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What can holiday shopping results tell us about trends for 2023?
It’s a question many brand and retail leaders are mulling as they review the peak season numbers in the first weeks of January. This week, Salesforce shared data for overall ecommerce sales globally and in the U.S. that bring forward several key insights about how to approach the next year.
The top-line: Throughout November and December, consumers spent $1.14 trillion on ecommerce purchases globally, and $270 billion in the U.S., according to Salesforce. That's a 5% increase over 2021. The cloud company analyzes aggregate data from over 1.5 billion global shoppers on sites using Salesforce Customer 360. This dataset includes 24 of the top 30 online retailers.
The comparison: Salesforce said November sales were below both 2020 and 2021, which saw massive growth as demand for goods and the necessity to order online exploded during the pandemic. However, the overall sales came in above the company’s forecasts.
"Retailers closed out the 2022 holiday season with stronger online sales growth than expected – driven in large part by U.S. demand, steeper discounts on peak days, and BOPIS options," said Rob Garf, VP & GM of retail at Salesforce, in a statement.
Here’s a look at Salesforce’s key takeaways on what drove holiday spending, and what it means for 2023:
The trend: Good deals drove sales
This holiday season was expected to be highly promotional, and it ended up playing out that way. Salesforce observed a 21% discount rate, compared with 19% in 2021. Beauty, skincare, and makeup were the most discounted categories at 29%, while general apparel and handbags reached 27%.
What it means for 2023: While the calendar turned, the tougher consumer environment didn’t change. People are still seeking to stretch dollars as the effects of inflation and interest rates filter out across the economy. Discounts will remain a key tool to convert, but it will be a tricky path for brands and retailers to maintain margins, especially after increasing prices to keep up with inflation last year.
The trend: Returns hit record highs
Salesforce predicted a returns “ tsunami ” and it seems that it arrived. The 1.39 billion items returned amounted to a 63% year-over-year increase in returns from 2021. In the six days after Christmas, 16% of orders were returned, which was a 5% increase over 2021.
What it means for 2023: The “staggering” numbers offer a sign that consumers are “cautious,” Garf said. One of the behaviors that Salesforce identified during Cyber Week was people returning items after finding a better deal. These types of behaviors will only continue as the economic picture remains difficult. Brands and retailers should be mindful of how returns pressure profits and logistics. As Loop Returns has shared with The Current , there’s also customer expectations to consider, as many have grown accustomed to free and easy returns. That’s why retailers are also rolling out new ways to make returns more convenient like box-free and even returns pickup from DoorDash. Remember: returns are a customer touchpoint, just as much as a logistics function.
The trend: In-store pickup delivers growth
Buy Online Pickup in Store , or BOPIS, was one of the modes to get orders to customers that grew in the pandemic. Even with the return to in-store shopping this year, consumers continued to turn to this method out of convenience. Quick data points:
- Nearly one in five of all online orders were fulfilled via BOPIS.
- Adoption peaked at 35% of all orders on the Friday before Christmas.
- After the window for home delivery closed , Salesforce said that companies with BOPIS grew revenue 7x faster than those without in the final week before Christmas.
What it means for 2023: Even with the return to in-store shopping, ecommerce is continuing to be sought out as a means of convenience. But customers often don’t see channel, and are comfortable moving between both to fit their lives. The staying power of BOPIS over the holidays is a manifestation of this physical-digital crossover. Continuing to pay attention to what customers want and improving the experience will be crucial. Another area to consider: How are brands and retailers merchandising in the store around BOPIS? Remember: A pickup is a visit to the store. What are the options to upsell?
The trend: Social media referrals hit an all-time high
More and more of commerce is being mediated through social channels, where shoppers discover products through ads and content, then complete the purchase through links to brand stores. Traffic referrals from social media grew 23% this holiday season, accounting for 12% of all mobile traffic. The U.S., Belgium and Italy had the most social shoppers.
What it means for 2023: Social is still a key investment area for brands and retailers to drive new traffic to their online stores. In 2022, there was plenty of fretting about broken digital marketing playbooks as a result of iOS14.5 changes to tracking and attribution that hampered the growth engines of advertising on platforms like Facebook and Instagram. Brands experimented with other platforms like TikTok, and even brought back catalogs. But the Salesforce data offers a reminder that social media is continuing to be a primary place to meet brands, and power discovery. The tools and even platforms may change, but the medium will remain, and still has room to grow.
The bottom line: Garf put it this way: "In 2023, retailers must double down on efforts to put the customer at the center of their business with data-driven personalization and efficient operations in areas such as fulfillment, service, and returns."
Trending in Shopper Experience
Upping marketing spend, growing loyalty members and multichannel sales are key to the beauty brand's strategy.
Digital commerce is helping e.l.f. Beauty pour fuel on the fire.
The brand continues to be one of the shining examples of the staying power of beauty products despite consumer pullback in other areas of discretionary spend. e.l.f. grew net sales 48% in the fiscal year ended March 31 as it reached $500 million in sales for the first time. For the most recent quarter, sales grew by a whopping 78%. The company is seeing profit gains as well, as adjusted EBITDA grew 56%.
With the top-line revenue flowing, the brand was opportunistic about how it invested in marketing in the most recent quarter. After upping spend to 33% of net sales in the quarter, the company ended up with marketing and digital investment at 22% of net sales for the year. That was well above the higher end of its 17% to 19% outlook. In the coming year, it expects 22% to 24%.
The fact that digital and marketing fall in the same category reflects the brand’s approach to marketing. It's a favorite among Gen Z, and has found a home on the social apps that are popular with the generation.
“Our disruptive digital-first marketing engine has built strength across multiple social platforms,” CEO Tarang Amin told analysts on the company’s earnings call. “We are a pioneer on TikTok and are now a four-time TikTok billionaire with our last hashtag challenge garnering nearly 15 billion views. We were the first major beauty company to launch a branded channel on Twitch and the first beauty brand on BeReal.”
As a sales category, digital penetration is now 17%, growing from 14% last year. The channel grew 75% in the most recent quarter.
Amin laid out three factors driving this trend:
Marketing. The marketing investment that e.l.f. made brought strong returns, and the digital-first nature of those ads are bringing people to the brand’s digital sales channels.
Loyalty. E.l.f.’s Beauty Squad loyalty program has 3.7 million members, which is a 25% year-over-year increase. Loyalty members are the biggest driver of the brand’s digital business, accounting for over 80% of sales on the brand’s DTC site.
Multichannel. e.l.f. is the only one of the top five mass cosmetics brands that has a DTC site, Amin said. It is also seeing strong growth at Amazon and other retailer ecommerce websites. The growing presence is “building upon itself,” Amin said.
With digital growth, the brand is seeking to expand capacity in the supply chain that will provide more efficiency and faster delivery, as well. It is shifting to a more distributed ecommerce fulfillment model. Previously, it had one automated warehouse in Columbus, Ohio, which meant shipping to the West Coast could take time. Now, it is moving to a multinode distribution network. With the first couple nodes up and running, there is already improvement in delivery times.
The brand is also adding distribution capacity to its main warehouse in Ontario, California.
As marketing helps more people discover and buy from the brand, the operational improvements will help create a customer experience that lives up to the hype.