In this article:
- Retail sales have been climbing throughout the year and reached their peak during the Holiday Season when prices were higher, and supplies tighter due to the pandemic, production, and logistical issues.
- Mitigating these challenges forces brands to step up their communication strategy and invest in relationship marketing.
More spending online and in stores
No question about it, people are spending more this year than last year. According to McKinsey, year over year growth hit 11% across both traditional and e-commerce sales, igniting the rise of omnichannel strategies.
McKinsey elaborated: “ Omnichannel shopping is ascendant, with about 60 to 70% of consumers researching and purchasing both in-store and online across categories. Not surprisingly, social media influence is heaviest among younger consumers but influences all age groups, most commonly in categories including jewelry, accessories, fitness/sports, and cosmetics.”
That many shoppers continue to select the buy online, pick up in-store (BOPIS) option, often with an election for curbside pickup also attests to consumers’ desire to use a cross-channel approach for purchases. Adobe, points out that this shows there is still use for bricks-and-mortar even while online orders increase.
Higher prices
McKinsey acknowledges that some of the rise in spending is due to inflation as well as to an increase in purchases. That jibes with Adobe’s report of an increase of 13.9% to 19% in shopping cart totals during November shopping events.
“It indicates that some are buying bigger ticket items, such as furniture, while others are feeling the effects of persistent online inflation (e-commerce prices have been up for 17 consecutive months),” Adobe explained.
Even if prices didn’t rise on certain products, retailers were not being as generous with discounts this holiday season. Adobe reported that this year’s Cyber Monday discounts for electronics were only 12% vs. 27% in 2020. For television sets, it was 13% off vs. 18% in 2020. For both sporting goods and appliances 2021 discounts were just 8% vs. 2020’s 20%.
Sold Out
Why were people willing to buy without good discounts? Likely because the strategy of waiting for better discounts fell short due to fewer supplies.
Adobe reported that “out-of-stock messages” have jumped up a whopping 169% over what they were in January 2020 and an even more astounding 258% over what they were at the end of 2019. That was not expected to let up for the rest of 2021.
McKenzie notes that over 60% of customers saw something they wanted to buy was out of stock. Only a minority (13%) decided to wait for it, while 39% opted for a substitute from a different brand or product.
Even more concerning for retailers is that nearly a third (32%) chose to try a different seller. Accordingly, McKenzie warns that shortages pose a serious threat to store loyalty, knocking out what may have taken months or even years to build up.
Now and later
FOMO certainly plays a role not just in the concerns of missing out on products, but in wanting them now even if we can’t lay out the money for them until later. New services under the umbrella of Buy Now Pay Later (BNPL) have been cropping up, and shoppers don’t reserve them solely for very large purchases.
The rise of such services has been “explosive,” according to Retail TouchPoints, up 44% over what it was in 2019 and 3% over what it was last year, as per the Adobe Digital Economy Index. It’s this generation’s substitute for traditional layaway and installment plans.
Major retailers like Walmart have given up their layaway programs and embraced BNPL. Retail Touchpoints refers to the report from Software Advice that found that out of 700 surveyed retailers 91% have or are in the process of setting up a BNPL offering for customers.
Vivek Pandya, Lead Analyst for Adobe Digital Insights told Retail TouchPoints that BNPL has proven very popular “with a lot of consumers, especially younger consumers.”
Retail TouchPoints cites Adobe’s findings of the top three categories for BNPL in ecommerce: “apparel (43%), electronics (33%) and grocery (30%).” It also found that the order value for BNPL dropped 12% from what it was in 2020 to just $225 for 2021.
Panyda explained that phenomenon this way in Retail TouchPoint: “If you try [BNPL] with a $500 order and it goes off without a hitch, then it’s like, why not do it with a $200 order or a $150 order?”
What will be in 2022?
Shortages may persist for a while yet, due to lingering supply chain issues. That will likely also keep prices higher. But in Q1 of 2022 we’d likely see less of a push from FOMO than we’ve seen in the last quarter of 2021.
What will likely remain in place is the omnichannel approach to shopping and receiving orders. Accordingly, retailers should continue to effectively engage customers at all touchpoints and also proactively suggest their own substitutes as an alternative to waiting for a ‘back in stock notification’ for sold out items.
Ok, so what’s the play?
As prices continue to rise and supply chain issues aren’t going away in the immediate future, one possible result is consumer frustration. This means that many consumers, slightly or plenty unhappy, will scramble in search of that product they’re after at a price they’re ready to spend. The result: higher churn and a bigger investment in acquisition efforts that will affect the bottom line.
In this environment, brands must ramp up efforts to mitigate these challenges. While external trends are out of their control, communicating with their clients in a personalized way certainly isn’t. For example: going from ten to dozens of client segments will allow brands better tailor their marketing messages and fight encroaching frustration. Being able to do just that across multi-channels and touchpoints will be crucial to this strategy’s success.
Prices went up again? Offer discounts to the right segments. That hot product is out of stock? Offer an equivalent one or let them know when it’s restocked. You get the picture, like in many other instances in life, so in marketing, uncertainty can be solved by a better connection.