21 September 2022
2022 holiday shopping predictions for ecommerce and retail
The Current shares the data and insights from 6 forecasts for an uncertain season.
Holiday sales are set to moderate. (Photo by Amy Shamblen on Unsplash)
The Current shares the data and insights from 6 forecasts for an uncertain season.
What should we expect for the 2022 holiday shopping season?
For brands and retailers, this is an important question. The holidays are not just a time when people are giving gifts, but also shopping deals for their own buys.
As a result, the festive season is also a time when retail puts its best foot forward, launching new campaigns, attractive deals and expanding capacity for the volume.
All of this doesn’t just appear on Thanksgiving week. Preparation starts early, and lasts all fall. Right on cue, the post-Labor Day period has brought a fresh round of predictions for the 2022 holiday season, with analysts putting numbers behind their expectations.
The Current dug through six of these forecasts to share the important figures, and key insights.
The predictions arrive in a year when many brands and retailers have withdrawn their outlooks for the second half of the year due to economic uncertainty. While each firm took a slightly different approach and there was some variation in the results, some common themes appeared throughout:
Here’s a look at the results that each of the forecasts are predicting:
Key insight: "As inflation weighs on consumer demand, we can expect consumers to continue to shift how they spend their holiday budget this upcoming season," said Nick Handrinos, vice chair, Deloitte LLP, and U.S. retail, wholesale and distribution and consumer products leader. "Retail sales are set to increase as a result of higher prices, and this dynamic has the potential to further drive ecommerce sales as consumers look for online deals to maximize their spending. Retailers across channels who remain aligned with consumer demand and offer convenient and affordable options can be well positioned for success this season."
Key insight: Despite a tough environment for consumers, they still plan to spend. The Bain Consumer Health Index showed that confidence was down slightly in August when compared with the 2021 holiday season, while anticipated spending was up. When it comes to segments, middle-income consumers showed the biggest increase in anticipated spending, while high-income consumers had the largest decline in confidence.
Key insight: Inflation is set to rule the holiday season, Salesforce found. Global online prices are set to grow 7% compared to 2021, while consumers’ total online orders will drop 7%. At the same time, costs for suppliers, labor and transportation will put 10% of profits at risk.
“Retailers are feeling the squeeze from unprecedented margin pressure due to increased labor wages, fuel prices, and inventory carry costs,” said Rob Garf, VP and GM of retail, Salesforce. “Retailers mustn’t let margin be the Grinch that steals the holiday. It’s critical to contain costs by automating and scaling operations – particularly by streamlining processes and removing friction as consumers increasingly shop across digital and physical touchpoints.”
US retail sales growth forecast, 2022 (Photo via Mastercard)
Key insight: “This holiday season, consumers may find themselves looking for ways to navigate the inflationary environment – from searching for deals to making trade-offs that allow for extra room in their gift-giving budgets,” said Michelle Meyer, U.S. Chief Economist, Mastercard Economics Institute. “New job creation, rising wages and lingering savings should have many consumers ready and able to spend.”
Key insight: “In today’s new world, consumers are demanding that even traditional retailers be ‘websites with stores,’ not ‘stores with websites,’” said David Bassuk, global co-head of the retail practice at AlixPartners. “That’s why it’s critical that retailers of all types embrace what we call ‘digital-first retail.’ Most retailers have yet to crack the code on sustained omnichannel profitability, but those hoping to thrive in this new world must take a completely new perspective into their operating model—including regarding processes, organization and technology.”
Key insight: "I am more optimistic than other forecasters regarding the upcoming holidays," said Udayan Bose, Founder and CEO at NetElixir. "My forecast comes from aggregating recent online sales trends, an analysis of key macro expectations guiding the ecommerce landscape, and a hunch about consumer behavior gleaned from decades in the business. This year will not be without its own set of challenges, but I strongly believe we will have another unique and fulfilling year. Now is the time for retailers to plan their pivots and get a headstart on the holiday rush. We're here to help guide those strategies in any way we can."
The retailer's marketplace is expanding quickly.
When it comes to ecommerce growth, was the pandemic a blip or a new trendsetter?
