The holiday season might be chestnuts roasting on an open fire for some, but it's make-or-break for many retailers. This year, a later Thanksgiving holiday in the U.S. condenses the holiday period.
How will that affect the role of digital commerce? Will retailers finally be able to turn their stores into a holiday asset, or will they get their systems tripped up by an inventory-liquidating holiday rush?
Those are a few of the burning questions I had for Rob Garf, Vice President of Industry Strategy and Insights at Salesforce Retail, on the eve of Salesforce's Q2 2019 shopping index, which included a ream of holiday predictions for retailers.
Sample size isn't a problem here. Salesforce crunched the shopping data of over half a billion global shoppers, added a proprietary study of e-commerce sites, and combined that with a survey of more than 10,000 consumers. First, the good news for retailers:
- Despite a shorter selling season with six fewer days between Thanksgiving and Christmas, Salesforce projects U.S. digital commerce revenue growth at 13 percent year over year, with total sales reaching a record $136 billion in the United States, and $768 billion globally.
A few predictions jumped out:
- A shortened holiday season will push an increase in "early bird shopping" on the Tuesday and Wednesday before Thanksgiving, driving a projected 19 percent year-over-year growth in global digital revenue.
- Retailers that capitalize on click-and-collect will gain from the five day run-up to Christmas day, with a 28 percent boost in revenue share over their rivals.
- Generation Z shoppers will push social buying to double digits - they are 3.5 times more likely than Baby Boomers to use digital purchase "touchpoints" like social media, messaging platforms and voice.
Retailers are headed for an omni-channel gut check
But retailers not-named-Amazon can easily end up on the losing side of these predictions. So I asked Garf: how should retailers apply this data? Step one: get cracking early:
What anticipate that retailers are going to scramble a bit. They're going to look to stretch the holiday on both sides of cyber week, so really trying to create some earlier moments before cyber week, and all the way starting at the beginning of November.
Step two: get that click-and-collect right:
Then, on the other side, really try to extend the holiday as long as possible by offering click-and-collect or buy online/pick up at store, because that magical shipping cut-off-window is going to close really quickly - as consumers wake up from Thanksgiving week, and realize they have a lot of shopping to do, and not a lot of time to do it.
Not long ago, mobile was primarily for browsing and research. Now it's an integral part of holiday buying:
We saw it last year - mobile is the remote control of our daily lives. It's become the de-facto standard for not only doing research and discovery, but also browsing and buying. So we anticipate throughout the holiday season that 52 percent of orders will be on a mobile device. That's up quite a bit from even the prior years and just a couple months ago, where we saw the high over Prime day of 49 percent.
I see one thing looming: a big omni-channel gut check. Garf:
Click-and-collect or buy online/pickup at store is right now, still a game changer, but in the not too distant future, it's just going to be the expectation. It's just one way that traditional retailers are looking to reinvent their physical locations... I liked how you put it, it's really a gut check for all the omni-channel talk, to see if this is actually going to be put into practice.
That omni-channel gut check will also include a report card: how well is your store makeover going?
Stores are becoming discovery centers; they're becoming experiential centers, and they're becoming fulfillment centers. That 28 percent is a big deal for retailers, because if you think about it as a consumer, you have a very short window between Thanksgiving and the magical shipping cutoff date of around December 14th and 15th.
Consumers who go to a site around those days or after, they're not going to buy something online without the confidence that it will be there in time on their doorstep for Christmas.
Perhaps the toughest part of this omni-gut check: real-time inventory. If customers can't get reliable availability data from their mobile with the assurance of pre-holiday pickup/delivery, they're going elsewhere.
Inventory can be either the best of times or the worst of times, for both retailers and consumers. That's why click-and-collect is so critical, because a consumer, more often than not, is going to go online to do research and discovery before going into the physical store. If they have the confidence that the product is available and has been held for me, they are more apt to go into the store and actually make that purchase.
Getting the consumer into the store is (almost) everything
Garf points out this is not just a technology problem: it's a process change inside the store.
Click-and-collect is predicated on advanced inventory practices. And I use that word "practices" on purpose. It's not about just technology, it's as much about the operational implication, because the associates essentially have to become pick, pack, and shippers to really fulfill that order.
