A rundown of recent developments in eCommerce and in retail that will shape this year’s holiday shopping season.
With Thanksgiving and Black Friday just around the corner, both retailers and consumers are preparing for another record breaking holiday shopping season, as was the case last year. 2022’s holiday shopping season was the biggest one to date; Black Friday online sales totaled $9.12 billion while Cyber Monday took in an additional $11.3 billion–and that was just Thanksgiving weekend! 2022’s Cyber 5 (the 5-day timeframe between Thanksgiving and Cyber Monday) saw a 4% increase over 2021 with online sales reaching $35.27 billion. Amazon and Walmart both claimed the majority of those sales. This, of course, was in the midst of escalating inflation, record credit card debt, and economic uncertainty as the world was still reeling from the effects of the COVID pandemic.
This year, not much has changed in these regards. Inflation still remains a constant problem with no solution in sight. Credit card debt continues to rise as consumers try to balance necessities such as food and basic living expenses with non-essential purchases. The threat of an imminent economic recession still looms overhead and in addition to the ongoing Russo-Ukrainian War, Israel and Palestine have now engaged in yet another large-scale conflict. But yet, with the possibilities of a global recession (and a possible global war) and the all-too-current realities of economic imbalance and growing disillusionment with the current administration, American consumers refuse to be deterred from indulging in this year’s holiday shopping frenzy.
Customer Spending to be Determined by the Entire Shopping Experience
A recent study conducted by Cisco AppDynamics found that consumers are expecting to spend more online than they did last year but that retailers must deliver optimal shopping experiences. Otherwise, people will take their business elsewhere. It’s a concept that’s not too difficult to understand; it’s a business rule that existed long before the Internet, probably closer to when the earliest humans first began to barter and trade with one another.
Said James Harvey, Executive CTO for Cisco AppDynamics’ Europe, Middle East and Africa: “Consumers around the world are planning to do more of their holiday season shopping online than ever before this year. On average, consumers expect that 59% of their spending on key shopping dates such as Black Friday and Cyber Monday will be online this year versus in-store, compared to 53% last year. And this year, they are favoring online shopping over in-store as they believe they can make their budgets stretch further (48% of consumers), get more choice (42%), and avoid last-minute panic buying in the shops (31%).” Harvey also noted that 43% of consumers expect to do more holiday shopping online through apps and digital services. This is in comparison to last year’s figures; only 13% planned to buy less.
Harvey’s research pointed out that as online shopping increases in scope and accessibility to the public, the public’s response to negative shopping experiences over the Internet is increasing accordingly. Almost 64 percent of consumers worry and feel frustrated if their holiday shopping apps and services don’t perform if they don’t perform as expected. Shoppers will be less patient, less flexible, and less forgiving than in years past in regards to online retailers. Harvey’s survey states that almost 60% of consumers believe that retailers have only one shot to impress them. Consumers that aren’t immediately wow’ed by the services offered by the retailer, that retailer has effectively lost any shot of regaining their business and making a sale. 71% of respondents say they will return to in-store shopping if their holiday apps and digital services fail to perform.
This holiday season, not only will inventories need to be fully-stocked, web merchants will also need to ensure that their websites are robust and stable enough to handle the oncoming net traffic.
Holiday Shopping Begins in October
In the lead-up to this year’s Cyber 5 and the entire 2023 holiday shopping season, online shoppers are spending early and often. Consumers spent $76.7 billion online in October, up 5.9% from last year. Adobe Analytics reports that it was also $4.3 billion higher than the prior year ($72.5 billion spent in October 2022).
This October’s spending shows a 13.6% increase compared to September. As in years past, early holiday discounts and promotional events such as Amazon Prime Day brought spread the sales wider throughout other months of the year but in doing so, also took away from the traditional sales period between Thanksgiving weekend and the end of December/early January. To date, consumers have spent $759 billion online (January 2023 to October 2023). Adobe Analytics says that’s an increase of 4.3% over last year.
Spending by online shoppers on mobile devices reached a record $35.9 billion in October 2023. Compared to last year, that is a 46.7% increase. This is due in no small part to increasingly intuitive mobile shopping experiences that have simplified the buying process for consumers that insist on using smartphones or tablets as opposed to desktop computers.
