Forrester’s Guide to the Holidays
After an impressive 2020 holiday season performance, in 2021 NRF found that US holiday sales reached a record $886.7 billion, a 14.1% increase from a year earlier. This increase happened even amid the holiday season omicron outbreak that resulted in surging US COVID-19 cases through December. Additionally, retailers faced myriad challenges during the 2021 holiday season, including rising inflation, labor shortages, and supply chain problems.
To prepare for the end-of-year holidays in 2022, US retailers and brands should review the lessons learned from the 2021 pandemic-era holiday season. These insights will help them gauge consumer sentiment and demand to plan their marketing, fulfillment, and more. As global uncertainties persist in the coming months, retailers must implement technology, processes, operations, and employee experience (EX) measures to operate and adapt as needed across stores and digital channels.
Consumers Shop For Months — And Expect Store And Digital Coordination
The pandemic isn’t over, but US states have eased restrictions, from removing mask mandates to reversing vaccine requirements. It’s difficult to predict what October 2022 will look like for businesses and consumers: For example, geopolitical issues such as the war in Ukraine are adding to concerns about supply chain and inflation. That said, we expect that the 2022 holiday season will be similar in key areas to 2021, where holiday shopping:
- Started months in advance — and, as usual, rolled right up to late December. According to a survey Forrester fielded in December, 30% of US online adults began their 2021 holiday shopping in October or earlier — a slight decrease from the 33% who said the same in 2020, according to Forrester’s January 2021 US Retail Post-Holiday Consumer Ad Hoc Survey. Less than one-quarter waited until December to start shopping — but 69% of consumers continued holiday shopping through December, much like the previous year. And Bizrate Insights found that 69% of online consumers planned to order earlier during the holiday shopping season because of late deliveries that they experienced in 2020.
- Had to accommodate many budgets. As the pandemic outlook improved, US national unemployment landed at 4.2% in November 2021, much closer to pre-pandemic levels than what we saw throughout 2020. However, even as unemployment fell and spending rose, holiday spending plans did not differ much from the year prior. Bizrate Insights found that the majority of US online consumers expected to spend the same amount (55%) or less (25%) on gifts, decorations, and other holiday-related merchandise — and 21% expected to spend more, only a slight increase from 2020. However, those planning to spend less in 2021 most often cited “increased expenses/spending on other things” (31%) as the main reason, likely attributable to factors like rising inflation and the increase in spending during the year as a whole (US retail sales experienced an overall 17.9% increase in 2021).
- Happened both online and in stores. According to Forrester’s December 2021 data, 27% of US online adults who shopped for the 2021 winter holidays said they still always avoided going into stores during the 2021 winter holiday season. Bizrate Insights also found that 49% said they made at least three-quarters of their 2021 holiday purchases online, down only slightly from 53% in 2020. In addition to traditional in-store shopping, consumers are now regularly using “buy online, pick up in-store” (BOPIS) options — Forrester’s data shows that one-quarter of US online adults who shopped for the 2021 winter holidays said they always used curbside pickup, and 24% said they always used in-store pickup or click-and-collect during the holiday season. When it comes to specific retailers, almost half of US online adults bought more from online-only businesses (e.g., Amazon, Wayfair) than they had in 2020, although 40% also said they bought more from online sites of retailers with stores (e.g., Target, Walmart).
Smartphones Are The Go-To Holiday Shopping Device
US consumers are increasingly comfortable both researching and buying on their smartphones. And given pandemic-imposed lockdowns and store closures in 2020, it’s not surprising that mobile retail in the US accounted for 44% of total online retail sales that year. By 2024, Forrester predicts that number will grow to 48%. By contrast, tablets’ share of total mobile commerce continues to fall. This means that smartphone experiences must work flawlessly to help busy customers. For the 2021 holiday season, merchants must assess, test, and continually improve their smartphone offerings because consumers:
- Rely on their smartphones for big holiday shopping events. Twenty-seven percent of US online adults find out about retailer sales and promotions from coupons and discount apps, 21% from mobile apps, 20% from automatically applied promo codes within apps, and 13% from promotional text messages. Smartphones play an integral role in every part of the shopping experience, from discovery to purchase and beyond. Bizrate Insights found that in 2021, 76% of US online consumers used a mobile phone to shop online on Thanksgiving weekend — up from just 54% in 2016. Furthermore, 70% also used their mobile phone to shop online during Cyber Week (the week following Thanksgiving weekend).
