COVID will certainly set a new precedent in ecommerce penetration: We predict that approximately 30% of international retail sales will be made via digital networks this upcoming holiday season.

Posted by Butcher Fox on January 13th, 2021

Holiday demand will be pulled earlier thanks to a later Prime Day: We predict that the Prime Day event in October could potentially steal up to 10% of Cyber Week’s digital revenue. With merely 50 days between Prime Day and Cyber Week, the reality is that consumers will finally make holiday purchases earlier in the season. Last-mile delivery will run out of capacity: We predict that parcels shipped by traditional delivery providers will exceed capacity by 5% across the globe between the week before Cyber Week and Boxing Day. That’s potentially 700 million gifts that are at risk of not arriving in time for the holidays. Stores will be critical again this year — as fulfillment centers: We predict that sites offering store pickup — curbside, inside, drive-through — will see a 90% increase in digital sales over the previous holiday season. Media mix will continue to dramatically shift to personalization and localization: We predict that 10% of mobile orders will be through social channels (with peak days reaching between 12%-15% of mobile orders). What does the number “118” mean to retailers? That’s the number of days between today (July 30th) and the start of Cyber Week. For some, that’s a lifetime away, but there is never enough time to prepare for the upcoming holiday season for brands and retailers. This year is the most challenging of all. Thanks to COVID-19, retail does not resemble what it did in years past. Supply chains around the globe are buckling under extreme pressure, and unprecedented surges in digital commerce have limited shipping capacity and impacted delivery windows. There’s also a looming threat of a second wave of COVID-19 cases this upcoming fall and winter that has consumers across the world on edge with uncertainty. For brands and retailers, these factors pose many challenges for the upcoming peak shopping season. The ability to effectively balance the marketing mix, accurately forecast demand, and efficiently fill orders are top priorities for executives. Using a combination of our comprehensive Salesforce Shopping Index and secondary resources, we’re making five bold predictions on key trends that will make or break your holiday season. Continue reading for what you need to know now to plan for a successful 2020 holiday shopping season. 1. There will be a new precedent in ecommerce penetration Retailers experienced holiday-like traffic and sales via digital commerce channels in the first half of 2020. One of the most common questions we field is, will these unprecedented levels stick around? The short answer is yes, this surge has established a new baseline for digital. When we launched our Q1 Shopping Index in April, we predicted that the digital surges we saw in March and April would likely continue as we headed into the summer. When we released our Q2 Shopping Index earlier this month, that prediction turned out to be correct. In Q2 of this year, global digital revenues grew by an unprecedented 71% over the same period in 2019. Consumer spending via digital channels increased even as brick and mortar locations began to open their doors again in the back half of Q2. As recently as June 1st, 61% of consumers [recommend viewing dashboard on desktop] reported that they were shopping in brick and mortar stores less often than usual. At the same time, over 50% of consumers reported record levels of digital engagement, saying that they were browsing the internet, shopping, and streaming content more than they normally would. The reality is that digital transformation has accelerated five years into the future in just a few short months. So what does this mean for holiday 2020? We predict that up to 30% of global retail sales will be made through digital channels this upcoming holiday season. Depending on who you ask, the range for digital commerce penetration spans from the low to the high teens as a share of total retail sales. However, there still is a tremendous amount of uncertainty in the brick and mortar environment. We believe many retailers will transform their stores to be more optimized for fulfillment rather than shopping this Holiday season (more on that prediction later), pushing up the share of digital shopping, regardless of fulfillment choice, to an unprecedented high. The obvious impacts of a large digital channel are the anticipated record levels of digital traffic and orders. This is something that you should prepare for now by conducting load testing, and planning accordingly for unprecedented surges in digital activity. However, the not so obvious aspects of scale that will be just as critical are the extensions in operations, fulfillment capacity, and customer service that will be necessary to ensure that the shopper is satisfied. It’s important to manage that digital surge throughout the entire customer journey, so customers return. 2. Holiday demand will finally be pulled earlier thanks to a later Prime Day When Amazon introduced Prime Day back in 2015, no one anticipated that it would become a shopping holiday that shook consumers out of the summer doldrums. The mid-July sale became a precursor for back to school shopping and posed no threat to the winter shopping holidays. In fact, over the years, brands and retailers have participated in the buzz and subsequent demand generated around the giant’s summer shopping holiday. Now fast forward to 2020. Facing fulfillment and supply chain challenges given the COVID-19 surge for essential goods, Amazon decided to postpone their Prime Day event until August. Then, they pushed it to September. And the latest rumblings are that it will now be in October. The later that Prime Day gets pushed, the more of a threat it is to Cyber Week. We predict that the Prime Day event in October could potentially steal up to 10% of Cyber Week’s digital revenue. With merely 50 days between Prime Day and Cyber Week, the reality is that consumers will finally make holiday purchases earlier in the season due to four key reasons: Confidence: Burned by ongoing delivery delays for the majority of 2020, consumers will be willing to purchase and hold gifts to avoid the stress of not receiving packages in time. Scarcity: Reduced container capacity and unpredictable demand will create supply and demand challenges on popular goods. Consumers will look to buy early to secure the goods they want. Deals: Promos and coupon codes are historically the number one factor influencing holiday purchases. Given the current economic challenges, consumers will be on the hunt for the best deals. Safety: More consumers will purchase their holiday gifts during Prime Day due to the potential of store closings and risk of infection. What does this mean for you? Don’t sit out on Prime Day. According to Salesforce research, 51% of retailers in Internet Retailer’s (IR) 2019 Top 500 advertised a sale during Prime Week, whether in their email marketing or on their ecommerce homepage. Take advantage of the visibility and demand created by this manufactured holiday to pull traffic and sales to your properties. 