It’s the middle of summer so obviously it’s time to think about Christmas and the Holidays!
Or it is if you’re in retail and planning needs to be underway by now. So therefore it’s also time for the annual Holiday tradition that is Salesforce’s retail predictions, a glimpse into the crystal ball that has proved prescient in previous years.
This time last year stores were just beginning to open up again following COVID-driven shuttering, with resurgent new strains of the virus a looming threat to the extent that the question of whether’Christmas is canceled’ might end up being the order of the day In the event, the Holiday season did go ahead and retail moved into what might have been hoped to be a better year in 2022.
But as we’ve repeatedly seen, things haven’t been quite that simple. The global supply chain crisis of 2021 continues to hit hard, while inflation rates are soaring and putting more pressure on disposable incomes. And that’s before the impact of the war in Ukraine is factored in. Overall, the retail sector in the Vaccine Economy remains turbulent.
So what’s the status quo-and what can we expect for this year’s Holiday season? First up, as we’ve seen multiple times in recent weeks, digital growth is slowing down. Now, let’s put some immediate caveats on that –it’s slowing down off the back of enormous growth levels that were fuelled by the closure of physical stores during lockdowns, when consumers had little or no choice other than to turn to online.
Those levels of growth were never going to be sustained once customers could once again browse the real world aisles. Rob Garf, GM of Retail at Salesforce, notes that, based on research data, Q1 saw a 3% decline digital growth:
Looking at this in isolation you say,’Wow, the digital growth is done. It’s behind us!’. That’s not necessarily true … What is important to call out here is this negative 3% growth is based on a Q1 of 2021 We’re looking at a high baseline.
The challenge now, as noted on many occasions on diginomica, is to achieve that elusive omni-channel balance between online and offline, with physical stores heavily back in the mix.
So with that in mind, what should should shoppers and retailers expect for this year’s Holiday season?
Shop early for Christmas!
We’ve seen for several years that the Holiday season has expanded in duration. It’s not just limited to Black Friday weekend, with discounts and sales offers now reaching both back and forward across the calendar. That’s going to continue to be the case this year. Caila Schwartz, Director of Consumer Insights & Strategy at Salesforce, argues:, with inflation adding fuel to the fire as consumers seek to avoid future price hikes by making their purchases earlier in the year.
We project [US] We’re seeing a lot of activity picking up in the monthly inflation to hit anywhere between eight and 12% between now and the end of the year. That is going to create that level of urgency for shoppers to start their Holiday shopping even earlier. first couple of weeks of November and we’re also seeing growth on the other side of the Cyber Week as well, closer to the Christmas holiday, due to things like Buy Online, Pick-up In Store. But really where we’re seeing a lot of activity and a lot of growth is that early November period.
The good news for consumers is that they can expect a more active and extended discounting period, she adds:
Lack of inventory last year drove down discounting. This year, because we’re seeing excess inventory and decreased consumption, we expect that this Holiday season will be a heavy promotion year. We anticipate the average discount rate will go back up to around 18% Between November and December. To put that into context, last year the average discount rate was around 14%, which is the lowest we’ve ever seen it across the Holiday season. Discounts are going to return. Because of the early Holiday season buying , we anticipate that it’s just going to be a really highly promotional Fall.
Loyalty counts in large amounts in large amounts
During the pandemic, loyalty was influenced and shaped around the twin concepts of convenience and personal safety. In the Vaccine Economy –no-one should be ready to call it a post-pandemic era yet! explains: explains:
Based on our research that we did across 10,000 consumers just a couple of weeks ago, we anticipate that half of shoppers globally will switch brands between now and the end of the year due to pricing. We asked about a bunch of different factors about what is going to change your mind or what will make you switch your favorite brands this year? Across nearly all generations and all regions of the world, it was price. Consumers are incredibly price conscious this year.
They’re also looking at the customer experience, she adds, making brands and retailers think hard about how they can really engage with those price conscious shoppers:
Getting that right price at the right time with the right message is going to be really critical. We’re gonna see some’discount chicken’ happening again this year.
Love the store!
Stores are back in business, big time, with Salesforce’s research predicting that store real estate will help drive growth across all channels, online and offline. As diginomica has noted, there has been suggestion that some pureplay online players are falling behind those with hybrid channel offerings. Garf argues that retailers with bricks-and-mortar presence will grow 1.5 x faster than those without:
[Analyst firm] Forrester has talked about how much store sales were influenced by digital because we all would go online and do our discovery and research before going to the physical store. We’re actually seeing the reverse of this happening, where the store is so influential not only for bricks-and-mortar, but for digital, whether demand is being generated or demand is being fulfilled.
There’s a pent-up demand from consumers who have effectively been under house arrest to get back out there behind their physical shopping carts. Garf goes on:
Many of us want to get out in the world. We saw this when the pandemic loosened up a bit over the last couple of years people, getting back to Main Street or the High Street and back in the malls again, wanting to go in the store, touch and feel the product talk to a knowledgeable store associate.
Think about the planet!
Shoppers are gradually gravitating towards retailers that can demonstrate their sustainability credentials. According to the research, 83% will seek out sustainable brands and products. That means retailers have to put up or shut up. Some 81% already provide public goals and performance commitments around climate change, while 23% state an intention to promote their sustainability strategies this Holiday season. Garf notes:
Sustainability has been a hot topic, but both retailers and consumers often don’t always put their money where their mouth is. But what we are finding is, it is driving loyalty or at least is influencing the purchase decision.
Dear Santa, I want an NFT for (next) Christmas!
Retailers won’t be majoring on NFTs this Holiday season, but they will be dipping their corporate toes in the water. Given that Salesforce has recently announced its own play here, that’s good news for the tech vendor, but what does it mean for consumers ? Garf suggests a phased approach will come into play:
This year will be as much about loyalty and access. How can we gift an NFT that will provide access into perhaps a loyalty program or an actual physical experience for the recipient?… Down the road, probably not this Holiday season, but we see an interesting opportunity for identity and control … This is giving more control living in the blockchain to the consumers so they can more proactively manage their identity and get certain perks in return.
But there’s going to have to be some consumer education done, he admits:
Consumers don’t necessarily know what an NFT does or see the value. But that’s not necessarily how it’s going to manifest itself per se to the consumer. It might be digital goods, it might be digital twins. It might be a digital way to So, like anything where we’ve seen innovation, there are typically phases that it takes. At the end of the day, in order for it to be adopted by a consumer, it needs to solve a real problem for them, especially given the context of the time we’re in.