Here, we share some trends we've identified and are planning for as we look ahead to the 2021 holiday season, which - in keeping with the trajectory of 2020 and 2021 so far - is likely to be fraught with new issues, challenges and full of exciting opportunities.
Difficult to Predict Retail and Ecommerce Sales
Continued Material Scarcity and Price Increases
Major Freight and Small Parcel Carrier Delays
A Sustained Consumer Focus on Ethical and Sustainability Focused Spending
Customers Taking the Time to Research Brands and Products
Continued Demand for Convenience
Holiday Gift Buying Starting Earlier Than Ever
Difficult to Predict Demand Forecasting
Retail sales in July declined 1.1 percent, which was worse than the anticipated decline of 0.3 percent. A portion of this decline is attributable to a softening of e-commerce sales. Sales at nonstore retailers, which include e-commerce businesses, fell 3 percent in July, the Commerce Department said. Credit card spending data declined 1.3 percent in July from June, which Bank of America analysts attributed to a decline in online spending.
With these recent economic declines, economists have adjusted their forecasted growth to an annualized 4.5%, significantly lower than the 11.8% growth rate seen in Q2 of 2021.
What does this mean for ecommerce businesses this holiday season? As we sort through the information, we see two competing trends and predictions. First is that spending and the economy are softening overall, trends that would normally bleed into ecommerce as well. But the second is that recent COVID surges and the Delta variant may mean that holiday shoppers go back to almost exclusive online shopping this year.
As businesses look to Q4, we recommend readying your business for aggressive sales as much as your resources and working capital allow, particularly if you hold inventory that can be sold long after the holiday season. Even as you stock up and staff up, build a conservative budget and gameplan that can accommodate slower sales.
Continued Material Scarcity and Price Increases
Companies across all industries are facing out of stock issues on any number of components. Furniture companies are facing foam shortages, cell phone manufacturers are dealing with a global chip shortage, and microbreweries are figuring out aluminum can shortages. And, when the raw materials you need are in stock and available, their price has often increased significantly. We receive an email at least once a week from a raw materials or supply chain partner highlighting a price increase of some sort, and all we can do is recognize and roll with them because we are all experiencing these bizarre economic trends together.
Chances are that you are facing some raw materials challenges in your business - out of stock issues, extended lead times, and/or price increases - trends that are likely to continue through the end of 2021.
What does this mean for ecommerce businesses this holiday season? The guidance is similar - if you produce and sell a non-perishable product that can be sold well into 2022, buy your raw materials early and in much higher quantities than you anticipate needing (as much as your working capital allows). Identify alternatives you can turn to if the main components or ingredients you typically use are temporarily unavailable. Be ready to message any such changes to your customer base.
Freight and Small Parcel Carrier Delays
Driver shortages, skyrocketed demand, congested ports and terminals, and unexpected events (like data breaches at terminals or a ship getting stuck in the Suez canal) have severely tightened capacity across global and domestic freight. Carriers are extending shipping times, increasing rates, and experiencing more and longer delays than ever.
While small parcel carriers like UPS, FedEx and USPS are currently operating at normal service levels, it is hard to forget last holiday season when so many shipments arrived days and weeks late, and holiday gifts were being delivered well into February.
Shipping and logistics, particularly with respect to freight, will continue to be a major challenge for the remainder of the year. Read more on the State of Freight and What it Means for Your Ecommerce Business.
What does this mean for ecommerce businesses this holiday season? Plan for your shipments to be higher priced and delayed. Make sure delivery information is accurate, that your orders are packaged properly, and shipping and receiving times are accurate. These steps will help avoid missed pickups, damages and the need to reroute a delivery (a step that is nearly impossible these days).
Consider diversifying your 3PLs and your small parcel carriers if it is feasible. It is hard to predict which carriers will begin limiting their services. Having a contingency plan will help you navigate these issues.
Continued Ethical, Sustainability Focused Spending
The consumer push to shop with more ethical, more sustainable, more transparent brands continues to grow. COVID, a much needed re-focused attention on racial inequity and environmental justice, raging wildfires and unusually active hurricanes - all of these issues are top of mind for so many consumers today. An Accenture 2020 survey found that consumers "have dramatically evolved", and that 60% were reporting making more environmentally friendly, sustainable, or ethical purchases since the start of the pandemic and nine out of 10 of them would likely continue doing so long-term.
