Online sales in April and May of 2021 were reportedly 7% higher than November and December of 2020. We may be looking at unprecedented numbers this holiday season, and it’s likely that means a few more hiccups, unforeseen costs, and unplanned issues as well.
What’s in store for Q4? After asking a few industry experts about their indications for the 2022 holiday rush, here are a few research-based predictions, and still many unanswered questions.
Big Changes to the Shopping Environment
Different Rules and Roles for Stores
What distinguishes the holidays from other shopping peaks of the year is the all-at-once rush. Everyone has the same target date to ensure all the presents are safely in their possession.
This peak season will likely see a huge uptick in ecommerce shopping, and for consumers who wish to still buy in-store, there may be limited options. Some stores have closed their physical locations all together. Of those that remain open, a few have issued announcements (Target and Walmart for example) saying they won’t be open on Thanksgiving at all. In the last few months, many stores have limited the number of customers, and that likely won’t change for the holidays. This may mean long lines and wait times for any in-store shoppers.
“It’s now easier than ever to spin up an online store, and consumers are getting habituated to online buying. Ecommerce as a percent of retail sales continues to climb each year. Web sales grew 55% in July over the same month in 2019. That’s down from a 76% year-over-year jump in June. Those are amazing growth numbers! The shift toward ecommerce isn’t a fad, this is here to stay. In some respects, I think fulfillment will get even more commoditized, shifting power to platforms like Amazon and bigger 4PLs. Retailers with a physical store presence that are ahead of the curve will have an advantage though—some are already using their locations to become dark stores (fulfillment centers), supporting their direct-to-consumer strategy, and an important shift to compete with same-day shipping services.”
Another option stores are offering is curbside-pickup. Obviously that still has a big online component, and it might not limit long lines or frustrating operational anomalies. It is a very viable option for bigger stores because it will mean brick-and-mortars will function more like fulfillment centers, which isn’t a bad thing given the strain on shipping times and last-mile delivery we’ve seen in the last few months.
More Online Shopping Means More Supply Chain Strain
It may be a good thing that ecommerce sales have continued to rise each holiday season, because if the 2020 peak season mirrors any of the past four months, online ordering will be the primary way shoppers fill up their wish lists.
If the COVID pandemic did anything to the supply chain, it slowed it down and made it more expensive. UPS reported that March 2020 had a 70% increase in residential deliveries, over March 2019. Of course with rising delivery numbers both FedEx and UPS have implemented additional surcharges that could cost sellers as much as a few extra dollars per shipment.
“Having a highly responsive supply chain becomes that much more important given the uncertainty in the strength of the economic recovery—sellers who are able to respond quickly to shifts in demand, both positive or negative may mean the difference between a profitable Q4 and ending the year heavy on inventory and cash constrained, or alternately leaving sales on the table due to limited supply. One silver lining is that the share of consumer sales through online channels this holiday is likely to be higher than in years’ past. As inventory levels for online channels typically can be ramped or throttled more quickly vs. traditional brick and mortar channels, having a robust online strategy and the means to deliver incremental inventory late in the season is one key to capturing upside sales when they materialize.”
Different Plan for Sales and Promotions
One of the biggest factors driving consumers to buy during Q4 is the sales. Cyber Week historically proves the highest earnings Q4, but that may look different this year. While stores have yet to release any concrete sales dates, one big factor is Amazon Prime Day. This year it is slated for July. The big question is, will Prime Day sales be additive, or simply shift holiday demand forward? It’s something for sellers to consider when forecasting inventory for the peak season.
Sales Spread Across Q4
Black Friday might also look considerably different in 2020. It is rumored that some stores will spread the sales out, starting in October. Since online events don’t have any physical limitations, there are no real restrictions to limiting sales to one weekend, or one week. Brands looking to even out their shipping and inventory strategies may think about pushing promotions and sales at different times than usual. This spread-out sales season may even bring out a different flavor to the customer-brand relationship: it might give brands more of an opportunity to connect with their fans, rather than focus on pushy promotions and higher numbers.
Small Business Squeeze
With all this promotional activity and buzz online, it could mean a harder time for small businesses. Independent stores may be harder to find if they aren’t on an aggregate consumer platform. It’s anyone’s guess to play the promotions game in Q4. Small businesses might get squeezed out this holiday season if big box retailers are pushing everyone online. There’s an added uncertainty for sellers using Amazon’s FBA services, since the inventory rules have changed dramatically this year.
“The biggest difference between this and prior years is forecasting demand for consumers who are now largely remaining at home. That problem is compounded by further uncertainty regarding Amazon and their inventory rules and regulations.”
Mobile Might Be King
Purchasing through mobile has taken a huge jump in the past two years, and although in-store sales have historically been the biggest revenue channel for most stores, customers have shown they are comfortable buying on any device. Many predictions are pointing toward mobile ads and social media promotions as the place for sellers to invest this year. If mobile orders are going to start coming in through social channels more (maybe even 10-15% more) it would be advantageous to get that social strategy on lockdown now.
What Does the 2022 Customer Want?
The Instant Lending Impact
Consumer spending habits are directly tied to the US economy, and this year has been bleak for many Americans. While it may be controversial still, companies like Afterpay allow consumers to pay for their items in installments. This might make spending feel easier for more people than if the service wasn’t an option. According to reports, these burgeoning new buy-now-pay-later platforms are used for lower priced items more often than big ticket items, which could boost those extra holiday purchases that wouldn’t have happened otherwise.
What to Get Them?
All that said, despite the economic downturn in the US this year, people are still spending, but what they are buying has changed dramatically. Whether it’s to invest in new at-home habits (bread anyone?) or to freshen up their Zoom-style, it’s obvious across verticals that customer spending habits will be very different this holiday season. Using the last few months as an indicator, industries that have seen a big spike this year include, online entertainment platforms, health/fitness/beauty, take-out and food/drink delivery services, as well as home and gardening.
“The biggest challenge is interpreting the volatility and the extremes. Take the fashion industry, some retailers have been crushed out of existence due to lack of retail foot traffic, and yet Lululemon apparel is essentially unobtainable, because no one predicted a global spike in demand for comfortable clothing to endure ten hours of daily video conferences. It’s essential this year to stay even more sensitive to market conditions and demand, and to think creatively about how to be able to respond more quickly than usual. Plan for the best, prepare for the worst.”
Questions Yet Unanswered
- Will the carrier shipping deadlines to get packages by December 25 be accurate?
- How will the USPS Federal funding issue affect last-mile delivery and shipping costs?
- Does higher order volume mean way more RMA tracking in January?
- How do sellers manage the increase in shipping cost during the holidays due to various holiday/COVID surcharges? Do they increase pricing, pass the cost to customers, etc?
- Are sellers trying to diversify sales channels in preparation for the holidays? Leveraging other non-core marketplaces like Walmart.com, Target.com, eBay? International shipping to open a new market?
If you are looking for a 3PL to help navigate the 2022 holiday rush, we’d love to hear from you. You can read DCL’s list of services to learn more, or check out the many companies we work with to ensure great logistics support. Send us a note to connect about how we can help your company grow.