Despite mixed signals from consumers and some heady crosswinds for merchants, this year’s holiday shopping season is likely to benefit from plenty of pent-up demand and a resilient global economy.
Shoppers have a little more money in their pockets—thanks to government aid programs and increased savings—and after nearly two years of isolation, they’re eager to spend time together and enjoy the holidays as much as possible. As a result, retail sales in the U.S. this holiday season are expected to increase 4.4 percent in 2021, delivering $760 billion, according to data provided by the Mercator Advisory Group.
With travel and experience-based spending likely to be high on wish lists and e-commerce expected to continue its well-established run, there might even be reason for additional optimism. Last year’s holiday-related spending, for example, increased nearly twice as much as originally predicted—at 8.3 percent— according to the National Retail Federation.1
“The pandemic has proven just how resilient both consumers and merchants can be,” said Mark Broderick, principal analyst at Panoramic Research. “Shoppers are expected to increase their spending this year, which likely means more consumers will begin shopping earlier, while some will migrate to a different channel to cross items off their shopping list.”
But there are reasons for caution. While retail sales are rising,2 consumer confidence in the U.S. has been mixed in this year’s second half, declining three months in a row before rebounding some as the shopping season began.3 In addition, critical supply chains continue to be disrupted, and no region is immune: Shoppers around the globe still face significant delivery delays, and retailers could have difficulty responding to increased holiday demand amid a backdrop of staffing shortages.
With so much uncertainty, the way retailers respond to this year’s challenges could make or break their whole year, so getting ahead of them now is critical. This is equally true for consumers’ increasing preference for digital-everything:
“The migration to digital payments caused by the COVID-19 pandemic isn’t going to go away, so merchants need to be prepared to accept payments where, when and how the customer wants to purchase to capitalize on the holiday season,” said Thad Peterson, Strategic Advisor, Retail Banking & Payments, Aite-Novarica Group.
To make sure 2021 finishes on as high a note as possible, here are six holiday trends retailers need to know:
1. Omnichannel everything dominates the market
Many consumers are planning to do their holiday shopping this winter in brick-and mortar stores, but online and mobile continue to rise in popularity. In addition, with greater e-commerce sales and consumers’ growing expectation of two-day delivery (plus free and easy returns), there is a greater need for creative fulfillment options. As a result, “dark stores”— retail facilities that fulfill online orders and are not open to the public—are springing up in various countries to help fulfill orders more efficiently. The converted dark stores allow retailers to optimize the physical store’s square footage, inventory, labor and geographic proximity in local markets and get orders to customers fast.
2. Pandemic-led payment trends continue to rule
Contactless payments in-store, and buy online, pick up in-store (BOPIS) continue to be more popular than ever because of the improved customer experience they offer. The National Retail Federation, for example, found that BOPIS improved the customer experience for 70 percent of surveyed consumers by increasing convenience.4 As nine out of 10 shoppers prioritize convenience when choosing a retailer, both BOPIS and buy online, pick up at-curb, are expected to be critical to retailers’ results.4
3. Buy Now, Pay Later (BNPL) is here to stay
The economic impact of the pandemic has led many shoppers to seek more manageable and predictable payment schedules. As a result, BNPL installment loans with set monthly repayments have become increasingly popular, and there’s little doubt why. Customer satisfaction with BNPL is high, with 61 percent of those who have used the payment method reporting they are satisfied or very satisfied.5 U.S. volume of BNPL is projected to surpass the $100 billion mark annually by 2024, from $55 billion in 2021.6 Gen Z shoppers, who generally have less disposable income than older groups, find BNPL especially appealing as an easy budgeting tool.
4. Holiday shopping keeps moving the calendar
Just like last year, consumers are shopping earlier this year—a smart move given the e-commerce boom and potential delivery delays. The real beginning of the holiday shopping season seems to have shifted to early October—and 25 percent of shoppers surveyed by Mercator said they had started or planned to start their holiday shopping as early as September, according to Don Apgar, Director, Merchant Services Advisory Practice at Mercator Advisory Group.7 As a result, retailers that started battling early for consumers’ attention with creative marketing assets gave themselves a head start. As part of this trend, more businesses have jumped on the early discount bandwagon, and consumers are getting their shopping done as soon as possible with hopes of beating the crowds and shipping delays common to the holiday season.
5. Leveraging gift cards to smooth those supply chain disruptions
Even if consumers decide to open their wallets and splurge, many merchants are confronting unusual product delays and the prospect of empty shelves. Hit by supply chain disruptions and a shortage of computer chips that is delaying other products—as well as higher prices in the face of these shortages—merchants will need to balance customer expectations with these constraints. As a result, retailers need to pay special attention to their customer communication, telling them when to expect their items, and quickly notifying them of delays. In many cases, retailers should also consider promoting the benefits of gift cards for purchases later when products are available.
6. Staffing shortages continue
Many retailers say their biggest workforce management challenge this year will be matching labor schedules to in-store customer demand. With about 10 million unfilled jobs overall in the U.S., the retail and hospitality sectors are struggling to find the help they need to provide both in-store and back-office service to customers. In many cases, higher wages are offered to entice new workers, but money isn’t everything. To attract and retain staff this year, retailers must take a page from their customer marketing playbook and focus on the employee experience: by taking the time to find out what their staff really cares about, such as safety, flexible scheduling and quality of life—in addition to compensation.
1 National Retail Federation, January 2021. NRF says 2020 holiday sales grew 8.3 percent despite pandemic. Viewed 18 October 2021.
2 The U.S. Commerce Department, October 2021. ADVANCE MONTHLY SALES FOR RETAIL AND FOOD SERVICES, SEPTEMBER 2021. Viewed 18 October 2021.
3 The Conference Board, October 2021. Consumer Confidence Increased in October. Viewed 8th November 2021.
4 National Retail Federation, January 2020. Consumer View Winter 2020, Convenience and the Consumer. Viewed 18 October 2021.
5 Mercator Advisory Group, Spring 2021. 2021 North American Payments Insights-Buy Now Pay Later. Viewed 24th August 2021.
6 Mercator Advisory Group, May 2021. Buy Now, Pay Later: Gaining Scale and Disrupting the Status Quo in Lending. Viewed 24th August, 2021.
7 PaymentsJournal, October 2021. Holiday Shopping Trends Towards Online “Social Commerce”. Viewed 27th October 2021.
The information provided herein is sponsored by Discover Global Network. It is intended for informational purposes, and is not intended as a substitute for professional advice.