- Expect mobile experiences and functionality to meet many shopping needs. Bizrate Insights found that over Thanksgiving weekend, US online consumers used their mobile device to make purchases (80%), browse and research products (52%), check prices (45%), and read ratings and reviews (31%). Likely due to store closures and pandemic safety concerns about potential crowds at the time, fewer consumers than in years prior used their mobile phone to find general store information (23%) and locate retail stores (23%). During Cyber Week, they used their mobile devices slightly more, buying (78%) or researching (55%) products and checking prices (49%), among others.
Make Marketing, Service, Fulfillment, And Security Agile This Holiday Season
For merchants, a successful Q4 will come down to how well they can adapt to variables like the uncertain state of today’s economy and consumer sentiment. Retailers and direct-to-consumer (DTC) brand manufacturers should analyze and apply lessons from the 2021 holiday season — as well as continually monitor economic, social, and health indicators — in four specific areas: marketing, proactive information, fulfillment, and security.
1: Meet/Exceed Customer Expectations With Authentic And Adaptable Marketing
As a retailer, you’re likely to spend a hefty chunk of your annual marketing budget to drive all-important holiday sales. But shoppers’ expectations for retailers and brands continue to rise. The pandemic accelerated digital adoption and permanently altered consumer preferences, behaviors, and expectations. Take time now to review last year’s holiday marketing to see how different creative and placement performed. Avoid deceptive design tactics like fake countdowns or misleading low-stock inventory warnings that skeptical consumers can see right through. Instead, tune into these empowered consumers with:
- Actions that align with company values. About one in four of customers will fit Forrester’s definition of the values-motivated consumer, shaping their purchasing behavior for a brand in response to its social choices. During the 2021 holiday season, 35% of US online adults who shopped for the 2021 winter holidays bought from brands that support causes that are important to them. In particular, sustainability was top of mind for some: 29% of US online adults who shopped for the 2021 winter holidays bought products that use environmentally sustainable materials, and one-quarter bought secondhand or vintage products. Retailers should focus their marketing to call attention to their brands’ authentic expressions of values, rather than using ad copy to signal values — which can be perceived as inauthentic by consumers. To showcase their values, Patagonia and REI once again chose to opt out of Black Friday, and in China, AliExpress used Singles Day as an opportunity to encourage consumers to shop sustainably with a page on its site dedicated to eco-friendly products.
- Authenticity in marketing and messaging. Bizrate Insights found that around the 2021 holiday season, only 12% of US online shoppers said they “love deals — the more, the merrier!” compared to 31% the year prior. After a decade of corporate scandals, data breaches, and revelations about greenwashing and woke-washing, consumers are jaded. Fifty-two percent of US consumers can’t think of any company that leads the way when it comes to acting with authenticity, according to the Forrester Analytics ConsumerVoices Market Research Online Community, Q3 2021 (US), a consumer study Forrester ran in partnership with Remesh. The road to a truly authentic brand is complex, but retailers can start by taking small steps. For example, watch out for the trap of coercive and deceptive design. Instead, craft marketing to build a longer-term relationship with customers and keep them coming back or subscribing to a service, as short-term trickery will lead to repercussions.
- Offers they care about. In 2021, promotional email volume skyrocketed as brands worked to reengage customers. Rather than overwhelming customers with an influx of emails and offers, focus on understanding what your customers really want. What offers would encourage them to buy more of their holiday purchases online? This past holiday season, Bizrate data shows that free shipping with no minimum order value (51%), a discount on their total purchase (48%), guaranteed on-time delivery (35%), and free returns shipping (35%) were among the most prized offers for US shoppers. Of the 75 retailers we tracked over Thanksgiving weekend, only 29 offered free shipping with no minimum spend, and 22 of those were retailers that already offer the deal year-round (see Figure 2).
