Last year's holiday shopping season was all about e-commerce. Retailers should plan on more of the same as pandemic-driven shopping trends continue to grow.
Consumers are ready to get out of the house to do some big holiday spending this year.
According to Deloitte’s 2021 holiday forecast, US retail sales will increase 7% to 9% this holiday season. Shoppers will be traveling again, dining out, entertaining, and going to the store to look for holiday deals.
While this year will see the return of many pre-pandemic holiday spending habits, consumer behaviors shaped by COVID will continue. Deloitte predicts e-commerce sales will jump 11% to 15% year over year, totaling between $210 billion and $218 billion.
Altogether, retailers will ring up holiday sales totaling between $1.28 trillion to $1.3 trillion, Deloitte estimates.
Mastercard also expects strong sales this holiday season, with more foot traffic in stores and booming e-commerce. US retail sales will grow 7.4%, according to Mastercard SpendingPulse, which predicts in-store sales will grow 6.6% and online sales to increase 7.6% compared to last year.
Delta be damned: Consumer comfort drives holiday spending
All signs point to a robust holiday shopping season, as consumers gain confidence after months of lockdowns and travel restrictions. Relatively low unemployment rates combined with increased savings will help drive up holiday spending, says Rod Sides, vice chairman, Deloitte LLP and U.S. retail and distribution sector leader.
“Generally, when consumers feel better about their personal situation, they open up their wallets,” he told me.
Despite the pandemic, holiday retail sales grew 5.8% last year — more than expected, according to Deloitte. That was up from 4.1% in 2019. Things are looking even better for retailers this year, even as the Delta variant looms.
With a growing percentage of the population vaccinated, it seems “that consumers aren’t going back to a lock-down mentality,” Sides said.
He expects consumers to resume holiday travel and make the trips they couldn’t before vaccines were available. He also expects shoppers to spend more on food and beverage with the return of holiday entertaining.
“Folks feel they’re making up lost time, to some degree,” he said.
MasterCard predicts that buyers will splurge this holiday season, snapping up apparel, luxury items, and jewelry. “Fueled in part by pent-up savings and government stimulus, consumers have the desire and the means to spend,” the company said.
E-commerce and BOPIS hotter than ever
While consumers are eager to get out of the house to celebrate this holiday season, they won’t be giving up the shopping habits they acquired during the pandemic anytime soon.
Between last November and January, E-commerce sales grew nearly 35% last year, totaling $189 billion, per Deloitte. That’s astounding growth: By comparison, e-commerce sales grew 14.7% in 2019.
“E-commerce just keeps getting bigger,” Sides said.
According to Mastercard SpendingPulse, e-commerce sales will reach a record high during the extended holiday season, growing 59.3% over 2019.
Contactless and buy online, pick up in store (BOPIS) retail also soared during COVID as consumers sought out ways to shop safely. Altogether, this underscores the importance of an omnichannel strategy for retailers. Consumers today expect options and retailers who can provide a seamless experience between online and offline channels will come out ahead.
“Retailers who remain resilient to shifting consumer behaviors and offer convenient options for online and in-store shopping, as well as order fulfillment, will be poised for growth this holiday season, and into the new year,” Sides said.
Flexible fulfillment is a requirement for retailers today. Ship-to-store, ship-from-store, and BOPIS (buy online, pickup in store) options rule the retail experience.
The Scrooge factor: Supply chain issues
Despite the rosy retail outlook and holiday spending predictions, ongoing supply chain problems could dim the 2021 holiday season.
Multiple factors are contributing to supply chain woes, including COVID-caused factory and port closures in Asia, a shortage of cargo ships, a lack of truck drivers, and a retail labor shortage.
For consumers, the result could be fewer choices, more out of stocks, higher prices, and delayed shipments. That means they need to be prepared by shopping earlier and maybe make due with second choices, especially when it comes to hot holiday items like certain toys and electronics.
Retailers will have to figure out ways to limit the number of out of stocks and fulfill orders in a timely way to deliver high-quality customer experience. Experts are confident that retailers will rise to the challenge, especially after all they endured during the pandemic.
“This holiday season will be defined by early shopping, bigger price tags and digital experiences. Over the past two years, retailers have learned a lot about what shoppers want and need, bringing us into an exciting new age of retail resilience,” Steve Sadove, senior advisor for Mastercard and former CEO and Chairman of Saks Incorporated, said in a prepared statement.