Holiday Guide 2021: Retail Trends and Predictions
What’s ahead for retail in the 2021 holiday season? The 2020 retail holiday season was anything but ordinary, and 2021 has its own surprises brewing. Shoppers are expected to return to stores this season, but they will continue to demand personalized omnichannel customer experiences. How can retailers navigate these changes and challenges?
This first installment of our 2021 Retail Holiday Guide reviews summer and back-to-school spending trends, and offers insights into the upcoming holiday season. It’s already clear that the 2021 holiday season is going to be a mix of naughty and nice for retailers; here’s what you need to know.
Summer Spending: Delta Variant Forces Changes
Summer spending has a longstanding history as an early indicator of retail trends for winter holidays. Spending was up compared to 2020 in the beginning of the summer but suffered a setback as the Delta variant hit communities nationwide.
When the tentative return to public outings and large events was cut short, summer spending dipped. After readjustments in July, summer spending increased more than expected in August. What does all of this mean for the winter holiday season?
The blip in summer spending doesn’t necessarily mean a decline in winter holiday spending. Some experts predict that the lull forecasts a more robust holiday season, as households spend the money that they saved over the summer. For example, TD Economics research found:
“Better-than-expected growth in August dulls some of the anticipated downward adjustment in the forecast for spending in the third quarter. On the plus side, consumers have saved a sizable nest egg, which should support a healthy level of spending…This should help lift consumer confidence just in time for the holiday spending season.”
Retail School Spending: Back to the Classroom
Back-to-school spending trends have been good indicators about the following holiday season for many years. Back-to-school spending in 2020 showed that people were scrambling to meet the needs of distance learning. Sales in electronics and distance learning necessities rose, while standard back-to-school fare, such as shoes and backpacks, declined. So far, 2021 has seen electronic purchases hold steady. Even more encouraging, shoes, clothing, and other in-classroom supplies have rebounded. According to a National Retail Federation back-to-school spending survey:
“Total back-to-school spending is expected to reach a record $37.1 billion, up from $33.9 billion last year and an all-time high in the survey’s history…Total back-to-college spending is expected to reach a record $71 billion, up from $67.7 billion in 2020.”
Covid-related items such as masks and sanitizers are being folded into back-to-school spending and hybrid learning means buying even more supplies. Back-to-school spending also happened earlier this year, a trend that many expect to continue into the holiday season.
2021 Holiday Season: The Naughty and The Nice
Based on these trends and predictions, this holiday season is a mixed bag of holiday magic and coal in the stocking. We’ve identified key challenges and opportunities for retailers.
Some of the retail challenges that began in the 2020 season are still with us today. Stock shortages continue to crop up, along with shipping delays and shipping cost increases. Several large global retailers—such as Walmart and Costco—have already chartered container ships to be sure they can transport their products in a timely manner. The good news is that customers are more prepared for delays and shortages. The bad news is that they still expect to be able to purchase what they want and get it fast.
Shortages: We learned all about large-scale shortages and delays in 2020, and the 2021 holiday season is expected to be similarly afflicted. Supply chain disruptions and product shortages will continue and retailers will need to make sure customers are aware of the issues.
Delays: Shipping delays have improved but are still going to be a factor in the upcoming holiday season. At the same time, consumers expect their purchases to arrive more quickly than ever. Retailers should provide customers with realistic shipping windows and consider offering promotions for shoppers who are willing to wait a little longer to get their packages. Buyers continue to expect free and fast shipping and retailers will have to juggle these expectations.
Rising prices: Shortages, delays, and general inflation are signaling a rise in prices across many consumer categories. There is some indication that customers are prepared to pay more, though they are equally interested in finding deals and promotions.
“The keys to success for retailers will be preparing stores and digital channels, keeping key items—and alternatives—in stock, offering compelling promotions, and managing orders alongside persistent shipping issues due to FedEx and UPS capacity constraints and surcharges.”
Spending will increase: Holiday sales this year are expected to grow at least 7% compared with last year, according to forecasts from Bain, Deloitte, and Mastercard. Shoppers are ready to celebrate—whether in person or from a distance—and they want to spread the cheer. They will be looking for the best deals they can get but they are prepared to spend a little more to get what they want.
In-store traffic will increase: Though the Delta variant continues to be a wildcard, shoppers are expected to return to stores more this holiday season. In one study, only 14% of U.S. shoppers say they will stay out of stores. In-store buying gives retailers a break from shipping purchases and offers easier and less expensive return options.
Furthermore, in-store traffic offers new insights about your customers. Dan Silver, SVP marketing, GroundTruth explains:
“Offline behavioral data can help retailers understand brand preferences among their customers and how much time they are spending with competitors. These strategic insights can guide how and when brands spend their marketing budgets during what is likely to be a holiday season in flux.”
Gift cards are pandemic proof: Gift cards are easy solutions to supply-chain obstacles and according to Berkeley Research Group’s research, they are on 50% of consumer shopping lists. Many retailers are expected to have promotions and marketing initiatives aimed at gift card purchasing in the upcoming season.
Omnichannel is key: Last year’s digital newbies are this year’s experts and they are active on every touchpoint. Curbside and buy-online-pick-up-in-store options will continue to be popular, and personalized, omnichannel experiences are the expectation:
“As in-store shopping resurges, digital’s role in shopping has been cemented, as more than 70% of surveyed participants reported that their shopping journey involved online touchpoints. Digital will be a critical part of their journey, whether it’s online or in-store.”
Customer Data Platforms (CDPs) such as Treasure Data for Retail can convert customer data into seamless, omnichannel customer experiences. CDPs are powerful tools that combine online and offline customer data to provide excellent customer experiences on any touchpoint. As digital transformation efforts accelerated rapidly with the pandemic, some retailers are already using CDPs, and they may see outsized returns on their data investments.
We Will Have Happy Holidays
We were all hoping that when 2020 finally ended, things might get back to normal. Though that hasn’t happened yet, we are in a much better place than we were last year. We’ve learned a lot, and retailers and shoppers have become very good at adapting to change. Though supply chain and shipping woes are going to be hurdles; shoppers are ready, able, and willing to make it a very merry season.