It's also a mobile/web design problem: We need to see - and trust - the availability options.
If the retailer can't guarantee that the product will be there, even in expedited shipping, the consumer is going to leave. They're done... But if you're that same consumer, and you go to a website with click-and-collect that on the same date says, "Yes, you can pick up the order within two hours or 24 hours," even though you still have to take that trip to the physical store, you're doing it with the confidence that the inventory is available.
There's one more issue for retailers to heed: despite the mobile commerce surge, getting the consumer into the store is (almost) everything. That might sound obvious, but are most retailers doing everything to get consumers in the door? No. Everything might mean accepting competitor discounts. It might mean doing what Kohl's did: finally offering in-store Amazon returns.
Why would a retailer do that? Two good reasons, according to this data:
- 83% of consumers said they are going into a physical store this holiday season.
- 67% of consumers who go into a store to return an item ultimately buy something else.
Suddenly Kohl's Amazon returns gamble makes more sense. Granted, that "buy something else" thing isn't going to happen automatically. Retailers must get their store associates bought in. Garf poses these questions for retailers:
- What are retailers doing to empower their store associates?
- Have they put a process in place that balances between the service of people coming in, and fulfillment for people that have ordered?
- Are they putting the right incentives in place to get associates excited about this?
For a few years, retailers were scrambling to improve holiday e-commerce. Now the balance between store and digital is the real holiday prize:
Don't get me wrong. Digital is growing at much higher pace, and digital must be infused in everything, both in the physical and virtual world. But still, consumers - even younger generations - want to go in to get that service experience, to be able to touch and feel the product. So you can't ignore the store.
There is this great flywheel that can be created between digital and physical. We're seeing that's going to really play a role between the winners and losers this holiday season.
This data projects the kind of holiday season retailers count on. However, that's a potent list of changes retailers must conquer - if they want to claim a winning chunk of that spending.
In my view, there's a difference between offering a great in-store shopping experience - which is non-negotiable - and turning stores into "experience centers." That sounds incredibly corny, but some "experiences" are practical and useful, like offering free eye exams in an eyewear shop. Other "experiences," like Santa reading Christmas stories, or offering an in-store 3D holiday adventure, are perhaps more marketing attractions than core to shopping.
After talking through this with Garf, my view is for the holiday season, retailers should put most of the "experience" fluff aside, and focus on core omni-issues like getting in-store-pickup right. That's no small feat when you consider all the factors, not the least of which are store associates, often supplemented by seasonal hires that may not be in tune with the store's customers or priorities.
On the other hand, "experiences" tied directly to shopping have potential. Garf told me about Canada Goose, which has a couple of stores, including one in Boston, with dressing rooms that are actually freezers. Garf:
What better way to know if the coat is going to keep you warm than going into a freezer and feeling it on your body, right? So to me, that is a great way to discover and research a product. It's not like rocket science, it's just practical - I'm going to solve a problem for a customer.
I suspect we'll also see retailers win rounds this holiday with savvy use of pop-up stores, but perhaps "next-gen" pop-up stores that include wifi, mobile app access, and some in-store personalization via the app.
Garf and I didn't get into in-store personalization in detail, but there are definitely holiday opportunities. Data on related purchases can impact in-store shelf arrangements - essentially mimicking Amazon's highly effective "customers also bought" digital displays. Retailers with a critical mass of mobile app users, or social check-ins, should be able to personalize as consumers walk in. Others won't be ready.
The whizz-bang tech of automated checkouts doesn't look like a holiday differentiator this year. I'd argue the opposite: the retailers that excel in in-store service, with associates who can help consumers with their mobile-and-store dexterity, will do better.
The Gen Z shopper is something of an enigma: highly-digital/social, but surprisingly interested in the store visit. However: the Gen Z shopper does a lot of buying "on the edge," on social platforms that retailers may not easily reach, e.g. gaming platforms, video live streams, and messaging environments.
That's a whole different article. Garf says Salesforce will be issuing a detailed report on the Gen Z angle in a few weeks, so we'll pick that up then.