In November 2019, my company, Intelligence Node, asked consumers if they were planning to cut back on spending during the upcoming holiday season, in part due to tariff and recession fears. While almost half (49 percent) said they were, holiday sales actually grew by 3.4 percent due to a century-low unemployment rate and a sharp increase in online shopping.
But this holiday season will see a 180-degree turn as we experience an all-time high unemployment rate.
Fast-forward to the summer of 2020 and data shows that consumers are planning to spend less on holiday shopping this season than they did last year. While the threat might sound similar on the surface, it’s very different. This year, it’s no longer hypothetical.
Rather than fear of a recession, we are in a recession. Rather than tit-for-tat trade tariffs on certain consumer products, the U.S. is in an all-out trade war with China that continues to escalate. Not to mention, millions of Americans are feeling the pain of unemployment and are unsure where their next paycheck will come from — all factors that are due to the long-lasting impacts of the coronavirus.
Consumers Are More Cautious Than Ever
We’ll see the consequences of COVID-19 on consumer spending patterns even before the holiday season rolls around.
Back-to-school, normally a reliable shopping event and a massive opportunity for retailers to capture revenue, will be dramatically different this year. According to 2020 data from the survey linked above, nearly one-third of consumers plan to spend less on school supplies this year than last year and only 17 percent have started to save for the occasion.
All things considered, consumers have never been more cautious when it comes to spending their hard-earned money — a hard truth that we will continue to see materialize in the second half of 2020. Where does this leave retailers? With the need to be more thoughtful and strategic than ever.
Strategies for Retailers to Grab Market Share
This significant shift in consumer sentiment and purchasing habits will cause a ripple effect for retailers, who will need to work harder than years past to gain their share of revenue.
To make the most of the upcoming holiday shopping season, retailers must execute the following strategies:
• Enhance online experiences. When retail stores closed in March due to COVID-19, online spending accelerated exponentially. According to Adobe, the pandemic accelerated e-commerce growth by four to six years. And, even as stores slowly reopen, our data suggests that 82 percent of consumers plan to continue shopping online. Add to this the news that many of the largest retailers in the U.S. — including Target Corp., Walmart Inc. and Best Buy Inc. — will be closed on Thanksgiving Day and it becomes clear just how important digital channels are to retail success.
As Intelligence Node’s Consumer Buying Report highlights, today’s modern online consumer references multiple digital touch points before making a purchase decision. Therefore, retailers must implement unified and omnichannel strategies that align with this and engage potential customers at every stage of the journey — from discovery to decision.
• Optimize pricing and shipping costs. While price is always a critical factor in the path to purchase for consumers, it’s even more so now. Data shows that 87 percent of consumers regularly compare prices of products while shopping online and one out of three shoppers make purchasing decisions based solely on who offers the lowest price.
This holiday, retailers must employ technology that allows them to closely monitor prices that other brands are offering to ensure they are presenting a price that is not only competitive but enticing.
In addition to price, shipping costs will significantly influence the buying decision. More than half of consumers say they will revisit online stores that provide fast, easy, and affordable — or free — delivery. To succeed this holiday season, retailers must upgrade their logistics and supply chain to offer fast and affordable delivery options.
• Represent social causes. Finally, today’s consumers expect brands to endorse social causes and voice their support against injustices. This will be a major factor for shoppers when deciding which brands to invest in this holiday season.
Nine out of 10 Gen Z consumers believe companies have a responsibility to address social and environmental issues. And, 30 percent of adult U.S. shoppers are willing to pay more for a product from a brand whose corporate values align to their own. Considering this evolving consumer ethos, brands can no longer stay neutral on social causes; they must embrace them and weave them into their corporate narrative as a way to stand out to potential customers.
• Overcome external forces. While there was a veiled threat of slowed consumer spending around the 2019 holiday, this year is wholly different and poses a new, tangible threat to retailers.
Consumers are reeling from the economic impacts of the pandemic and retail brands have much larger external forces working against them than ever before. During the 2020 holiday shopping season (and beyond), brands that simplify the online shopping experience, optimize pricing and appeal to consumers’ larger belief systems are more likely to gain in the hard-fought market share war.
Sanjeev Sularia is the cofounder and chief executive officer at Intelligence Node.
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