The holiday season is always a hectic time for retailers trying to capture revenue that will push them into the black for the year. With the uncertainty they have experienced over the past few years, they may be looking for guidance on how to best navigate the holidays. A look back at last year and an evaluation of current trends can help.
Holiday Spending Last Year
Last year, the industry experienced an unexpected month-over-month decrease in retail sales in December. Several factors contributed to this decline, including supply chain issues, the first indications of economic uncertainty, and sales earlier in the quarter that showed many consumers finished their Christmas shopping early. But December sales numbers were also good news. December holiday spending in 2021 was 19.3 percent higher than in 2020.
Insights from the 2021 holiday season that will benefit merchants also include where people shopped. Online sales increased 8.6 percent year over year. Retailers should also note that 2021 holiday shoppers didn’t just buy online; they made purchases on their phones. eMarketer found that 43 percent of online sales were on phones, and projects that number will double over the next three years. Additionally, online orders weren’t only for delivery. Nearly one-quarter, 23 percent, of online holiday purchases included curbside pickup.
Buy now, pay later (BNPL), which allows consumers to divide payments into fours, also increased by 27 percent year over year in 2021.
What to Expect This Year
With the current economic climate, this holiday season is bound to look different. The National Retail Federation (NRF) sums it up succinctly: consumer confidence is down. The industry is no longer seeing the dramatic increases in consumer spending coming out of 2020. Moreover, inflation is at 8.2 percent, and concerns over a recession are increasing.
How is it playing out for consumers? Credit card balances are increasing, and consumers are spending more on essentials, with some making tough choices to cut discretionary spending. Deloitte predicts holiday retail sales to increase by 4 to 6 percent; however, that figure is primarily tied to increased prices. Mastercard SpendingPulse, which measures all forms of payment for online and in-store retail sales, has a slightly more optimistic view. It predicts retail sales, excluding automotive, to increase by 7.1 percent.
Samba TV’s 2022 Holiday Report states that 74 percent of adults say holiday spending will be the same as last year for an average of $1,041. Also, a Christmas shopping study conducted by Coresight Research found that 55 percent of shoppers plan to spend $500 or more on gifts, up 48 percent in 2021.
Will E-commerce Continue to Rise?
All indicators point to continued e-commerce growth. Deloitte predicts e-commerce sales will grow to $262 billion, more than twice as fast as overall sales growth at 4 to 6 percent. Moreover, 72.9 percent of those sales will take place on a smartphone.
Analysts are offering mixed predictions on BNPL. Bluedot, a geofencing customer tracking platform, says there will be significant demand due to higher prices. Many consumers, 43 percent, say they are more likely to open a new retail store credit card to receive discount offers.
But Adobe is looking for BNPL to slow down, stating: “While the growth has been partly affected by the broader economic environment and a slowdown in consumer spending, BNPL is also contending with challenges in demonstrating value to mass consumers.”
However, there’s no debate about buy online, pickup in store (BOPIS), as 78 percent of consumers are planning to use that convenient option.
Additionally, BlueDot shares some other trends: 60 percent of consumers say they prefer self-service to assistance from a staff member, and social media apps will play a big role this holiday season. Four out of every ten consumers say they plan on purchasing gifts using social media apps. Among Gen Z, that number climbs to more than five of every ten consumers.
Advice for ISVs and VARS
It’s vital to help your clients be ready for anything, from quickly building social marketing campaigns, adding self-service lanes, or enabling conveniences like QR code payments or text-to-pay to capture sales to ensuring they can provide fast, efficient checkout in-store. Work with an omnichannel payment solution that enables all types of payments on all channels to capture holiday spending everywhere and in anyway consumers want to shop.
