Lessons Learned From the 2018 Holiday Retail Season

By:
Rakuten Super Logistics
Oct 2, 2019

Gone are the days of driving down to a shopping mall or downtown store and fight the crowds to get the best deal on a coveted gift during the holiday season. Online retailers are increasingly ramping up efforts to attract customers who want to avoid the hassle of in-store holiday shopping.

Large-scale department store Christmas displays are no longer the lure they once were, not even on Fifth Avenue, and the priorities of customers are shifting to greater convenience and cost-effectiveness. Accordingly, retailers that only offer their products online and those with brick-and-mortar stores must adapt to the changing expectations of customers to maximize profits.

Although online holiday sales are expected to rise, the news isn't all rosy. Online retailers will have to find ways to set themselves apart in a context in which shoppers have seemingly endless choices, and small eCommerce sites will have to deal with challenges related to logistics and shipping.

Trends in Holiday Shopping

Retailers are feeling confident about the 2019 holiday season, and with good reason. If the 2018 holiday season can be taken as a guide to what to expect, online retailers can look forward to an increase in sales from last year. Many already do, in fact. A survey of 106 retailers showed that 44% expect at least a 25% increase in sales next season, while 51% expect an increase of no more than 25%. Very few, 5%, expect a downturn or stagnant sales.

Of shoppers surveyed, 69% reported purchasing items online, and 37% of those said they preferred to skip the in-store experience and shop from the comfort of their homes, the "pajamas effect." That appears to be an increasingly important factor in whether to shop online. While many shoppers still prefer the brick-and-mortar experience, online shopping often wins out for a variety of reasons:

• 39% of shoppers reported that speed was the biggest factor in their decision to purchase items online.

• 23% cited the price difference as the reason they skipped the store.

• 23% said distance made it difficult for them to visit brick-and-mortar stores.

• 78% reported that they value reviews left by other shoppers on eCommerce sites.

Throughout 2018, online sales climbed by 15.5%, according to U.S. Commerce Department statistics. That indicates bigger growth than during the previous three years, and reflects a dramatic shift in how Americans view shopping.

All that is great news for large retailers that can capitalize on economies of scale when it comes to managing and shipping inventory to customers. For smaller retailers, shipping can pose a significant barrier to reaping the benefits of customers' increasing preference for the online shopping route.

Holiday Season Challenges for Online Retailers

The proliferation of online shopping is tied to the Amazon behemoth, which has revolutionized the way customers view eCommerce. Amazon's vaunted Prime service has accustomed customers to expect cheap, fast shipping, which has created a more favorable impression of shopping online.

That change in customer perceptions of online shopping has become a double-edged sword, however, as smaller online retailers struggle to keep up with Amazon despite their smaller scale and whatever logistics capabilities they have.

In one survey, 44% of respondents claimed that Amazon was their first stop when making a purchase online, and 92% of online shoppers said they had made a purchase through the retail behemoth. From 2017 to 2018, Amazon's share of the total online retail market climbed from 43.5% to 54.1%, and its upward trajectory can be expected to pose an ever-greater challenge to smaller retailers because of a push to offer more convenience to customers with same-day and one-day shipping.

"Empowered Customer" and Multi-Channel Shoppers

Most online shoppers (78%) reported they value the lack of lines and other shoppers when purchasing items online. Given that brick-and-mortar stores are especially crowded and hectic during the holidays, the significance of that factor is magnified during the part of the year most critical for retailers.

Online shoppers spent about $126 billion during the 2018 holiday season, an increase of 16.5% over the previous year, signaling a fundamental shift in the American retail landscape that traditional retailers must adapt to if they expect to survive.

One important, yet often overlooked, factor in the proliferation of online shopping, especially during the holiday season, is the growing sense of empowerment in customers. Shoppers aren't limited just to the stores located in their cities anymore, they can order goods from just about any corner of the country (or globe) and rest-assured that the retailer will make every effort to ensure that they receive their order quickly.

People who use a variety of methods to do their shopping are known as "multi-channel" customers. They like to play the field, searching for the best deals, in-store and online, and the number of shoppers who fall into that category isn't expected to decrease anytime soon. In fact, their ranks swelled by 40% between 2017 and 2018. Those customers tend to be more valuable, too, spending about $93 more per purchase on average than single-channel shoppers.

Less-Pressured Customers and eCommerce Holiday Increase

The optimism of online retailers can be attributed to a few factors: increased consumer confidence and the willingness to buy goods online, expansion of the post-Thanksgiving Black Friday from a single day to a nearly week-long event called "Cyber 5" and the increase in efforts to maximize convenience by offering lightning-fast shipping a la Amazon Prime.

As holiday shopping inches its way forward every year, it will be crucial for retailers to capitalize on the convenience of getting holiday shopping done early by extending holiday deals to an even wider timeframe. Because of the availability of deals throughout November, shoppers no longer feel pressured to do all their holiday shopping within a short timeframe.

Accordingly,online retailers, which are usually chosen by customers out of convenience, will have to appeal to shoppers with a variety of promotions and sales early in the holiday season, effectively beating brick-and-mortar stores to the punch.

Conclusion

The prospects for online retailers look bright for the 2019 holiday season, if they can keep up with customer demands. Online sales can be expected to continue growing for online retailers, but they will have to contend with ever-increasing customer expectations of convenience and affordability while contending with the logistical hassles of delivering purchases quickly.

Smaller businesses will also face hurdles when attempting to compete with Amazon and other large retailers. By understanding the needs of customers and planning accordingly, however, retailers of all sizes can devise effective strategies for increasing their sales this upcoming holiday season.