A 2020 First Insights survey found that two-thirds of Generation Z shoppers believe both giving and receiving sustainable gifts to be somewhat or very important, with the majority of Millennials feeling the same. In fact, Generation Z shoppers are likely (56%) to return/exchange a gift that was not sustainable.
What does this mean for ecommerce brands this holiday season? Hopefully you are already a conscious brand, with a focus on making environmentally positive choices and upholding strong ethics across your supply chain and workforce. If that is the case, your main opportunity this holiday season is to promote your efforts and your values - on your website, on your packaging, in your email marketing and more. During the holiday season in particular, extra touches like notecards, stickers and eco-branded tissue paper can go a long way.
Convenience Remains Critical
There are thought to be five “C’s” of convenience. Customers will ask themselves:
- Can I order online, when and how I want?
- Can I pick up in-store if I want?
- Can I reserve online and have the product waiting for me to review, test or take home?
- Can I get speedy delivery?
- Can I return or exchange my order easily?
For the small set of brands that are both brick and mortar and ecommerce shops, Buy Online, Pick Up In Store will continue to be a major advantage. In fact, 2021 has seen a 200,000% growth in the “product near me” search function. This has led companies to rethink the in-store experience altogether. For some brands, in-store has simply become a decentralized fulfillment center. For others, storefronts exists to create a unique experience around the product or brand, not as places for customers to browse, select and purchase.
What does this mean for ecommerce brands this holiday season? Go through your website, ordering, fulfillment and returns process. Are they seamless? Are you making things easy for your customers? If you are both an online shop and a brick & mortar store, make your Buy Online, Pickup In Store (BOPIS) strategy smooth and enjoyable for your customers.
Customers Taking the Time to Research Brands and Products
2020 was the year of fast purchasing decisions from consumers who needed a distraction from the pandemic or had extra discretionary money to spend. 2021 has become the year of slower, more thoughtful purchasing decisions.
In fact, more and more consumers are going directly to specific websites to search for products they want, rather than marketplaces like Amazon. While on brands’ sites, users are spending time researching the company, product attributes, product how-to’s and more. In fact, many customers now see ecommerce websites not only as storefronts to buy products, but as portals to learn about and become an expert in a topic. 48% of uses are more likely than ever before to return to a website the following week to make a purchase, after reviewing information and data. In fact, research has shown that a customer now has eight touch points with a brand and website before a purchase is made.
This trend is the difference between a customer buying a few essential oils on Target.com or Amazon.com (the 2020 approach) versus going to Rocky Mountain Oils’ site and spending time learning about essential oils to find the right ones for their unique needs (the 2021 approach).
What Does this Mean For Ecommerce Businesses? Is your website or your social media channels serving as portals of education and information? If not, consider adding this content - via newsletters, blog posts, resources, educational videos, infographics, Instagram live and reels, webinars. Start looking at metrics other than website traffic and conversion, and focus as much on time on site, the stickiness of your key informational pages, and the rate at which visitors return to your site. Really understand the journey of your typical customer and what information they need so they can make a thoughtful purchasing decision and become an expert user of your goods.
Earlier Than Ever Holiday Shopping
I recently saw a headline, “Why You Should Start Your 2021 Holiday Shopping Now (No, We're Not Kidding).” I wish I could say it was a joke from The Onion, but it was Money Magazine and...the message certainly rings true.
Many of us are likely disillusioned after UPS, FedEx and USPS shipping delays last year caused many gifts to arrive well after the holiday season. Additionally, today’s supply chain and logistics issues are likely to be exacerbated in Q4, resulting in either out of stock products or goods that are much higher priced come October than they normally would be.
Additionally, last year most of the largest retailers hit the ground early with their marketing and promotions. We were seeing Black Friday deals as early as October. Given its success last year, expect brands to continue offering sales and holiday advertising earlier than ever.
What Does This Mean For Your Ecommerce Business: Get your inventory, website, shipping operations, and holiday promotions ready as early as you possibly can and be ready to enter “holiday mode” right after Labor Day.