How different is the holiday shopping season in 2020? Analysis of key trends and challenges

Christmas has (certainly) come early

While traditionally, retailers expected the Christmas shopping to begin in December, Black Friday changed that a few years ago and brought it earlier, in November. And, this year, Amazon Prime Day, held in mid-October, has marked the beginning. The two-day long discount shopping event saw participation from 19 countries as the sales surpassed the $3.5 billion mark – indicating a 60% year-over-year increase for the eCom giant.

With authorities such as the British Retail Consortium, and Amazon (with its Christmas Lisa and Claire ads) actively calling out on shoppers to do their Christmas shopping early this year, I believe that shoppers are spreading out their shopping spree. Another reason could be that shoppers fear the disappointment caused by ‘out-of-stock’ items if they leave their shop at the last minute — they have learned their lesson from the first lockdown period.

It’s all happening online

While many have been left reeling from losses and job cuts, eCommerce was one of the few sectors that thrived during the pandemic and exceeded the growth predictions. In the UK, e-commerce sales have reached over £79 billion, which is a growth of 19% against the 11% growth forecast. The latest ONS data points out that record online retail performance has helped the country’s GDP to recover by 15.5% in the third quarter from Covid-19 impact. 50.1% of non-food sales were online in June, up from 33.1% a year earlier.

The pandemic has changed shopping habits causing a colossal tilt towards online shopping. So, it is not surprising to see shoppers spending hours online comparing different websites to find the perfect gifts at best prices – the time that they would have typically spent hopping around different stores to grab the best deals. As a result, we are also seeing and likely to see a further rise in subscriptions of money-saving newsletters, e.g. moneysavingexpert.com for coupons/discount codes each week.

The unprecedented surge in online shopping first lockdown created myriad issues for the brands from supply-chain management to last-mile delivery coordination. So, this year, the retailers are better prepared as they have invested billions in scaling their logistics and operations for eCommerce. I would expect the brands to invest more in managing backend operations than on marketing.

The carriers are also gearing up. Royal Mail is having its biggest ever Christmas recruitment drive by hiring over 33000 seasonal workers — up by 40% from last year.

Despite the preparations, last-mile delivery can remain challenging especially when customers are setting one-day delivery as the benchmark. Some say that distribution hubs may become a cause for concern as parcel carriers are already running at capacity and a Christmas-time peak may push things to the edge. And even though the technology is scalable, logistics issues such as shortage of trucks and drivers can create impediments.

Growing retail sales amid the job losses and an economic slowdown may seem contradictory, but the retail sales this holiday season are predicted to show robust growth. According to Deloitte’s forecast, holiday e-commerce sales may surge by 25% to 35% in the US.

While the unemployment rate has increased, slashing the spending power of a group of consumers, the pandemic, on the other hand, has increased the savings and disposable income of another category of (higher-income) consumers. WFH has brought the commuting expense close to zero, and the inability to take exotic vacations or eat out at high-end restaurants due to Covid-related restrictions has resulted in more disposable income – which the consumers are splurging on online shopping.

In the UK, thanks to an extended furlough scheme, the unemployment rate stands at 4.9% — only 0.9% more than the year earlier, and the disposable income has not been impacted significantly. In fact, the country saw a record increase in household savings with the households saving rate increasing to 29.1%!

More than anything, it is the human desire to clinch even strongly to traditions in these uncertain times, is the key driver of surging retail sales. According to a recent consumer survey from online discount platform RetailMeNot, 66% of respondents say they plan to spend the same amount of money or more during the upcoming holiday season.

Insights from the e-commerce brands

Digitally native, e-commerce brands have had the edge over traditional retailers as they already had better infrastructure in place. However, with many traditional retailers having a strong e-commerce set up also, this has shown just how important the online store has been for businesses that invested online early. Still, there are challenges that they will have to encounter. I spoke to 10 e-commerce brands to find out how they are approaching the holiday season. See the excerpts below:

Thread

E-commerce platform, Thread.com, uses a combination of human stylists and powerful algorithms to make it easy for men to dress well. With over 100k products, they boast of one of the largest inventories in the UK.