3. Last-mile delivery will run out of capacity The ability for packages to arrive on the doorstep this holiday will be significantly constrained. Based on the increase in parcels due to surge in digital orders, along with social distancing measures in distribution centers, traditional delivery providers will run out of last-mile capacity during the holidays. We project that parcels shipped by traditional delivery providers — such as FedEx, UPS, DHL — will exceed capacity by 5% across the globe between the week before Cyber Week and Boxing Day. That’s potentially 700 million gifts that are at risk of not arriving in time for the holidays. In addition to the potential of disappointing shoppers, significant operational costs are at play as well: We project an incremental approximate .5 billion in COVID-19 delivery surcharges from the traditional delivery providers. Billions of customer service inquiries that service agents will field about Where Is My Order (WISMO). Relatively higher increase in returns due to purchasing of alternative gifts because anticipated late delivery. Which last-mile options are available when traditional delivery providers are no longer reliable or profitable? Let’s talk about crowdsourcing and store associates. Crowdsourcing Uber, Lyft, Instacart, and a myriad of other crowdsource transportation and delivery platforms have, in theory, an unlimited capacity. During the peak of the pandemic this spring, essential brick and mortar stores like grocers stood up relationships with these platforms out of necessity. At-risk populations were able to easily order groceries from the safety of their homes, and get them delivered the same day. As we think ahead towards the holidays, and as most Uber and Lyft drivers are giving fewer rides to restaurants and airports, this is a prime opportunity to tap into these channels’ capacity. Store associates Tap into store associates to ratchet up throughput based on spikes in demand. Picking, packing, and delivering is a new muscle they will need to learn how to flex. Provide the tools — such as order management, scheduling, route optimization — to untether associates from the store and empower them to deliver to the doorstep (see Prediction #4 for more details). Key actions required now to effectively execute these alternative last-mile delivery options include: Make forward buys in capacity with these providers ahead of the season. Move inventory closer to the source of demand — the physical stores. Make sure you can anticipate your customers’ needs in each market by leaning on your customer data to help guide your assortment and allocation by market. Reskill your store associates to be fulfillment gurus. Align incentives to empower and motivate new processes and procedures. masque chirurgical couleur noir will help prevent delivery issues as we head into a season poised to ship a record number of parcels. 4. Stores will be critical again this year — as fulfillment centers What a difference a year makes. Last holiday, stores were critical experiential, discovery, and fulfillment hubs. But even with fewer shoppers visiting physical locations, stores remain an important asset to enable contactless fulfillment. Contactless fulfillment will be critical to extend the shipping window and relieve the pressure that will undoubtedly be pushing on the last-mile delivery network. Transforming stores into fulfillment centers will enable both efficient last mile delivery and convenient pickup locations. We predict that sites offering store pickup — curbside, inside, drive-through — will see a 90% increase in digital sales over the previous holiday season. The reality is that over the past year, consumers have realized the benefits of purchasing online with confidence and picking up with convenience at their local store. Consumer adoption only accelerated during the pandemic — reducing health risks and bypassing shipping delays with same day pickup. Thirty-six percent of U.S. consumers reported that they used contactless delivery more than usual, and 30% used buy online pick up in-store (BOPIS) more than usual [recommend viewing dashboard on desktop] throughout the pandemic. When asked about the upcoming holiday season, 33% of U.S. consumers reported that they are more interested in using BOPIS for the holidays [recommend viewing dashboard on desktop] this year compared to last. Benefits for brands and retailers are also clear — mainly in the form of margin improvement. Fulfilling orders in a matter of hours and not days allows merchandise to turn faster and enables more accurate demand forecasting, which is especially critical as inventory has been locked in stores for much of the first half of the year. And with the imminent .5 billion of COVID-19 surcharges, avoiding shipping costs and surcharges by offloading some of the fulfillment costs to customers is a smart tactic. So what is required now to prepare for fulfillment at the store level? Provide store-level inventory visibility via digital channels in real time. Establish flexible and agile fulfillment options, and as with Prediction #3, move inventory closer to the source of demand. Segment your customers based on their proximity to your stores. Nudge your customers that live closest to your store to utilize BOPIS or crowdsource options with special offers and incentives. Incentivize customers to use these fulfillment options rather than opting for shipping. Communicate early and often with your customers about the fulfillment options that are available to them. And pass on the cost savings. Allow for options and provide clear instructions. Some customers may want to come into the store to pick up their order; some may want you to deliver it to their car via curbside. Implement intelligent localized marketing. The messaging to customers living 3-5 miles from a store should be different from those over 50 miles away. As retailers shift from scrappy (manual and clunky) to scale (automated and streamlined) for new store capabilities, customer experience will be enhanced while operational costs will be reduced.

Butcher Fox

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Butcher Fox
Joined: January 13th, 2021
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