent)
- USD $2 billion on gift cards (19 percent)
- USD $1.3 billion on greeting cards (43 percent).
Additionally, when it comes to who they are spending their gifts on, the modern consumer of 2020 spends an average of $30 on family members other than spouses, $15 on friends, $14 on children’s classmates and teachers, $12 on pets, and $11 on others. One interesting statistic retailers have been seeing over the years is the rise of spending on pets, as roughly 20 percent say they will buy a Valentine’s Day gift for their pets. This is the highest figure in the history of surveying, as it is 17 percent up from a decade ago.
Another significant trend that has been on the rise, especially amongst Millenials and younger, has been the gift of experiences. Whether it’s buying a ticket to a concert or a trip to a spa, 41% of consumers wanted an experiential gift, while 28% planned to give one.
The rise of experiential gifts
According to a McKinsey report, in the US, spending on activities and traveling (a.k.a. experiences) has grown more four times faster than material spending. Even as far back as 2017, an Eventbrite report noted that three out of four Millennials stated that they would prefer to spend their money on an experience rather than purchasing a physical item (even if it was desirable).
This was further confirmed by a Harris Group study, which noted that 72% of Millennials reported preferring spending their money on experiences rather than things. A consumer report by the National Retail Federation in 2019 has also stated that consumers have ultimately been spending more on experiences. In fact, close to a third of all consumers (of any age group) had reported spending more on experiences than in the year before, with 29% stating that, in the past year, they had given an experiential gift.
One of the main reasons gifts of experiences are highly popular (especially with Millenials) seems to be the role of social media. The ability to record and remember the experiential gift – making it ‘permanent’ – appears to hold more value than receiving something that is simply physical.
The desire to show off your unique, wild experiences is not the only reason pushing people to experiential gift-giving. Research by Cornell University indicates that sharing an experience with someone has greater likelihood to create more long-term happiness than simply giving them a smartphone. In a world where almost everything and anything can be purchased at the tap of a finger, it seems that satisfaction from material purchases diminishes quite quickly.
How retailers can boost sales on Valentine’s Day
- Omnichannel Marketing – As retail goes through a digital transformation, more and more businesses are learning the importance of omnichannel. For this reason, omnichannel marketing allows consumers to easily access your products and given that Valentine’s Day consists of a range of purchases, with many types of consumers and different buying habits, it’s vital to be available everywhere. An omnichannel strategy can help you engage with customers more effectively and efficiently.
- Mobile Shopping Optimization – As mobile commerce is the rise, with predictions that the volume to increase to USD $488 billion (44% of e-commerce) by 2024, retailers should begin to think about adapting their campaigns to be mobile-ready. The modern consumer purchases through multiple digital touchpoints these days, so it’s important to optimize existing websites to be mobile responsive and quick-to-load.
- Manage Inventory – Out-of-stock items can negatively impact a retailer. When there are not enough products in-store, the customer’s journey is stopped. Even if you optimize your business for mobile or plan out a thorough omnichannel marketing strategy, it means nothing if you aren’t stocked up properly. Replenishing your items at the right time can make or break a retailer, which is why these days, AI-driven solutions that help predict best and worst sellers can help prevent stores from having too much or too little.
More retailers are branching off and offering greater niche gifts and long-tail options. As this occurs, consumer demands are diversifying and changing rapidly. To optimize for this kind of assortment as quickly as the demand changes, retailers need to look to technology to help them make decisions faster and easier.
With that being said, Chain of Demand’s AI-driven solution can help retailers manage their inventory at quicker speeds, replenishing items before they overstock, and effectively optimize their product assortments.
To find out more on consumer shopping and how predictive analytics are used to capture sales, request a demo below.