Sam Vinden, marketing lead, Thread:

"2020 has been a turbulent year, everything has changed so fast and the holiday season in e-commerce is going to be more competitive than ever with everything forced online. Given the competition, media costs are going to be sky high, so we're setting our own benchmark for costs and diversifying our strategy to maximise our marketing within that benchmark. Non-paid channels such as SEO and Email become increasingly important in these periods and the big winners will be those who have been focusing on them the longest."

Bloom & Wild

Online florist, Bloom & Wild, has disrupted the flower-delivery market with its cutting-edge technology and has been on Deloitte's list as the second-fastest growing company in the country.

Gary Taylor, director of acquisition marketing, Bloom & Wild:

"Being a digitally native brand has undoubtedly helped us throughout the pandemic. This Christmas, we will have more focus than ever on helping to keep our customers connected with their loved ones through our flowers, plants and trees. Over the last six months, the team have worked hard to adapt our supply chain to meet the growing demand we’ve seen. This allows us to fulfil more orders, whilst maintaining our excellent customer satisfaction levels - which is really important to us."

This Works

This Works is an award-winning British skincare brand, renowned for delivering clean targeted skin solutions.

Joe Fletcher, e-commerce director, This Works:

"A universal issue facing brands at the moment is the impact of Covid on the supply chain – for example in our case, limited ingredient availability – this continues to impact stock availability as we go into the holiday season.

There is always an element of seasonality to our business, and we’d expect in the run-up to Christmas for sales to be buoyed through gifting, as in any year. It is also reasonable to expect with tightening restrictions on the high street, that the gravitation online will continue apace and earlier than it may have historically. With This Works having an eCommerce dominant distribution, we are relatively well placed to manage that demand through our direct to consumer and third-party stores."

Wild

Wild Cosmetics is a DTC start-up selling sustainable, natural personal care products. They have sold over 300k bottles of their all-natural deodorants and have recently raised £2 million in funding.

Charlie Bowes-Lyon, co-founder & CMO, Wild Cosmetics:

"eCom has had a particularly strange year with most D2C companies actually benefiting quite heavily from the initial lockdown. Customer acquisition was very cheap over major channels such as Facebook and many companies saw record sales. Lockdown 2.0 and the holiday season is set to be a little bit different. This time, big retailers and small companies alike are prepared to go online and spend large amounts of cash. Typically offline retailers have had to rethink and scramble to be in a position to not lose out as we approach Black Friday and Christmas. This means that online advertising is going to be seriously expensive and, opposite to the first lockdown, acquisition costs are set to rise considerably.

At Wild, we've focused on preparing for each holiday event much earlier than we usually would. The key to success will lie in acquiring email addresses and potential customers through all channels in the lead up to the holiday events and then heavily retargeting them with holiday offers over the festive events themselves.”

Industrial Workwear

About: Established over two decades ago in Durham, Industrial Workwear supplies workwear, PPE, corporate clothing and marketing/promotional items in the UK.

Shane Parkins, e-commerce & technical lead at Industrial Workwear said:

"The biggest challenge to eCom brands this holiday season, in my mind, is if their business is agile enough to deal with likely unforeseen challenges even with the best risk assessment in the world.

It is looking like Industrial Workwear will double in size for the 2020/2021 trading year. It sounds surreal as we’re not a supermarket nor Amazon but our unique position within the eCom world has driven this growth – along with our staff working tirelessly. We don’t operate like typical e-commerce businesses, failing to fulfil orders or any systematic breakdowns in procurement doesn’t ‘inconvenience’ our customers, it shuts down full manufacturing lines, building sites and key industries – through not having correct PPE or passing regulation.”

