Ecommerce, retail stores, consumers shopping more, consumers shopping less? Retailers have a lot on the line this holiday season. I’d like to start with some of the questions on my mind.

• Will there be enough inventory?
• Will the season be less promotional?
• Will consumers shop early and be less interested as the season winds down?
• What type of growth are retailers forecasting?
• How will consumer behavior be different in 2021?
• What are the biggest obstacles to success?
• How will retailers tackle the behemoth Amazon?
• Will they be generous in shipping and return policies?
• How aggressive will retailers be in their marketing strategies?

Digital Commerce 360’s annual pre-holiday survey was completed by 100 retailers over the summer and into fall (July-September). Our research looks to answer these questions and more.

Starting out on a positive note, almost all retailers expect their 2021 online holiday season to see revenue growth. With a breakout as follows, up is the operative word:

• Up 25%+: 34%
• Up 1-24%: 48%
• Flat: 6%
• Down: 12%

The retailer perspective on the evolving shopper

Given the tumultuous nature of the times, retailers believe it is important to understand consumer behavior and how it just might impact online holiday shopping. The following represents what retailers expect from online shoppers throughout the season. 53% of retailers believe that shoppers will be traveling and gatherings will be taking place this holiday season. They predict that a contingent of shoppers will keep it local as expressed by 33% of the survey respondents.

Other expected behavior changes noted by retailers may include a concentration of buying with Amazon (23%), shoppers seeking out experiences rather than products (20%) and 19% who suggest that shoppers will buy more on marketplaces. Omnichannel is a force to be reckoned with as 52% believe there will be a BOPIS and curbside increase, likely driven by past positive experiences. 35% indicate that shoppers will demand even faster shipping and 26% may take advantage of same-day delivery more. One thing everyone’s talking about and what may have the biggest impact on the season is that 42% will find products out-of-stock more than in past seasons and that 29% will buy earlier to avoid out-of-stocks. In my mind, this could go even higher.

The 2021 holiday season should see growth across all channels and reflections from retailers are insightful. Domestic sales will grow 72%, yet international sales beyond North America will still fare well at 34% growth. The retailer’s own site is projected to be the winner with the greatest growth at 70%. Marketplace growth is also expected to be strong and participants indicate that Amazon Marketplace will be up 48% and other marketplaces will follow close behind at 46%.

1. Now looking at different parts of your overall holiday business versus the same period in 2020, how do you expect your 2021 online holiday season to compare from a revenue perspective?

Yet, obstacles abound–retailers face increasing costs as well as logistical and inventory challenges. Profitability looms large for survey respondents with the following challenges: increasing costs (47%), meeting profitability goals (35%) and managing marketing budgets (21%). All of these are concerns with inflation looming, which is weighing on 25% of retailers. Retailers expect logistics to be challenging amid high customer expectations starting with timely delivery (44%) and enhancing fulfillment efforts (31%). The inventory dilemma also remains one of the greatest challenges as 41% were concerned about securing sufficient inventory.

Another tangent of that is the ability to refine product assortment, cited by 22% of those surveyed. It’s tough to get the numbers right and that is in play from the 38% who call out fluctuating consumer confidence. And 37% of retailers said it’s always a challenge to forecast growth. The Amazon factor is forever in play in hopes of capitalizing on the growing marketplace business for 28% and 25% who cite Amazon competition in general. Of course, 29% of respondents want to be sure that technology systems are updated.

Retailers have invested first and foremost in marketing (47%) and the customer experience (44%) to grow their holiday business. Marketing investments include everything from embracing social media’s rising role at 36% to SEO’s continued value at 20%. Customer experience always must include customer service and investments were forthcoming for 39%. Site checkout at 38% is always an area where retailers look for improvement, as is personalization for 25% given their impact on conversion. Mobile must also be touched on as 21% cited due to its continued relevance for online shopping. Topping the list of back-end technology is ecommerce platforms (37%) and analytics/testing (35%); many others are noted though their penetration is less than 20% of those surveyed. In support of current industry trends, both logistics/operations (26%) and fulfillment/delivery/supply chain (24%) are seeing critical investments. Retailers are also looking to get creative with new products, services and models and addressing personnel issues, which is a looming challenge for many retailers.

