Amit Mathradas, president and chief operating officer at Avalara Inc.
Thanksgiving night and the four days that follow have become a highly anticipated time of year across the retail community. Retailers offer consumers sales incentives to drive increased consumer spending as the year comes to an end. In 2020, those big retail spending days looked a lot different as the pandemic both forced and prompted changes for retailers and consumers alike.
Early in the year, most major retailers decided to close stores on Thanksgiving Day, and many online shopping deals began hitting inboxes before Halloween even arrived. All the change that has occurred throughout the year culminated in a Black Friday and Cyber Monday that delivered unexpected results and signaled a significant shift in consumer behavior that may be here to stay.
At Avalara, our engineering and data science teams work 24 hours a day throughout the period between Thanksgiving and Cyber Monday, which we refer to as “Cyber Week.” Our analysis of retail transactions drew several interesting takeaways that retailers can learn from moving forward.
Online shopping changed in 2020
Like a jump in in-store sales, retailers generally prepare for an uptick in online transactions right after Thanksgiving. That’s exactly what happened in 2020. Retailers prepared for what many expected to be a never-before-seen jump in online sales during Cyber Week due to the pandemic. Interestingly, Avalara’s data reflected what many experts also found: transactions during Cyber Week were up year over year. Still, the traditional major spikes were flattened and spread over October and November. On the other hand, the power and promise of online commerce were on display during Cyber Week. Avalara saw an increase of 48% year over year in completed transactions for U.S. companies by international buyers. Likewise, Avalara saw a rise of 70% year over year in completed transactions for international companies by U.S. buyers.
Online shopping dominated post-Thanksgiving sales as expected because many retailers pulled their holiday sales forward into October. That diminished the emphasis on catching deals during Cyber Week. But why did retailers pull their online holiday sales so far forward this year? The supply chain and customer experience took a hit early in the pandemic as the virus’s impact wreaked havoc on fulfillment and shipping. Wary of the tidal wave of online purchases coming during the holiday season, many retailers worked to avoid supply chain disruptions by spreading major deals to lessen the pressure on fulfillment services and protect the customer experience. The last thing you want to do as a retailer is not deliver the Christmas gift that your customers were so excited to receive.
Economic uncertainty has a direct impact on sales
In April, our data tracked a year low in total retail sales nationwide. Following the onset of the pandemic, mandated closures and widespread uncertainty directly impacted retail sales. As the year has progressed, the impact of COVID-19 cases has been felt across retail. Fortunately, as consumer spending rebounded throughout the year, online sales helped offset lower in-store sales.
In October and throughout November, the U.S. experienced a significant surge in COVID-19 cases. The full extent of the impact this surge might have on retail sales is still unclear. But, if data from prior months is any indication, the pandemic could heavily impact retail in the coming weeks and months.
Consumers are purchasing with intention
The pandemic has had major impacts on small businesses that have struggled to adapt to lockdowns and the associated economic uncertainties that loom. Throughout the year, consumers have become increasingly more aware of the impact on small businesses. This increased awareness has led more consumers to support small businesses through direct ecommerce and marketplace-facilitated purchases.
In 2020, with restrictions in place for in-person shopping and increased support from consumers, ecommerce has proved valuable for small retailers. Of the days in Cyber Week, the largest year-over-year increase in volume happened on Small Business Saturday. This growth on Small Business Saturday signals the convergence of two major shifts in consumer behavior—increased adoption of ecommerce and elevated concern for supporting small businesses.
We believe that the adoption of ecommerce will only continue to increase, which grants small retailers an opportunity to compete with larger retailers and expand their customer base and geographic reach.
Cyber Week 2020 was riddled with unknowns for retailers and consumers alike. The rapid acceleration of ecommerce combined with ample preparation by retailers created a longer than usual holiday shopping season. While Black Friday and Cyber Monday will continue to occur, the lessons from this year tell us that they will likely no longer carry the impact that they have in the past.
As we look forward, retailers will need to continue selling online and expand the ecommerce channels through which they sell. Consumer behavior will continue to err on the side of convenience—something retailers can easily provide through a well-thought-out ecommerce strategy. We may not know what Cyber Week 2021 has in store for us, but retailers can be confident that ecommerce is here to stay and will continue only have a larger role to play during the holidays in the coming years.
Avalara Inc. is a provider of tax management software.