Article courtesy of Salesforce here
Salesforce expects digital sales to hit all-time highs and lead to strained shipping capacity as retailers grapple with the impact of the COVID-19 pandemic.
The pandemic has quickly forced many companies to operate at Black Friday levels of efficiency every day as people moved to digital commerce. As this trend continues, Salesforce forecasts:
30 percent year-over-year growth in overall global digital commerce this holiday season (up from 8 percent growth in 2019) and 34 percent growth in the U.S. (up from 12 percent in 2019).
Total digital sales are expected to reach a new record high of $940 billion globally and $221 billion in the U.S.
The surge will likely result in an acceleration of digital commerce to 18 percent of total retail sales globally and 30 percent of total retail sales in the U.S. during this holiday shopping season.
Overall holiday sales are expected to be flat despite this digital growth, with an expected $5.1 trillion in global holiday sales and $730 billion in U.S. holiday sales.
“Digital commerce won’t fully compensate for the projected brick-and-mortar slowdown, but it will be critical to help retailers close the gap this holiday season,” said Rob Garf, VP of Industry Insights for Retail and Consumer Goods, Salesforce. “Businesses that succeed during the holidays will use everything at their disposal to make shopping easy and safe, including convenient digital ordering, creative and efficient fulfillment, and responsive customer service.”
With the pandemic impacting how retailers will sell and ship gifts, influence the popularity of retail categories and affect delivery timelines, Salesforce predicts:
Fulfillment Concerns Will Overshadow Brand Loyalty
As health mandates forced store and warehouse closures, many businesses encountered fulfillment challenges and struggled to maintain both product availability and the delivery windows that customers were accustomed to. As a result, shoppers’ priorities are availability, shipping and delivery times.
Two converging pressures from traditional carriers are expected to arise from the spike in online orders:
The overall volume of packages that need to make it from a retailer to a customer’s doorstep will likely exceed shipping capacity by five percent globally, potentially delaying up to 700 million holiday packages.
Approximately $40 billion of COVID-19 delivery surcharges are expected between November 15 and January 15 globally, as shippers prepare for a massive shift to digital commerce.
To avoid a fulfillment crunch, retailers are offering alternative pickup options such as buy online, pickup in store (BOPIS), which can help grow their digital revenue by an average of 90 percent compared to last holiday season. Retailers are also crowdsourcing last-mile carriers through the gig economy to alleviate the strain placed on traditional carriers. Reminding shoppers to buy early and highlighting shipping cut-off dates will help shoppers avoid last-minute purchases and reduce fulfillment strains during the busiest weeks.
Holiday Demand Will Start Sooner
The combination of Amazon’s Prime Day event in mid-October and consumers eager to ensure their packages arrive on time will lead to an earlier start in the holiday shopping season. This earlier demand is expected to shift up to $6 billion of November’s Cyber Week volume in the U.S. and $26 billion globally to the month of October. However, Cyber Week digital traffic is still expected to grow by 28 percent year-over-year—a trend accelerated by nearly ubiquitous access from mobile phones and the fact that fewer people will be rushing to stores on Black Friday.
Concerns over health and safety, anticipated product scarcity and shipping delays are also expected to contribute to the start of an earlier holiday shopping season.
Growth in Online Shopping Means a Spike in Holiday Returns
More digital purchases will mean an increase in returned merchandise. In total, $280 billion in online purchases are expected to be returned globally—30 percent of all purchases made.
To reduce return rates, retailers should use store associates to help guide online buyers to the right purchases via communication tools like live chat and digital concierge services. Commerce websites should also be revamped to provide comprehensive product descriptions, product reviews, videos, clear and accurate fit guides, inventory availability and expanded shipping options to minimize returns.
Consumers are predicted to engage 30 percent more with service agents this holiday season. Retailers are equipping traditional service agents and store associates with the tools and skills required to quickly address consumer requests, particularly regarding product availability, shipping visibility and status.
New Consumer Behaviors Will Drive Hot Product Categories
The rapid change in consumer behavior brought on by the pandemic will drive a different set of top products this year. Last year’s leading categories included footwear, general and luxury apparel, beauty and electronics and gaming. While beauty and electronics and gaming will once again be top holiday spending categories in 2020, home furnishings and decor, home fitness and toys are among the new leading categories this year.