With the customer experience receiving strong attention, we wanted to dig a little deeper and discuss the tactics retailers believe will help them improve their holiday business. For at least half of surveyed retailers, onsite search, key page upgrades, better product information and the checkout are very important to improving holiday business. Giving shoppers the information they need efficiently from product search through checkout has always been and remains one of the keys to conversion.

Retailers are being proactive to optimize inventory, increasing orders along with reviewing their vendor network while simultaneously upping communication and attempting to monitor the situation. From an ordering perspective, that means buying more from existing suppliers (40%), ordering from new suppliers (34%), increasing orders from more countries (27%), and just generally increasing orders overall (24%). Much of the retailer’s work takes place behind the scenes and that involves being in constant communication with suppliers (37%), aggressively monitoring deliveries (30%), working to minimize disruptions (28%) including using technology to assist in those efforts (14%). Planning is also at the heart of keeping the supply chain intact and this factors in both contingency plans (26%) and alternative manufacturing plans (23%). The only thing retailers can be confident about is that there will be uncertainty and that being in the ready position with alternatives and a broad array of supplier relationships, grounded in communication, will serve them well.

Touching on some of the top ways to compete with Amazon must begin with the customer experience and it is here that 37% suggest they will pay greater attention to customer service. From my vantage point, this is one that usually pays off. More personalized experiences (36%), loyalty programs (34%) and upgraded onsite content (26%) were all on retailer to-do lists. Merchandising always matters and 36% of surveyed retailers believe they can deliver on unique or curated selections. 31% indicated that innovative merchandising should also be a differentiator, along with creative gifting offerings that address the needs of the season for 24%. Of course, money talks and that always start with free shipping (27%) along with lower prices (23%). Trying to match Amazon’s delivery prowess won’t be easy but 26% were aiming for faster delivery. Going after Amazon at its own game would also mean expanding the number of marketplaces for 24%. Of course, omnichannel remains a factor as 17% will try to provide better cross-channel integration while 14% will seek expansion/better execution of omnichannel features.

We all know the shopper is hunting for free things across the board, so being as competitive as possible on delivery while also making BOPIS (buy online pick up in store) and curbside available should kick off the season on just the right note. Retailers will offer an array of shipping options over the holiday season with options as follows.

Free

• Two-day: 24%
• Next-day: 14%
• Same-day: 12%

Paid

• Next-day: 22%
• Two-day: 18%
• Same-day: 12%

Retailers keep profitability in play as 17% intend to offer unconditional free shipping while 47% will be requiring a minimum purchase to get free shipping. Keeping that in mind, 36% will use an array of tactics monitoring performance and the competitive landscape. Other free shipping requirements to make note of include tying it to a specific category (22%), loyalty program benefits (18%) or an option to wait longer for shipments (11%).

Though many pundits are predicting that it won’t be a highly promotional season, retailers still appear to be employing tactics beyond both digital gift cards (41%) and physical gift cards (22%). Retailers will offer online-only promotions to spur online shopping while also deploying more traditional tactics, including percentage-off options (38%), buy more save more (34%) and product bundling (28%). It is also important to be cognizant of financing, which continues to see growing interest and will be in play among 33% of those surveyed. Given that we are expecting shoppers to buy early, watch for early season promotions among 32% of surveyed retailers while last-minute shoppers will not be disappointed by 30% of sellers.

They will begin their holiday marketing early in anticipation of consumer interest as follows:

• July-October: 59%
• Early November: 23%
  • Cyber-5 or later: 18%

When asked, “given the changing dynamics of today’s marketing programs, please assess how you plan to tweak each of these available tactics as a percent of your overall holiday budget this year,” more than half of retailers are increasing email, social and SEO with most others seeing growth as well.

Retailers are embracing more customer-centric return policies, starting with extended return deadlines and free return shipping, two of the customer favorites that we have monitored over the years.

While we began with many questions, we hope this sheds light on some of the answers to what is surely going to be an uncharacteristic season. We will be shopping and hoping our selections are in-stock and our deliveries are timely.