Digital Commerce 360 took an unscientific survey of our in-house editors and researchers as well as a handful of analysts, industry observers and retailers and asked them how the holidays will be different this year and why. Here is what we heard.

The 2020 holiday shopping season is a lot like that kitschy White Elephant game nearly every office employee has endured at least once: you just don’t know what you’re going to get.

Yes, a few things are becoming clear. Carriers will be strained with the surge in online shopping as consumers still aim to avoid stores and ship packages to friends and family they won’t be gathering with this year. Omnichannel and curbside will likely soar as merchants increasingly offer this option to help procrastinating consumers get gifts on time without rubbing elbows with strangers. And many online e-retailers will deal with Christmas chaos as they struggle to keep online assortment in stock and get the rush of holiday orders out the door with fewer warehouse workers due to social distancing.

But how retailers and vendors will navigate these complexities is up in the air, as is how consumers will shop during this very non-traditional November and December. For this festive season, like much of 2020, the only thing certain is uncertainty.

Digital Commerce 360 took an unscientific survey of our in-house editors and researchers as well as a handful of analysts, industry observers and retailers and asked them how the holidays will be different this year and why. We also looked at holiday data from vendors, ecommerce companies and research firms.

Here is what we found.

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1. It will be an especially merry shopping season—at least when it comes to online sales growth.

COVID-19 will bring healthy holiday web sales.

Software provider Salesforce.com Inc. says holiday sales in the U.S. will rise 34% year over year for the 2020 season. That’s a major jump from the Digital Commerce 360-estimated 13.6% growth in November and December 2019. For the November-December period, digital revenue is anticipated to hit a record $221 billion while total holiday sales will reach $730 billion, Salesforce says.

Research firm Deloitte estimates online sales will grow between 25%-35% for the 2020 season and web sales will reach $182-$196 billion in November, December and January.

What’s more, 57% of consumers plan to shop online more this holiday season, according to a survey of 2,094 U.S. online shoppers from logistics vendor Pitney Bowes Inc. and Morning Consult, a data intelligence firm.

2. Carriers will feel the holiday heat.

Last-mile technology vendor Convey expects the 2020 holiday shipment volume for its 130 retail clients—which include The Home Depot Inc. (No. 5 in the 2020 Digital Commerce 360 Top 1000), Neiman Marcus (No. 40) and Eddie Bauer LLC (No. 137)—to increase at least 30% from last year. By comparison, shipment volume in November-December 2019 jumped by a moderate 14.2% year over year, with December alone seeing a 24.2% uptick. Convey’s data is based on tens of millions of packages shipped from more than 500,000 U.S. locations across the company’s client base.

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Perhaps nothing puts carriers’ package volume fears on display more than a new commercial from FedEx: “Shipathon Training Day,” which features a FedEx carrier balancing packages (and sporting a mask) competing in a galactic warrior–esque race. “We’ve been training for the Shipathon,” the voiceover says. “Because the obstacles are bigger than ever this holiday. Shop and ship early.”

“A product of the reduction in travel (due to COVID-19) will be shoppers shipping more of their gifts rather than handing them to recipients in person,” says Don Davis, editor at large for Digital Commerce 360. “That has several implications. For one, the volume of orders shipped will be higher, and delays will be more common. Online retailers will want to encourage early buying, perhaps with aggressive promotions in early December, as a way of avoiding late-season delays.”

Shipping will be delayed as carriers reach capacity, says Manish Chowdhary, CEO of order fulfillment network Cahoot and an expert on supply chain and logistics optimization. “FedEx and UPS are warning shoppers for “shipageddon” as both are reaching capacity and UPS is even encouraging shippers to bring holiday volume forward and find alternatives,” he says.

According to Cahoot, an estimated 7 million packages per day between Thanksgiving and Christmas could face delays. “Some experts estimate customers might need to shop before Dec. 1 to get items delivered in time for Christmas,” he says.

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To curb demand, both UPS and FedEx added peak season surcharges to packages sent to residential addresses, as well as to lower-cost package services like UPS SurePost and FedEx SmartPost. And, Chowdhary says, oversized items will be hit with a peak-season fee of $50 per package or more. “This is especially difficult for merchants who are selling big and bulky merchandise online,” he says.

