Article courtesy of Forbes here
While we await the National Retail Federation’s holiday retail forecast – which will come any day – Deloitte and Forrester are out with their predictions for holiday 2020 and year-end.
Big Four accounting firm Deloitte has a “glass half full” view, expecting a rise in holiday retail sales between 1% to 1.5%. On the other hand, market research firm Forrester looks and sees the glass half empty, with retail sales declining 2.5% for the full year.
Despite their differing forecasts, both firms are firm about one thing: This will be the year when online shopping explodes.
Online growth off the charts
Forrester sees online retail growing 18.5% this year, so that it will reach 20.2% overall penetration in North America.
Online sales for retailers in popular gifting categories will get a boost this season, with health and beauty up 23%, consumer electronics rising 20%, fashion up 19% and home furnishings growing 16% by year’s end.
On the flip side, in-store retail performance in these categories will tank – health and beauty offline sales down 8.2%, home furnishings off 15.2%, consumer electronics down 26.3% and in-store fashion sales off by 33.7%.
“As online buyer behavior remains strong, we expect offline sales to decline by 6.6% in 2020,” Forrester reports.
The more bullish Deloitte predicts e-commerce holiday retail sales to grow between 25% to 35% from November through January, reaching $182 billion to $196 billion in total.
“When we ran the forecasts, it turned out to be better than I was thinking going in,” says Rod Sides, Deloitte’s vice chairman and U.S. leader retail and distribution. As he explains, “We saw a strong back-to-school season that rose about 2% and consumers’ savings rates were up dramatically, which is one of the key metrics that factor into our economic forecasts.”
Much of this increased savings came from consumers forgoing travel, vacation and dining experiences during the pandemic, leaving them “some dry powder” to spend as the holidays approach, Sides shares.
Given the uncertain state of the Covid infection rates, consumers will continue to forgo much holiday travel and family-and-friend get-togethers, with people giving more gifts to substitute for time spent apart.
And with fewer parties to attend and more time spent at home, Sides sees more self-purchases directed toward home improvements and decorating. Eager to get some “Ho-Ho-Ho” holiday cheer after what we’ve all been through this year, consumers will splurge on new outdoor, indoor and Christmas tree decorations, he expects.
“If I’m not going out, those dollars have to go somewhere and home is where a lot of it will go,” Sides believes.
And all that time spent at home will bring much more online shopping. “For the last four years, e-commerce growth has averaged between 13% to 17% increase, and last year it was up 14.7%. This year it will go ballistic, somewhere around 25% and it may go higher,” he says.
Adding ammunition to that explosive e-commerce forecast is a new survey conducted by Dynata for Redpoint Global, a software company providing omnichannel support to retailers.
That study found nearly two-thirds of the 1,000 adult shoppers surveyed (62%) planned to do all their holiday shopping online.
Another recent survey from GfK Consumer Pulse found fewer shoppers (42%) planned to shop exclusively online. But whatever the actual number works out to be, retailers can expect far less foot traffic in their stores and far more online traffic to their websites.
Mounting pressure on retail supply chain
This will put tremendous pressure on retailers, as they need to shift resources out of stores and into fulfillment centers to process unexpectedly high numbers of orders.
“As online sales grow to historic levels, retailers will feel significant pressure on their margins in 2020 because e-commerce logistics costs increase retailers’ costs,” Forrester reported. “As online buying trends remain strong over the next five years, retailers will have to find a balance to help alleviate this pressure on margins.”
One of those pressure points that must be relieved is lack of transparency about out-of-stock products and potential delays in shipping, Redpoint’s chief marketing and strategy officer John Nash reports. This is one of online shoppers’ top frustrations and plenty are likely to be frustrated this holiday season.
“The physical supply chain may not be able to handle the flood of orders and making those deliveries,” Deloitte’s Sides says. “Retailers have been building more capability for that last mile, including buy-online-pickup-in-store, but this year is going to be a stress test for the retail supply chain.”
Customers demand personalized engagement
Another pressure point that retailers need to ease is the expense of ineffective online marketing. Most retailers are gobsmacked when they calculate the actual cost of converting a inexpensively-sourced digital lead into a paying customer.
Redpoint’s Nash says retailers have a fix for this problem if they would use consumer data that is readily available to personalize their online marketing and customer engagement processes.
“Retailers are not meeting customers’ expectations for personalized omnichannel experiences,” he shares, saying that over 70% of consumers surveyed last year by Harris Poll for his company reported a personalization gap.
And it continues today, as consumers’ expectations for more personalized engagement, both online and in-store, is being dashed.
Among their greatest sources of frustration are retailers sending offers for a recently purchased item (34% rated this very frustrating), sending irrelevant offers (33%), and failing to recognize them as existing customers (31%).
Personalizing the customer experience so that their inboxes aren’t swamped by indiscriminate messages pays off. Nearly half of consumers (49%) say they are more likely to purchase from retailers that send them personalized content and offers this holiday season.
Such personalized communications prove that the company understands the individual customer and isn’t just lumping them together with a whole bunch of others based upon some arbitrary data point.
“Retailers need to integrate all the data available about the individual customer, not just past transactions, response data to previous emails or demographic data,” Nash advises.
“They should overlay that with other behavioral data, attitudinal data and survey information. And this customer information needs to be activated at every point of contact with the customer, whether they are shopping on the website, in-store, via a mobile app or reaching a call center,” he continues.
Understood customers are loyal customers
A basic human need is to be understood and people bring that same need to their relationships with retailers and brands. Retailers that demonstrate real understanding of each and every customer will be rewarded.
Some 70% of people Redpoint surveyed about their plans for holiday shopping said they would exclusively shop with retailers and brands that personally understand them.
“What’s critical is for retailers to deliver relevant messages and offers in the customers’ moment,” Nash says, adding it’s a big ask for retailers but one they better start to answer.
“There are a lot of operational complexities around trying to match the customers’ cadence with your day-to-day business cadence,” he concludes. “But with the right, relevant customer data available throughout an organization, you’ll be able to deliver them personalized messages and offers, so that the customers get what they want when they want it. Retailers that do it will be more successful in securing consumer spend this holiday season.”