Nurture Brands

Nurture Brands is a food and beverage FMCG company that sells a range of plant-based products under 3 popular brands: Rebel Kitchen, EMILY, Ape & The Primal Pantry.

Suzie Walker, head of e-commerce, Nurture Brands:

"In our sector (Food and drink) covid has played a huge part in driving shoppers online to get their groceries. Either due to lack of availability in stores, an inability to get to stores or a change in mindset to support small and local businesses. Due to the holiday season, I anticipate challenges in the supply chain, both in the supply of our goods to us and out from us to the end consumer. We sell through Amazon as well and since July there have been long delays at the fulfilment centres and this has had a huge impact on sales, this is unlikely to get any better in the runup to the holiday season."

Woodland Leathers

About: Woodland Leathers are a 3rd generation family business. Specialising in the sale of leather garments and a variety of leather goods for over 50 years.

Daniela Pisciottano, e-commerce specialist, Woodland Leathers:

“If we learned anything from the first lockdown, it’s that consumer behaviour can be affected in a variety of ways and not all of these can be predicted. We were prepared for a drop in sales when lockdown was first introduced back in March. What actually happened, however, was a slight increase in sales, which we weren’t prepared to deal with. To avoid making the same mistake twice, we are implementing a more efficient “picking & packing” method, ensuring that all stocks are updated daily to avoid disappointing our customers with Out of Stock products.”

YourLibaas.com

A Shopify-powered online clothing brand, YourLibaas offers an exquisite range of Asian apparel and has customers from around the globe.

Akram Tariq Khan, co-founder at YourLibaas.com, said:

"We have traditionally had a high returning customer rate as a set of loyal customers would regularly buy apparel as new catalogues were released. Due to the pandemic, offline events and parties are a rarity and the regular buyers have dwindled. A new wave of customers who shy away from brick-and-mortar stores and have shifted online have compensated and the sales figures are more or less similar to what they were pre-lockdown. We have added more information about the product on the category pages to educate the new customers about the product. For instance, Salwar Kameez category demonstrates how it is being done.

As for the holiday season, we have signed up for a Customer Data Platform that takes the customer order data as inputs along-with their PII (Personally Identifiable Data) in a secure manner and matches it with 3rd party data to generate predictive analytics."

Piglet

Piglet is a DTC e-commerce brand selling linen bedding, pyjamas and table linens.

Jake Newbould, head of digital marketing at Piglet, said:

“At Piglet, we place a huge focus on customer happiness, that’s reflected in our great Trustpilot reviews and high referral rate. In these more uncertain times, over communication a transparency with new online shoppers is critical. As we’ve been able to scale up our paid acquisition efforts this year, we’re reaching a broader audience than before, some of those customers may need a little more hand-holding throughout their buying journey with us, then it’s our chance to turn them into brand advocates with great customer service and product quality—you won’t be waiting long for a response if you’ve got a question for us.”

Gates Garden Centre

About: Gates is one of the largest independent destination garden centres in the UK, established in 1948 and continually growing and developing in response to customer demand and market trends.

Bryan Hallatt, head of marketing & e-commerce at Gates Garden Centre, said:

"Given the sector we operate in and our focus on Christmas, we are expecting that we will see significant demand this season driven by a desire to bring some light into life after a year blighted by Covid. I think that in general terms, due to the fact that shops have been closed together with a general feeling of uncertainty among consumers as to whether physical stores will open prior to Christmas, more and more customers will continue to be driven to purchase online. While potentially being good for e-commerce brands, this will present challenges in coping with demand at a time of year that is busy anyway.

We're expecting sales to be affected positively this season as people will want to enjoy a great Christmas to relieve some of the stress of the continued lockdown.”

I couldn’t agree more with Bryan — despite the pandemic’s impact on income, we should expect to see a strong demand by the shoppers giving a further boost to the retail sector which it desperately needs.

Antonio Wedral, co-founder, Novos