- Special treatment for loyalty members. For 60% of US online adults who are loyalty program members, getting special treatment is important — so show your best customers how much you value them, even beyond discounts. Target leveraged insights from its Circle loyalty program during the 2021 holiday season to better understand its customers and personalize its offers. The result? An $8 to $10 lift in promotional basket size compared to mass offers and a conversion rate of 70% compared to 40%.
- Shipping information incorporated into ads. In anticipation of supply chain troubles during the 2021 holiday season, consumers were proactive: Forrester’s data shows 49% of US online adults who shopped for the 2021 winter holidays said they always purchased online to ensure the items they wanted were in stock and available to ship. And 48% of them purchased early to get orders on time. To set expectations and win over hesitant customers, include estimated delivery dates, shipping time frames, and alternatives such as curbside pickup in your holiday advertising — including onsite ads. Barnes & Noble included a shipping timeline on its site as early as Cyber Monday, while other retailers opted to send shipping reminders via email when the cutoffs got closer.
2: Help Busy, Stressed Customers With Value-Add Info — At The Right Time
According to Bizrate Insights, in 2021, 74% of US online consumers bought at least half of their holiday purchases online. To accommodate online customers this holiday season, savvy merchants will ensure that their sites:
- Have accurate and valuable product information. Customers are buying more than they ever have online, but many are still not confident making online purchases, as they are sometimes unclear on what they’ll actually receive. Plus, unclear item information drives costs around customer service and returns processing. Two-thirds of US online adults say it is important for companies to include product information from the retailer or manufacturer on their website. To combat customer uncertainty, retailers can implement better product imagery (e.g., size comparison to common objects), make reviews more visible and helpful (e.g., highlight reviews with real-life photos), and use technologies like augmented reality (AR) to enable virtual try-on to ensure that customers know what they’re getting. Apparel brand Good American aims to boost purchase confidence by including photos of models of different sizes on its site so customers can view the clothes on bodies that are more similar to their own (see Figure 4).
- Make help pages and chat easily accessible. Particularly during the holiday season, few customers have time to scour websites for customer service links or, worse, wait on hold for answers in their moment of need or decision-making. In preparation for holiday, retailers and brand should use contact center call transcripts and other voice of the customer research to understand what their customers don’t know or understand and then update product descriptions, remove confusing terms, and add help text when necessary. However, when all else fails, customers must be able to find out where to turn for help. Before the holiday season, make sure your chat capabilities are up, running, and visible to customers — and are properly staffed.
- Promote alternative payment options. In our annual review of alternative payments in US retail, the number of merchants that offer at least one “buy now, pay later” (BNPL) option doubled in the past year, from 26% in 2020 to 52% in 2021. In addition, more US online adults are familiar with and have used BNPL payment options. Arguably the biggest draw of BNPL for merchants is the promise of increased sales, while customers are attracted to it for budgeting purposes, both of which are top of mind during the holiday frenzy. In the 2021 holiday season, we saw retailers highlight BNPL options front and center on their websites and in email marketing (see Figure 5). Afterpay offered exclusive deals from its retail partners as part of the BNPL provider’s own promotions — and American Express offered zero interest on payments to consumers using its BNPL “Plan It” solution.
3: Develop Fulfillment Operations To Build Customer Delivery Confidence
Retailers and brands must help customers understand the delivery options that are available to get their orders on time while managing and delivering on those expectations along the way. For the 2021 holiday season, wise merchants will:
- Enable filtering by availability and fulfillment options. Seventy-four percent of US online adults believe it is important for retailers and brands to include the estimated date and time of arrival on their website. Filters that allow consumers to view items based on color, size, or price are table stakes, but filters based on inventory level and shipping options are not yet as widely available. Making it clear upfront what products customers will be able to receive in time will improve their confidence in buying — and manage their expectations overall. In Q4 2021, Etsy added estimated delivery dates to its search and ranking models to help customers tailor their results to items that would arrive in time for the holidays (see Figure 6). The result: 90% of Etsy’s US domestic orders that were estimated to be delivered on time did arrive on time, which was a significant increase from the 2020 holiday season, per Etsy CEO Josh Silverman.
