2020 has been the year of the curveball—a year in which seemingly anything could happen. Even just in the world of logistics and supply chain management, this year has seen dramatic shortages, supply chain disruptions, air freight capacity crunches, ocean freight blank sailings, and much more. (The list goes on!) As the COVID-19 pandemic continues to impact the globe, most experts agree that the 2020 holiday season will look a little different this year for consumers, retailers, and logistics providers alike.

But exactly how will it be different? Obviously, that still remains to be seen. However, in this article, we’ll take a look at some statistics and some predictions, as well as share our own thoughts on where retailers might see some shifts in business as usual during this busy season.

First, the big question: How will the events of this year impact consumer spending?

The Experts Are Split on Spending Volume

Many holiday sales forecasts have been cautious out of the gate:

  • The International Council of Shopping Centers has projected a 1.9% rise in holiday spending, in sharp contrast to their 4.9% rise predicted for the 2019 holiday season.
  • Deloitte predicted two potential scenarios for the 2020 holiday season: one in which anxiety keeps the rise in spending under 1% and a second in which significant events (the development of a vaccine, for example) boost consumer confidence, resulting in a spending increase from 2.5-3.5%. Overall, though, their formal forecast settles in at a 1.0-1.5% increase, in line with the ICSC projection.

However, if you look at Amazon’s 2020 Prime Day’s estimated results, you might be inclined to a slightly rosier outlook.

Digital Commerce 360 estimated Prime Day 2020 sales at $10.40 billion, up from $7.16 billion in 2019. (That’s a 45% increase!)

That said, Prime Day 2018 brought in an estimated $4.19 billion for Amazon, which means that 2019 represented a 71% increase in Prime Day sales. So, while Prime Day sales still rose in 2020, the year-over-year increase was less than 2019. This might temper your holiday sales projections a bit.

However, a RetailMeNot survey revealed that 66% of consumers plan to spend the same amount on holiday shopping or more this year. So retailers may still get the opportunity to capture significant revenue in the last two months of the year.

But even if consumers spend a significant amount of money during the holiday season, the events of 2020 are still likely to create some ripple effects in consumer behavior that will affect retailers in particular.

Effect #1: Changes in Spending Categories

Driven in large part by millennials, the “experience economy” has boomed in the last couple of years. In fact, since 1987, the share of consumer spending on live experiences and events has increased by 70%.

However, with venue closures, travel restrictions, and uncertainty around COVID safety, consumers may not buy as many experience-based gifts. A Coresight Research poll noted that 68.9% of respondents are moving their spending to retail products instead. Additionally, a number of households have saved significant money they ordinarily would have put into services such as food, travel, and entertainment, which could represent spending power of as much as $450 billion.

These dollars could get funneled into some of 2020’s most in-demand items. For example, home workout equipment, home office items and décor, and even comfortable loungewear and workwear for loved ones who rarely leave home could become wildly popular this season.

The other change we may see is consumers kicking off the holiday shopping season earlier than usual.

Effect #2: Shifting Timelines

Whereas in past years, consumers have aired complaints about holiday shopping décor and deals prior to Thanksgiving, this year, look for consumers to start their holiday shopping sooner rather than later.

A Coresight Research study reported that three in ten consumers expect to start their holiday shopping earlier than usual. Additionally, a Salesforce study estimated that up to $6 billion in holiday retail spend may have already happened in October, with Prime Day pulling a great deal of that revenue.

Many retailers are encouraging this behavior with early deals—and with good reason, considering the capacity crunch we may see in holiday deliveries this year. But, before we get into detail on that topic, let’s take a quick dip into the “why” behind this crunch: the rise in online shopping.

Effect #3: More Consumers Shopping Online

Safety concerns around COVID-19 have massively boosted online sales, with reports that as many as one in every two shoppers now does 75% of their shopping online. Additionally, research from Deloitte suggests that holiday sales online could grow by as much as 25-35% this year.

What does this wrap up to for retailers? Big brands like Target, Walmart, and Best Buy are turning to BOPIS (buy online, pick up in-store) options to save on delivery and packaging costs. In fact, while many retailers are bringing on staff for the holidays, they are largely using them to fulfill BOPIS orders or to serve BORIS (buy online, return in-store) needs.

Encouraging your customers to use BOPIS options has some key benefits this holiday season. In addition to saving you money on shipping and packaging, BOPIS options give your customers more control over their holiday gift timelines. Whereas these are good things, even in a normal holiday season, they’ll be especially important this season, given the next ripple effect, we’ll discuss.

Effect #4: Capacity Crunches & Distribution Challenges

UPS, FedEx, and USPS have all announced holiday surcharges, which that fulfilling online orders will get more expensive. Additionally, Salesforce has projected that packages shipped during the holiday season will likely exceed capacity by 5%, resulting in as many as 700 million delayed packages from retailers to consumers.

In other words, holiday shipping will cost retailers more—and delays are likely, which can trigger significant customer frustration. As a result, many online retailers are imposing aggressive shipping cut-off dates to ensure that there’s enough time for consumers to get their packages before Christmas.

That said, driving customers to BOPIS options can save retailers a significant amount of money, and offer consumers the ability to get their hands on the items they want within 24 hours. If you’re interested in adding or expanding your BOPIS options, check out our article on the topic: Making a BOPIS Strategy Work for Your Retail Business—and Its Bottom Line.

Just remember to anticipate both sides of the equation in your BOPIS strategy—the purchases and the returns, which can be higher with online purchases.

Adapting to the Reality of Retail in 2020

The events of this year have required everyone to be flexible, from consumers to retailers to distributors to logistics professionals. However, adaptability has its benefits. The more you’re willing to adjust your operations to meet the challenges the year has brought us—and will continue to bring into 2021—the better you’ll equip your business for a future that will continue to demand flexibility.

 

 

 

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Want to talk with one of our professionals about adapting your supply chain for the holiday season—and beyond? Reach out for a free consultation. We’ve been delivering freight forwarding and supply chain management solutions for more than 20 years. We’ve seen a lot in that time, and we can help you adapt to what’s next.