09 September 2022
Delivery times, inflation in focus heading into holiday shopping
58% of shoppers plan to increase ecommerce use during the 2022 holiday season, Radial finds.
58% of shoppers plan to increase ecommerce use during the 2022 holiday season, Radial finds.
As brands and retailers get ready for the holidays amid a return to in-store shopping, it's worth remembering that ecommerce will remain an important channel during 2022's busy season.
According to a new survey from Radial, 58% of shoppers plan to increase ecommerce shopping this holiday season. This marks an increase of 8% in ecommerce intent over a similar survey conducted last year.
At the same time, 46% of respondents said they planned to shop in-store in the same volume this year.
Radial, an ecommerce solutions company, surveyed 1,000 US-based adults to gather insights on shopping trends for the 2022 holidays. The results show that it's a year when the pandemic-induced shifts are starting to shake out. Some new habits are sticking, while others are evolving anew.
Through it all, one question has remained consistent year-to-year, and just as difficult to answer this year as the last: When – and, more to the point, how early – does the holiday shopping season actually start? Radial provides some data on where things stand in 2022: In August, 12% of consumers said they had already started holiday shopping, while 18% will start in September.
It’s especially worth noting that 41% of respondents said they will begin shopping before Thanksgiving, in the period from October to the early weeks of November.
A big factor that’s new for this year is inflation. It has hovered at 40-year-highs for many months of this year, and the Federal Reserve is signaling further actions ahead to bring it down. If these interest rate hikes have the central bank's desired effect, it will cool off the economy, which could dent spending even further than rising gas and food prices already are. Many retailers already trimmed profit outlooks in Q4, and are fretting continued pullback. Radial’s research found that there will be some “curbing” in gift-giving as a result of inflation. Overall, however, brands should expect similar consumer demand as last year. About 38% of consumers noted they will change the volume of gifts they purchase, while 40% plan to buy the same amount of gifts as last year.
But retailers shouldn't let the macro environment distract them from tightening operations. In ecommerce, this year’s holidays will be marked by rising expectations in customer experience, Radial says. When it comes to fast delivery, one-in-three consumers said 2-3 days was a reasonable time for delivery. That's an increase of 10% year-over-year and a big jump over 2020, when 14% said they expected orders within two days.
Consumers are also proving to be willing to try new delivery methods, as 46% said they would try out drone delivery if offered.
At a time when shoppers are planning to shop both online and offline, offerings that cross both channels will continue to be important. The survey found that about one-third of respondents plan to use both curbside pickup and buy online pick-up in store services. These hybrid methods of getting orders to consumers rose during the pandemic, and continue to be a necessary part of the mix that retailers can offer to shoppers as they seek to provide convenience.
Following the supply chain challenges of 2021, brands and retailers have a chance to win loyalty through delivering great experiences in 2022. Consider their experiences last year. They survey states that two-thirds of consumers dealt with out-of-stocks, while 39% said items were unavailable on their desired channel. Another 40% received items late. Shoppers won't want to repeat those experiences, and there's a good chance they'll remember the brands and retailers that ensure they don't.
“The retail sector has undergone significant unpredictability and digital acceleration over the last two years. Supply chain disruptions and evolving consumer behaviors have shifted a formularized market, into a dynamic one. The impact of inflation introduces a new variable for brands to plan and strategize around this year,” said Laura Ritchey, COO and EVP at Radial. “To ensure peak operations run smoothly, it is essential that brands focus on inventory management and measure against consumer demand. The need for sound omnichannel offerings will ensure customers get a great experience regardless of the channel from which their order is fulfilled.”
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.