3. Merchants will pass on the shipping fees and find delivery alternatives.

Merchants are responding by passing those fees onto less price-sensitive consumers. Giftware brand Demdaco says it’s raising prices because of extra shipping charges and because consumers are so desperate to get goods that they’re not very price-sensitive. The retailer also set its cutoff for delivery by Christmas on Dec. 15, far earlier than usual, says Marisa Lytle vice president of consumer engagement and ecommerce.

Nathan Gordon, chief information officer at ChristmasCentral.com (No. 912), is also finding that consumers are less price-conscious. That’s a good thing because he is increasing shipping fees he charges consumers as a result of the surcharges he has encountered. And they keep coming. Gordon says UPS has informed him the next surcharge goes into effect Nov. 15.

Jim Tuchler, president at personalized gifts retailer GiftsForYouNow.com, says inbound shipping costs—or what truckers charge him to bring goods from ports in Southern California to his warehouse in Chicago—are twice as high as what they were in April.

Meanwhile, some retailers with stores are turning to curbside or BOPIS to help shoppers get orders fast without having to linger in stores amid throngs of holiday shoppers. In fact, 53% of retailers anticipate that BOPIS or curbside pickups will increase significantly over the holidays, according to a Digital Commerce360 pre-holiday August/September 2020 survey of 118 retailers. And, 29% of online shoppers will place a BOPIS order over the holidays, according to a Digital Commerce 360/Bizrate Insights 2020 pre-holiday September 2020 survey of 1,000 online shoppers.

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Even retailers without stores are figuring out ways to get in on the curbside rush. Web-only sports apparel retailer Fanatics (owned by Kynetic LLC, No. 15) just announced it is offering curbside pickup from the Chicago Fire soccer team’s stadium. Time will tell if other online-only players follow suit.

Retailers have already realized how lucrative curbside can be since the rise of COVID-19. For example, as of August 2020, 44% of Top 500 retailers with stores offered curbside pickup, up from 7% pre-pandemic.

4. E-retailers may struggle with meeting online demand.

Sales growth is good. But never-before-seen sales surges during a pandemic can quickly turn a good thing sour. Merchants are struggling to meet consumer demand for products, as well as with fulfillment and staffing.

For example, Tuchler’s specialty is personalized goods and he’s worried that he won’t have the capacity to fill all his orders, especially if some of his workers get the coronavirus. He’s throttling back marketing through lower-margin channels, including deal sites that take a commission, Amazon.com Inc. (No. 1) and coupons in Sunday newspaper supplements.

Chowdhary of Cahoot says retailers are struggling to get products out the door because warehouses are forced to have fewer staffers pick, pack and ship orders to maintain social distancing. Warehouse operating costs are also increasing as workers need masks and hand sanitizers, he says.

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Finding seasonal labor will also prove more difficult, especially for smaller businesses, Chowdhary says.

These large, established companies tend to beat small businesses in pay and benefits. Small businesses need to pay a premium or get stuck with less-favorable workers.

Amazon announced plans to hire 100,000 seasonal workers for its fulfillment center on top of the 75,000 it hired in April and the 100,000 it brought on in September. Meanwhile, FedEx is hiring 75,000 seasonal employees for this holiday season, an increase of 27% over 2019. And, Walmart Inc. (No. 3) hired 20,000 seasonal workers this holiday season after hiring more than 500,000 workers since the beginning of COVID-19.

“These large, established companies tend to beat small businesses in pay and benefits. Small businesses need to pay a premium or get stuck with less-favorable workers,” Chowdhary says.

5. Nearly everything else is a mystery.

There’s still a lot we don’t know about the holiday shopping season. And the questions mainly lie in what shoppers will buy and the nuances of how they will spend their holidays and how that will impact purchase decisions.

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A poll of the Digital Commerce 360 staff and some analysts makes clear there is no holiday handbook this year on how consumers will shop or celebrate.