Walmart in Full-On ‘Holiday Shopping Season’ Mode
Walmart is set to take on Amazon as the clear and unanimous victor in this year’s battle for holiday sales supremacy. While that’s yet to be seen, the world’s largest retailer has launched a few new initiatives to help them realize that goal. Among these initiatives are revamped stores that offer a more modern shopping experience, an automated supply chain, and a multi-day Black Friday promotion.
Last February, Walmart unveiled an all new supply chain that will increase the efficiency and accuracy of inventory management and customer fulfillment. The multi-year supply chain revamping project features an AI-based inventory management system that positions products according to customer demand. For example, the system could identify the top-selling toys in a region and automatically send more of those items to those stores. In alternate scenarios, the inventory management system may reposition inventory to the Midwest if a toy does better there than on the East Coast. Walmart says that this year will be the first holiday shopping season where customers will notice the advantages of the retailer’s next-gen supply chain system.
Walmart has also increased its delivery options and expanded its next-day and same-day shipping capabilities due to improved technology within its supply chain. 80% of American consumers can now expect same-day delivery from Walmart, and 90% can expect next- or two-day deliveries. Walmart uses its 4,700 stores as fulfillment hubs to make same-day delivery available to such a large percentage of consumers. 90% of Americans live within 10 miles of a Walmart store. In addition, on-demand delivery slots are available for same-day delivery. Orders can be delivered in 30 minutes or faster if express delivery is selected. Customers can also choose the Late Night Delivery option, which is available at 4,000 stores, to receive orders until 10:30 p.m.
Walmart continues to use “next-generation” technology to streamline its fulfillment process in its logistics centers. Over 15% of Walmart’s stores will receive merchandise from automated distribution centers this holiday season that will sort items by department and load them onto pallets. Instead of manually sorting items, Walmart employees move pallets to the appropriate departments after the merchandise arrives. The company says it expects to accelerate delivery times to stores by shipping merchandise from automated distribution centers. The first high-tech distribution center opened in Joliet, Illinois, in 2022. By Thanksgiving, Walmart will have seven high-tech distribution centers in operation.
Total Holiday Sales to grow 9% in 2023
The National Retail Federation (NRF) predicts 7% to 9% growth in November and December for online shopping to reach $273.7 billion and $278.8 billion, up from $255.8 billion last year. Retail sales will increase from $930 billion to $957.3 billion during the winter holiday season, an increase of 3% to 4%. Digital Commerce 360 predicts that retail sales will be expected to grow by more than 62% this holiday season, with online sales increasing by about $20 billion and overall retail sales increasing by $32 billion. The growth of brick-and-mortar establishments will only grow at around 2%.
An annual study conducted by the NRF and Prosper Insights & Analytics finds that the Internet is the most popular place for people to shop over the holidays. 58% of survey participants plan on shopping online this holiday season. Department stores rank second at 49%. Compared to the same survey taken in 2019 right before the COVID pandemic hit, the percentage planning to shop online is up modestly from 56%. In line with last year’s survey, 92% of American adults plan to shop for the holidays and 43% will start their shopping before November.
Several other research firms have predicted eCommerce growth, but the NRF’s forecast falls in the midrange. On the higher end of the spectrum, consulting and accounting firm Deloitte predicts that online holiday shopping will grow 10.3% to 12.8%, while Insider Intelligence predicts 11.3% growth. Consumer Growth Partners and Adobe, Inc. had notably more pessimistic take; only 5.1% and 4.8% growth, respectively. Forrester Research projects 8.4% growth in online retail year-over-year. For Deloitte, November through January is projected, while November and December are projected by the other firms. Based on the NRF forecast, online retail sales in the U.S. grew by just under 8% in the first half of 2023. This has been the trend for several quarters, including the last quarter of 2022, when online retail grew by 7.7%, according to the U.S. Department of Commerce.
There is also a correlation between the NRF forecast and retail growth, which has been 3.7% for the first nine months of the year. Retail sales growth in the U.S. averaged 3.6% per year on average during the decade prior to the COVID-19 pandemic that hit the country in 2020, an indication of a return to normal sales growth. The NRF’s projection for online growth also reflects the growth in non-store sales, which include both online sales and sales made through mail order, telephone, and vending machines, which are all increasing this year. As reported by the U.S. Department of Commerce, non-store sales for the first nine months of the year grew by 7.9% compared to 4.2% for sales at brick-and-mortar stores for the same period.