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Why ecommerce is going to rule the 2021 holiday season

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After a stellar year of ecommerce growth during the 2020 holiday season, 2021 is set to be another record-breaking year. Forecasts by eMarketer put revenues for the 2021 holiday season at $206.88 billion – 11.3% higher than last year.

This may come as a surprise to some retailers, with recent reports discussing a resurgence in foot traffic at both downtown shopping areas and malls following the end of COVID-19 restrictions. Target, Kohl’s, and Ulta Beauty are all experiencing more in-store shoppers than they forecasted, indicating the start of a strong recovery. 

But with the Delta variant raising concerns for a potential fourth wave of cases and renewed restrictions, the 2021 holiday season is being characterized by one thing: Uncertainty. With consumers now unsure what the last quarter of the year will look like, it appears that ecommerce will be the first port of call for seasonal needs.

The holiday season 2020: Not just a blip in the radar

The 2020 holiday season was uncharted territory for every retailer. With heavy restrictions on in-store retailing due to the pandemic, brands had one route for success: Go big on ecommerce – or go home.

With online shopping a necessity for both consumers and retailers, it’s hardly surprising that holiday ecommerce sales exceeded $118 billion. This is an increase of 33% on 2019 and the equivalent of two years’ worth of forecast growth occurring in one holiday season. 

So, will the 2021 holiday season be a repeat of 2020, or will vaccinations and the economy’s reopening push consumers back towards physical stores?

While there’s definitely room for optimism in physical retail’s recovery this holiday season, 2021 will still belong to ecommerce. 

Here’s why:

3 Reasons why ecommerce will reign supreme this holiday reason

1. The majority of consumers are not ready to venture back into stores

Consumers are showing an increased preference to shop in-store this holiday season. Shopkick’s 2021 survey found that 43% of consumers plan on shopping at physical stores – 9% higher than 2020. However, 57% of consumers still plan to do the vast majority of their holiday shopping online.

This can be partially explained by the recent uptick in COVID-19 cases. In the third quarter of 2021, it’s apparent that vaccines are not going to be a silver bullet. High rates of vaccine hesitancy combined with the spread of the much more contagious Delta variant have resulted in case numbers escalating. Consumers are understandably cautious about putting themselves in environments where the risk of transmission is high – such as crowded retail stores. 

We can see this concern reflected in the desire for ongoing COVID-19 measures. Such as enforced mask-wearing, plexiglass screens, social distancing, and being able to shop at off-peak times to avoid crowds. But there’s another, much simpler reason behind this reluctance; old habits die hard. With online shopping a necessity for more than a year, these newly-formed habits are proving tough to shake. Brick and mortar retailers will need to up their game this holiday season if they want to attract more foot traffic.

2. Physical stores aren’t going to be a major player for BFCB

We all remember the crazy news footage of consumers queueing up outside big-box retailers in the early hours of Black Friday – or even camping out days before to get a spot at the front of the line. Yet signs show that the news reports of people fighting over washing machines are numbered.

Back in 2013, the retail sector saw a growing number of retailers jumping on the bandwagon of opening on Thanksgiving Day itself. Ironically, this had the effect of cannibalizing Black Friday sales and splitting consumers between multiple stores, leaving everyone worse off.  

Thanks to the COVID-19 pandemic, 2020 saw the majority of retailers shuttered over the Thanksgiving period – while doing a roaring trade online. Shopify saw a whopping 75% increase in sales amongst its merchants on Black Friday while Cyber Monday sales hit a record $10.8 billion – up 15% on 2019.

Forecasts for 2021 show that retailers are likely to be in for more of the same. Of those consumers planning to take advantage of Black Friday, 78% say they plan to do so online, followed by 64% who plan on shopping in-store. Moreover, the overwhelming majority of consumers (70%) say they support retailers who choose to close on Thanksgiving Day.

In sum, COVID-19 has sharply accelerated the move away from physical retail for the Black Friday shopping weekend. With consumers also happy to forgo the risk of crowded environments, it’s unlikely that we’re going to see a return to the traditional rush any time soon.

3. People are shopping earlier – and online

People like to joke that the holiday season starts earlier every year. And in a way, they’re right. 