As we move further from the height of COVID-related closures, it’s a question that will start to be answered through the lens of history.
So far, the narrative of ecommerce growth in the U.S. from 2019-2022 has gone like this: Ecommerce’s share of overall retail saw a huge spike at the height of the pandemic in 2020-21, when goods in general were in demand and online shopping was necessary to preserve health and safety. Experts looked out and saw a permanent exponential change in the penetration of ecommerce as a share of retail that would last beyond the pandemic. Then, in 2022, everyone went back to stores and the trendline came back to 2019 levels. Growth was no longer exponential. There was still growth, but it was not happening as fast as during the pandemic period.
With this in mind, it’s worth pointing out that 2023 is the first year that there likely won’t be a pandemic-influenced swing to influence ecommerce growth. It is also a year where demand has suffered challenges amid inflation and interest rate hikes.
So as we seek to determine the importance of ecommerce to overall retail, it’s worth it to continue taking a close look at what growth trends retailers are seeing now, whether ecommerce is remaining resilient amid consumer pullback and how retailers are preparing for the future.
The latest example arrived this week from Macy’s. It’s a fitting one for the times. Overall, Macy’s is seeing a slowdown as consumers pull back on discretionary purchases, with sales declining 7% in the first quarter versus the same quarter of 2022. Digital sales were down 8%.
Macy’s is particularly susceptible to the macroeconomic headwinds that many brands and retailers are facing, as spending among the middle-income consumers it counts as a primary customer base is particularly softening, said GlobalData Managing Director Neil Saunders.
But while ecommerce is slowing overall, the importance it gained to Macy’s business during the pandemic is remaining in place.
In 2019, ecommerce made up 25% of Macy’s revenue, CEO Jeff Gennette told analysts on the company’s earnings call. That jumped to a high of 44% in 2020. By 2022, digital reached 33% of sales after the pandemic boom. In the first quarter of 2023, it remained at 33%. So, while the trend line dipped after shoppers returned to stores, ecommerce share still settled in at a higher post-lockdown point than it was before the pandemic.
This came in a quarter in which traffic was “relatively good” across both online and in-store, Macy’s CEO Jeff Gennette said. It was “flattish” online, and slightly up in stores.
“We do expect that this is the reset year with the penetration between them,” Gennette said. “But we do expect more aggressive growth in digital in the future versus stores as we think about '24 and beyond. And that's going to be foisted by a lot of ideas and strategies.
Over the last year, the retailer has made investments in boosting ecommerce, even as shoppers returned to stores. In a bid to boost the assortment of goods available online, Macy’s launched a marketplace in September 2022 that welcomes goods from third-party sellers.
The marketplace had an “outstanding” first quarter, said Macy’s President Tony Spring, who is poised to succeed Gennette as CEO next year. Gross merchandise value increased over 50% when compared to the fourth quarter of 2022, while the average order value and units per order for marketplace customers was 50% above those not shopping at the marketplace.
Macy’s is continuing to build the marketplace even as it racks up sales. The retailer added 450 brands, ending the quarter with 950 brands.
This is helping to draw in new customers, as well as younger existing customers who are buying more items, resulting in increased basket size.
“We're very excited as to how marketplace is really attracting the Gen Z customer, particularly in categories where it was not economically feasible for us to carry in the past,” Gennette said.
In the end, Gennette said a strong digital and social presence is key to attracting younger consumers. That's a different type of shopper than other age groups.
“We know the younger customer starts first online,” Gennette said. That behavior will still be in place as the generation gets older, and gains more buying power in the process.
Going forward, Macy’s is seeking to expand the model to other retail banners in its portfolio. Bloomingdale’s will open a marketplace in the early fall.
The Macy’s ecommerce trajectory isn’t that different from the wider U.S. ecommerce narrative detailed above. With one quarter of 2023 data, there is evidence that ecommerce share settled out at a higher point after the pandemic than where it started before COVID arrived. There is flattening now, but the retailer is taking it not as a sign of a slowdown, or a signal to change course. Rather, it sees changing consumer behavior as a reason to build for the future.