Retailers also plan to zero-in on maintaining the right inventory levels, sharpening their pricing and promotions in what promises to be a price-sensitive season. While 2020 will no doubt bring about a non-traditional holiday season, retailers plan to work hard to make sure it’s both healthy and prosperous, writes Lauren Freedman, senior consumer insights analyst at Digital Commerce 360.

Ecommerce has for years garnered standard double-digit annual growth. As consumers seek to stay home more with the pandemic and have grown extremely comfortable with online shopping, ecommerce stands to potentially gain even more of total retail’s market share. Retailers are focusing on fast delivery and more omnichannel options. Amazon will once again be a formidable player and retailers will invest in customer service and creative products and solutions to compete with the behemoth. Retailers also plan to zero-in on maintaining the right inventory levels, sharpening their pricing and promotions in what promises to be a price-sensitive season. While 2020 will no doubt bring about a non-traditional holiday season, retailers plan to work hard to make sure it’s both healthy and prosperous.

Digital Commerce 360 conducted its annual retailer holiday survey completed by 118 retailers over the summer into early September. It’s important to note that Prime Day was not yet announced when results were being tabulated.

Retailers are forecasting strong online holiday sales as a result of store closures amidst the pandemic. 33% of retailers project web sales this holiday season to increase as much as 24%, while an additional 34% are bullish, predicting gains of 25% or more. The remainder are projecting flat sales (11%) or a downward trend (22%).

Consumer behavior reveals mixed sentiments

When asked how they expect consumer behavior to change this holiday season, it’s challenging for retailers to truly forecast during these unprecedented times. 63% believe consumers will be more cautious based on circumstances. Yet, 40% are optimistic that there will be a shopping frenzy, given pent-up demand.

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It’s hard to know what shoppers will buy, as some retailers believe there will be less demand for holiday items such as decor or attire with fewer in-person gatherings (41%). A quarter (26%) of merchants think holiday buying will vary by merchandise category. No matter the times, getting a good deal remains in vogue. Retailers say 36% of consumers will expect deeper discounts. I’m surprised it’s not even higher.

BOPIS has surged during the coronavirus and 53% of survey respondents are expecting it will play an increasing role in their business. Retailers also foresee more local shopping on the horizon as cited by 29% of merchants. 19% think consumers will prioritize faster shipping since they may not be able to quickly pop into a store and, when they do, there are often inventory shortages.

Inventory is the 100-lb. gorilla as retailers make choices about stock levels

Retailers are taking a cautious stance regarding inventory given weakened consumer confidence. Almost half (44%) cite inventory as a potential obstacle to their success this holiday season. 36% list navigating supply chains as a challenge while 14% are refining assortments to adapt to the times.

Retailers say timely delivery is tough (49%) along with getting fulfillment up to speed (24%), which also includes omnichannel capabilities (16%). The customer’s interest in buying is a concern and 37% of merchants cited weakened consumer confidence as an obstacle. Retailers are always on guard about meeting customer expectations (25%) and nothing has changed in that realm. 

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Promotions will likely power the 2020 holiday season

63% of retailers will provide a simple percentage off of products. Thinking about other tried-and-true tactics, retailers plan to offer the following promotions:

  • Gift with purchase: 35%
  • Buy more save more: 32%
  • Product bundling: 31%
  • Friends/family promotions: 28%
  • Buy one get one: 18%

Seasonality sees early season deals at 33% and last-minute trailing close behind at 28%. That of course can change as the season progresses.

Channel approaches will likely be a tactic leveraged by retailers:

  • In-store only: 18%
  • Marketplace: 20%
  • Online-only: 19%

Retailers plan to offer an array of shipping options this holiday season, with an emphasis on omnichannel. With COVID-19 still prevalent, omnichannel options are growing in importance. The numbers speak for themselves, including curbside gaining ground as government mandates ebb and flow:

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  • BOPIS: 29%
  • Ship from store: 26%
  • Buy online, curbside pickup: 22%

Below is an early read on shipping options and related fees that retailers plan to use over the holidays:

  • Two-day shipping: 29% will offer free; 30% will offer paid
  • Next-day shipping: 8% will offer free; 23% will offer paid
  • Same-day shipping: 4% will offer free; 10% will offer paid

Retailers’ holiday free shipping approach most often requires a minimum dollar threshold, though 45% use a mix of tactics. Holiday tactics surrounding free shipping include:

  • Minimum dollar threshold: 45%
  • Unconditional: 18%
  • Offering free shipping for specific merchandise categories: 12%
  • With loyalty program: 11%
  • During peak holiday periods: 8%
  • Paid memberships: 8%
  • Eco-friendly delayed deliveries: 6%

For perspective’s sake, of the Digital Commerce 360 Top 1000, 71.1% offer some form of free shipping. They know all too well this is the perk shoppers prefer most.

Retailers must find ways to chip away at Amazon’s market share

Fundamentals, including customer service, selection and free shipping, top the list of ways retailers intend to compete with Amazon. Almost half (49%) believe that one of the answers to winning business from the behemoth could be paying greater attention to customer service. Given Amazon’s UX and business model, predicated on Prime members, price remains important and around a third of retailers (33%) will be extending free shipping and lower prices (25%). Logistics is always in play, and the main one to watch is the 19% of retailers that will attempt to compete via faster delivery.

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Amazon’s October Prime Days will provide an early read on shopper behavior. The stakes are high and retailers are certainly readying their promotions to meet the moment. We will monitor the season and hope for a successful season for all.

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