Here are some strategies retailers can leverage to ensure a successful holiday season that don’t rely on slashing prices and promotions.
After a roller coaster 2021 the U.S. consumer retail market rebounded well beyond expected growth, culminating in an incredibly strong all-important 4th quarter of the year — right in time for the all-too-critical holiday season.
Total retail spending grew 16.1% year-over-year, the largest annual increase in 17 years, and e-commerce sales increased 10.4% vs. 2020 and 64.1% vs. 2019, reflecting the sustained COVID-19 effects and accelerated shifts to digital platforms.
Looking ahead to this year’s holiday season, however, growth is predicted to slow amid a backdrop of uncertain macroeconomic conditions. Consumers are increasingly showing signs of pulling back on spending as inflation cripples wallets and supply chain issues persist. Forecasts are putting U.S. retail growth at 3.3% — a steep deceleration compared to 2021’s holiday season.
Regardless of expected demand, however, brands continuously face an uphill battle at the end of the year. Holiday planning continues to be pushed earlier and earlier and retail marketers are tasked with immediately strategizing the next year’s strategy the minute the previous one concludes.
This year, it’s an arduous task against an already tumultuous landscape. But, as retailers prepare for more measured consumer demand, there are strategies they can leverage to ensure a successful holiday season and push into the new year — and ways that don’t rely on slashing prices and promotions.
Capitalize on early demand to drive engagement
Fears about product shortages and shipping delays, combined with early discounting, prompted customers to begin their holiday shopping earlier than usual in 2021. This year, however, as new spending triggers pop up on the calendar, consumers across the globe are expected to pull their spend even earlier. For example, Amazon Prime Day (July 12-13) heralded the start of the back-to-school season, Singles Day (November 11) continues to grow in popularity and saw a 15% year-over-year increase in 2021, and Amazon announced the addition of a second Prime Day for October. eMarketer predicts the Cyber 5’s share of holiday sales will continue to plummet below 2017 levels.
To survive the holiday season, thinking of outside the box on ways to engage shoppers as early as possible will be key. Preparation will be the name of the game. For example live polling, where consumers are asked pointed questions to inform future communications, can help retailers better understand shopper intent early in the season, finding out not just who they’re shopping for but a sense of their price range or shopping style. By staggering polls early and throughout the season, marketers can build a detailed customer profile that best supports the consideration process and purchase journey.
With half of customers looking to brand websites for inspiration, and nearly 70% re-visiting e-commerce sites before making a purchase, the discovery window should be a critical part of any retailer’s handbook. Since this is tied with the endless options at consumers’ fingertips and an expanding holiday season, relevancy and early communication should be a chief priority — and well before discounting periods begin. With irrelevant content driving 40% of consumers to hit the unsubscribe button, brands should clearly tie back any sitewide offers to personalized category and product recommendations.
Create highly connected experiences
As consumers’ discovery and consideration periods continue to stretch, it’s also happening across multiple channels. In 2021, despite lingering fears about COVID-19, Black Friday brick-and-mortar traffic in the U.S. was up 47.5% from 2020 levels, underscoring consumers’ willingness to pair their digital shopping with in-store activity. Omnichannel, long spoken about, is now a reality. Customer journeys and experiences must be positioned as fluid where shoppers can move seamlessly from one channel to the next, from digital to in-store — and without friction. Buy Online, Pickup In-Store, for example, saw a huge surge in the last two years, accounting for nearly 1 in 4 online orders during the 2021 U.S. holiday season. In addition to customer value, BOPIS also helps retailers stand out from the competition — driving 2x more growth for retailers offering BOPIS versus those that do not.
To survive this holiday season and beyond, retailers must embrace a new retail model where the physical and digital realities coexist and reinforce each other. Doubling down on digital — this means mobile, app, website, email, SMS (your owned channels) must be in sync. Consumer expectations also demand a wide range of fulfillment options making convenience the ultimate goal. Relevancy and convenience will continue to be a huge necessity for brand communications — it’s what separates a good brand from a great brand.
Manage uncertain inventory and the price-conscious consumer
COVID-spurred disruptions and product shortages affected retailers and consumers the last two holiday seasons, with the U.S. experiencing the most significant supply chain impact compared to the rest of the globe.
While retailers tried their best to mitigate issues, out-of-stock messages skyrocketed by 258% from 2019, amounting to 6 billion out of stock messages received by US shoppers last year.
A ripple effect was also seen across pricing, shipping costs, and dwell times. To counteract these factors and maintain profits, retailers were forced to reduce discounting or promotional activity. For example, the average discount in the U.S. dropped by 35%, sitting at 9% across the board, vs. 14% in 2020. Unfortunately, shoppers also felt the burn with a 25% increase in prices during the 2021 holiday season.
Unfortunately for brands and consumers, 2022 forecasts don’t look much different. Recent macroeconomic pressures have exacerbated supply chain challenges. Moreover, with inflation at a 40-year high, consumers have less disposable income making competition among retailers — and consumer-facing brands in general — fiercer than ever before.
Retailers will be faced with balancing managing the different external factors pushing the inventory and profit margins into challenging waters while simultaneously ordering and clearing inventory amid a turbulent market — no small feat.
To weather the impending storm, agility will be essential to managing live inventory promotions and pricing changes. Savvy retailers will use this to their advantage by layering on up-to-date inventory and discounting information in all owned consumer communications, especially those that include recent browse, cart, or conversion behaviors. Additionally, Buy Now Pay Later and flexible payment options will set retailers apart as consumers seek more convenient and affordable shopping experiences.
And as external economic factors drive even greater divides across segments, where, for example, higher earners will be less impacted compared to lower earners, data-based price point targeting will be key. Leveraging behavioral and zero-party data to inform personalized product recommendations and offers to maximize efforts this holiday season will push brands to the forefront of consumers’ minds.
Loyalty: Activate early and often
If we had to pinpoint one thing that changed most as a result of the pandemic, it would undoubtedly be loyalty. We live in a culture where consumers have grown accustomed to convenience and having their needs met right away — and that culture is here to stay. Many retailers either lost market share to competitors or gained a new audience entirely — a trend that is expected to balloon in the year ahead. In fact, one survey showed 68% of consumers believe their loyalty is more difficult to maintain now than ever before. Still more, another nearly 30% of U.S. and U.K. consumers show no brand loyalty at all.
As brand affinity becomes a thing of the past, retailers need to zero in on personalized experiences that reflect each customer’s interests and behaviors to encourage habitual purchasing. Wise brands will cultivate loyalty by activating their customer base early on in their journeys and reward them with exclusive benefits to drive increased value. They’ll also focus on sustaining demand through private offers and increased awareness of points and rewards collected throughout the season — again, it’s all about highlighting that customer value.
Lastly, zero- and first-party data will be the key to unlocking customer loyalty and connecting with customers through storytelling. By reminding consumers of the value of active participation in a loyalty program through evergreen loyalty trackers across communications, or points-to-be-earned overlays on product grids, retailers can effectively put up blinders against their competition, by constantly reminding shoppers that it pays to be loyal.
Clearly, it’s not all doom and gloom. There are opportunities at retailers’ feet that can help them drive home unique customer value and deliver experiences that set them apart from the competition. It’s all about planning ahead.
About Julio Lopez
Julio has worked across multiple martech SaaS companies whose integrated solutions focused on driving digital innovation for retailers, including Cheetah Digital (acquired by Marigold), RevTrax (acquired by Neptune Retail Solutions), and Eversight (acquired by Instacart). Today, he leads Movable Ink’s Retail Strategy team, developing innovative, business-critical programs for some of the largest and most successful retail marketers across the globe.