Here’s a sample of staff, analyst and retailer comments about holiday shopping:

“I’m seriously thinking about buying less tangible gifts and giving more experience or digital-based gifts,” says a Digital Commerce 360 research staff member. “I may buy my nieces’ and nephews’ kids less ‘stuff’ that takes up space around the house and buy the family a gift certificate to their local zoo or restaurant. I want to support smaller businesses, like restaurants or local family attractions that may have been hit hard by COVID. I have a lot of family that lives out of state, and I’m thinking about calling their favorite restaurant and buying a gift card so they can order in a family dinner and then I may send a movie with the gift card so they can do a pizza and movie night on me.”

As a counterpoint, another editorial staff member says she thinks shoppers will veer away from experience gifts that will force them to leave the house and will be more inclined to purchase items to keep families and children occupied at home for the long, indoor winter during the pandemic. She also thinks shoppers will keep Christmas decorations simple if no one is coming over to see them.

Holiday decorating will increase and happen earlier because people will want something to celebrate, given the grimness of the year.

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Meanwhile, Eric Roth, managing director at Private Equity firm MidOcean partners has a differing view.  “Holiday decorating will increase and happen earlier because people will want something to celebrate, given the grimness of the year,” he says. And, he predicts take-out food will explode again as people get tired of eating their own cooking and having to clean up.” Another Digital Commerce 360 editor adds she thinks food or cookie gift baskets will be popular as many families aren’t gathering for large meals or cookie-baking traditions.

A recent survey from online grocer FreshDirect LLC (No. 70) finds that attendance will be 55% smaller than usual for those who typically host holiday meals. It says its suppliers are planning to harvest smaller turkeys and lean more heavily on hens this year in response. The grocer is also offering three sizes of Thanksgiving meal bundles, investing resources in smaller cuts of meats and planning on strong sales of whole chicken, another smaller and easier option for a smaller Thanksgiving.

Home decor retailer Wayfair.com Inc. (No. 6), meanwhile, is banking on shoppers eager to stock up on decor as they are stuck at home for the holidays.

“Looking at the holidays, we think it’ll be even more important this year than usual. With customers likely staying in or close to home, perhaps limiting social gatherings, creating the right atmosphere will be key to capturing the spirit of the season,” Wayfair executives said on the retailer’s Q3 conference call according to a transcript from Seeking Alpha.

There’s also a range of answers across our staff on when they will knock all the presents off their lists. “I completed all of my holiday shopping about two weeks ago, as I’ll be celebrating in spurts throughout November and December,” one research staff member notes.

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Another senior analyst is taking the opposite approach. “Though encouraged to shop early, shoppers may still wait,” she says. “I am in no rush despite calls for late delivery. I will count on BOPIS and curbside to get the job done.” In that vein, she says local retailers might fare well this November and December.

Editor at large Davis also notes that the increase in online shopping may spur retailers to hold off on promotions. “What happens with the coronavirus obviously will also impact how the season unfolds,” Davis says. “If cases keep increasing and consumers avoid stores even more, that will of course boost sales for online retailers. And that could result in those retailers running out of popular items early in the season.” He suspects many e-retailers won’t offer deep discounts early in the season, figuring that they may be able to sell more products at close to list price this season than in a typical year. And, as inventory falls on popular items, they will cut back on discounts even more.

I am in no rush despite calls for late delivery. I will count on BOPIS and curbside to get the job done.

But another editor says early promotions lured him in this year. “I usually don’t buy holiday gifts until December. This year, I started in late October,” he says. “I bought one thing that was a ‘Black Friday Early Access’ deal at Wayfair and another item during a competing sale held at the same time as [Amazon] Prime Day. I don’t know how much traction these early Black Friday sales are getting. But they’re everywhere.”

Another staff member says he will shop for gifts for fewer people because they won’t be traveling to see family and friends. And that means he will make fewer, but more thoughtful purchases.

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“The inability to travel, and even to gather in person with friends and relatives nearby, will change shopping this holiday season,” Davis says “Some people who would have spent money on airline tickets now have more money to spend on gifts.”

And I will personally contradict that premise. My family and I are traveling to Mexico over the holidays—in lieu of purchasing Christmas gifts.

 

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