- Offer options that suit the customer in the given moment. In the 2021 holiday season, US online adults used numerous delivery methods including delivery to home (61%), in-store pickup (i.e. click-and-collect) (24%), and curbside pickup (25%). In July, Forrester’s data showed that nearly half of US online adults told us that they like having “lots of fulfillment options to suit my need of the moment.” To keep up with the increasing demand for these services, merchants must ensure that their order management system can support the many delivery options that their customers now routinely expect.
- Use post-purchase notifications to improve transparency. Thirty-one percent of US online adults who shopped for the 2021 winter holidays said actual shipping times were always longer than expected (i.e., deliveries were late), 30% said estimated (promised) shipping timeframes were always longer than they expected, and 16% said they had online orders canceled completely. Use post-purchase notifications to better manage expectations this holiday season. Fully 53% of US online adults said the notifications they get from brands for things like delivery updates, order status, and appointments are helpful. However, when we reviewed 60 leading retailers’ post-purchase messages, only 45% included specific delivery or pickup dates in their order confirmation emails.
4: Increase Customer Trust By Proactively Preparing For Security Scenarios
Around the holidays, return fraud is always top of mind for retailers. NRF found that “ … for every $100 in returned merchandise accepted, retailers lose $10.30 to return fraud.” In preparation for the holiday season, retail CISOs should collaborate with their IT, marketing, and merchandising colleagues to particularly prioritize:
- Application security. Applications are a top attack vector, with software vulnerabilities and web application flaws, respectively, contributing to 35% and 32% of external attacks that led to breaches. In response, some retailers are prioritizing tactics such as improving application security capabilities and services (22% versus 21% across all industries). API security remains a hot topic across the board, but retailers are also prioritizing serverless security, with 15% of retail security decision-makers planning to adopt it in the next 12 months.
- Bot management. Good bots like search engine crawlers help your business — but merchants must implement tools to combat the many bad bots that hurt their business. Think bots for web scraping (e.g., inventory and pricing data for competitive purposes) and inventory hoarding (e.g., “sneakerbots” and “grinchbots” buying up any desirable inventory). DDoS bots limit or prevent customers from interacting with your site, flooding customer service teams and social media with complaints. And ad fraud bots create fake leads on fake sites that merchants pay for with very real money. The required quartet is: 1) dedicated bot management tools (web application firewalls are inadequate); 2) risk-based authentication (RBA); 3) passwordless authentication (using one-time passwords or login links); and 4) e-commerce and retail fraud management (ERFM) solutions. Bot management has relatively low adoption in the retail space — only 64%of retail security decision-makers with network, data center, app security, or security ops responsibilities in 2021 had already adopted it.
- Supply chain risks. Retailers must keep an even closer eye on the top systemic risks for 2022, including the global chip shortage crisis, zero-COVID-19 policies impacting manufacturing output and port closures in China, and a war in the bread basket of Europe. The rise of bots targeting certain products such as PS5sand even infant formula often indicates supply/demand asynchrony. Retailers should be prepared for inevitable stockouts. Determine how to manually increase safety stock parameters for key value items in your replenishment systems. Analyze the feasibility of pushing scarce inventory to local stores and limiting the number of units that each shopper can buy to reduce the risk of hoarding. Be prepared also to suggest in-stock alternatives to delayed or out-of-stock products. Retailers of short lifecycle seasonal merchandise should consider how to emulate online fashion retailer Miss Guided’s AI-infused automated rebuy. And be transparent and timely in communicating with customers about what the issues are and how long it may take to resolve them (keeping you FTC Rule-compliant).
- Ransomware protection. Ransomware attackers tend to target organizations that need as close to 100% uptime as possible, making retail organizations prime victims. These attacks have the ability to affect every aspect of the retail supply chain, including suppliers, logistics, operations, products, and websites. If attacked, a company’s entire business can be upended and, depending on the scale and severity, the firm’s brand image and trust from customers can take a major hit. To best protect their company, retailers must take action, starting with informing their teams of the implications and potential signs of a ransomware attacks. One way to do this is to gamify finding phishing attacks to train employees to identify and report them, as phishing attacks are one of the main ways cybercriminals begin their attacks. Additionally, work with your security teams on a companywide incident response plan to simulate what you would do in the event of an attack. This exercise and scenario planning will ensure that if disaster strikes, you have a well-developed plan in place to take action.
Source: Forrester Research