Online holiday sales in the U.S. will surge 34% year over year for the 2020 season, nearly tripling the 12% growth registered in the prior year, according to new projections from software provider Salesforce.com Inc. The pandemic-induced spike in ecommerce this year will carry into the holidays, and with total sales through all channels expected to remain flat, digital will make up 30% of seasonal spending, the company predicts.
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. The upcoming holiday is an unprecedented one, and the digital footprint is about to get even bigger than it has been year to date, says Rob Garf, Salesforce’s vice president of industry strategy and insights for retail and consumer goods. It took 20 years for online penetration to reach about 15%, and in just over the course of this year, that will “skyrocket” up to 30% by the holidays, he says.
Salesforce’s forecast is in line with numbers released last month from Deloitte. The research firm expects holiday sales to jump between 25% and 35% for the November-January period.
“The yesteryear of standing outside on Black Friday to get your doorbuster really goes away,” Garf says. “Retailers don’t necessarily want the volume, and consumers don’t want it as well. It’s going toward digital traffic, which is ultimately driving digital sales.”
But it’s not as if stores will be obsolete—even if shoppers are largely staying away because of the coronavirus. Brick-and-mortar locations have a critical role to play, with stores serving as fulfillment centers, Garf says.
Omnichannel-focused retailers stand to benefit this season. Ecommerce sites that offer options for buy online pick up in store (BOPIS), curbside pickup or drive-through will grow online holiday sales by an average of 90% year over year, the company forecasts. That’s because these programs solve several pressing problems for both retailers and consumers: hard and fast holiday gift-giving deadlines, uncertainty about shipping times this year and current discomfort with crowded, indoor spaces.
Traditional carriers will be over capacity
The unparalleled jump in online orders during COVID-19 has already put an immense strain on shipping carriers. Although retailers have reported Black Friday-level order volume in the second and third quarters, they’re still bracing for an even bigger surge in Q4.
The overall number of holiday packages that will be sent out globally will exceed the shipping capacity for traditional carriers by 5%, jeopardizing promised delivery windows and potentially delaying up to 700 million orders worldwide, Salesforce projects. U.S. figures are unavailable.
“Winners and losers this holiday season will be defined by the last mile, and retailers don’t want to be caught on the wrong end of those shipping woes headlines,” Garf says.
Retailers will leverage stores and push alternative fulfillment options like BOPIS to essentially outsource the last mile to the consumer and help avoid last-minute time crunches, he adds. And while merchants will continue to lean on conventional parcel delivery services, they’re increasingly “crowdsourcing” fulfillment through companies like Uber and Lyft to help with worsening delivery bottlenecks. Garf points to PetSmart Inc. (No. 19 in the 2020 Digital Commerce 360 Top 1000) partnering with DoorDash to offer contactless, same-day delivery and other retailers syncing up with Roadie, which has a similar model.
“What we saw earlier on in this pandemic was retailers being really, really scrappy,” Garf says. “But now retailers must move from being scrappy to scale in order to fulfill the orders in a cost-effective manner… and to be confident in getting packages to the doorstep.”
Holiday shopping will start earlier
Consumers already are inclined to start holiday shopping sooner this year because everyone was burned by out-of-stock items and longer-than-normal ship times earlier in the pandemic, which has sparked fear over product shortages and delayed packages for the holidays, Garf says.
But there are a couple of other factors that will contribute to an earlier kickoff to the season. First, retailers are very likely to pad their ground shipping cutoff—traditionally Dec. 17—with extra days to compensate for spotty carrier performance and protect guaranteed delivery dates, he adds. Garf would be “shocked” if deadlines weren’t pushed earlier in December.
Additionally, Amazon.com Inc. postponed Prime Day, the retail giant’s annual sales event that’s typically held in the summer, until Oct. 13-14 because of COVID-19. Historically, other retailers have run competing promotions to capitalize on an overall barrage of web traffic during the sale as shoppers flock to Amazon.com (No. 1) and also comparison-shop on competitors’ sites. In fact, last summer, other retailers boosted their online sales by 37% year over year during Prime Day in what was widely considered the “halo effect,” Salesforce reports.
This year, there are only 44 days between Prime Day and Black Friday, so the widespread promotions in October will effectively mark the beginning of the holiday season, Garf says. According to Salesforce projections, 10% of Cyber Week (the Tuesday before Thanksgiving through Cyber Monday) revenue, or $6 billion in the U.S., will shift to Amazon Prime Day.
“There’s a really compelling event smack dab in front of us, and retailers will create artificial demand to pull that shopping earlier in the season to ensure the product is actually available and they have the means to get it to the consumer or have the consumer get to them,” Garf says.
If things play out this way, that will help spread out the influx of holiday orders typically concentrated over peak days or weeks over a longer period of time. Aside from alleviating some of the strain on overburdened carriers, retailers have an added incentive to push seasonal spending earlier, Garf says. Holiday orders that are placed before mid-November will avoid COVID-19 delivery surcharges that carriers are levying on commercial packages. Salesforce estimates carriers will charge retailers $40 billion worth of added delivery fees globally from Nov. 15 through Jan. 15.
The holiday returns problem
The perennial returns problem will be magnified this year, Garf says. Consumers are expected to send back $280 billion worth of global ecommerce orders—30% of all purchases made during the season, Salesforce says. U.S. figures are unavailable. And that price tag doesn’t account for the operational costs for processing returns.
This high return rate is in part caused by consumers “bracketing” their size, Garf says, which is when a consumer orders an item in the size she thinks will fit but also buys the same product one size up and one size down to try on with the assumption that two of the three items will go back, for example.
To combat that, retailers can help reassure consumers that a product will arrive as described by reinvesting in product detail pages, Garf says. That includes revamping sites to include more robust product descriptions, clear and accurate fit guides, reviews, photos, videos, inventory availability and expanded shipping options.
Additionally, retailers can use store associates to guide online shoppers to the right product and size via live chat and digital concierge services, which also will help reduce return rates, Salesforce says. The company predicts a 30% spike in the number of consumers engaging with customer service agents during the holidays, and retailers have reported additional training for traditional agents as well as store associates to handle the influx.
But if a shopper does need to return a product, retailers with stores should offer that as a curbside or drive-through service, too, and figure out how to make that a convenient and safe procedure for consumers as well as store associates, Garf adds.
Salesforce aggregates data from the activity of more than 1 billion global shoppers flowing through its Commerce Cloud platform and extrapolates its clients’ findings to the broader retail industry. The company also uses publicly available third-party data sources and interviews with dozens of retailers to aid in its holiday insights.
Percentage changes may not align exactly with dollar figures due to rounding.
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