Over the past few years, consumers have shown a marked preference for starting their holiday shopping before most seasonal inventory (and promotions) hit the shelves. This trend was identified as far back as 2018, with a Facebook survey that year finding that 1 in 5 consumers started their holiday shopping in October. 

But 2021 forecasts are showing an even bigger surge in early purchasing; a survey by Sitecore found that 34% of consumers intend to start their holiday shopping by Labor Day – a clear sign that Black Friday weekend no longer heralds the start of the holiday season.

A longer, more spread-out holiday season has benefits for both retailers and consumers. Rather than handling a short, intense peak, retailers gain the ability to forecast demand for different products as the holiday season unfolds, allowing them to be much more responsive to marketplace trends. This also helps them to avoid large bottlenecks in order processing and fulfillment that result in delivery delays and impact customer satisfaction.

For consumers, an earlier holiday season creates more confidence that they’re going to find the items they want amid ongoing supply chain challenges. Last year, the National Retail Federation found that 69% of holiday shoppers say were able to find the items they wanted all or most of the time, while 84% were confident that they would receive their online orders in time for the holidays. 

4. Convenience is still king – and online brands are upping the stakes

Being able to skip queues and browse for items more easily are among the biggest reasons why consumers prefer to shop online during the holiday season. Being in charge of the end-to-end shopping experience gives consumers more flexibility and convenience, especially as free shipping and fast delivery become more commonplace.

Yet shopping online does have its drawbacks. Being unable to try items in advance is what persuades many customers to shop in person. But with ecommerce sales set to soar for the second year running, consumers are keen to support retailers who can make online shopping easier than ever.

According to a survey by AI messaging platform LivePerson, consumers are interested in the following ecommerce shopping services for the 2021 holiday season:

  • Virtual showrooms (45%)
  • Augmented/virtual reality tools (44%)
  • Livestream shopping (34%)
  • Video consultations with personal shoppers (29%)

Digitally native brands are stepping up to the plate by enhancing their digital shopping solutions. 91% of retailers surveyed by Sitecore said they planned to enhance their VR and AR offerings by the end of 2021, a clear recognition of the importance of assisted shopping as consumers become more reliant on ecommerce.

What can merchants do to start the holiday season off strong?

Create a scalable fulfillment strategy. Scalable fulfillment is your ability to handle fluctuations in order volumes, which can be dramatic during the holiday season. This means not only managing rapid increases in orders, but also being able to scale down labor and storage effectively once it’s no longer needed. Otherwise, your business will be saddled with costly infrastructure that’s unnecessary during the rest of the year.

Strive for unified inventory. If you’re running multiple selling channels and storage locations, real-time visibility is vital to identify trends in regional product preferences and move the right SKUs closer to your end customer. During the holiday season, it’s important that online orders are being fulfilled by the store or facility closest to the final destination, not where the most stock happens to be. This saves precious time during the last mile and ensures that customers get their orders as quickly as possible.

Prep your stores for BOPIS and curbside pick-up. Just like last year, BOPIS (Buy Online, Pick-up In-store) and curbside pick-up are set to be important offerings this holiday season. Forecasts by Statista estimate that click and collect will be worth $64 billion in 2021 – $10 billion more than last year. An uptick in case numbers is likely to drive more consumers to opt for socially distanced shopping options, so it’s important to make sure that your click and collect system is able to handle the increased pressure.

Lengthen your returns windows. Returns processing commonly faces huge bottlenecks following the end of the holiday season as people try to return and exchange gifts. To take pressure off your network, it’s a good idea to amend your returns policy for products bought within a specified timeframe to give customers more flexibility. By spreading out returns over a longer period, you’ll face fewer delays with getting products back on the shelf for resale.

Uncertainty is going to be a big driver of shopping habits this holiday season, with the ongoing COVID-19 pandemic persuading many consumers that shopping online is the safer and more convenient option. More brands are investing in high-tech solutions to aid shopping digitally, so we can expect offerings like AR and virtual shopping assistants to be major drawcards during peak season. With seasonal shopping starting earlier than ever, retailers need to be extra prepared by having holiday inventory and promotions available to align with consumers’ needs.

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