Tuesday 18 January 2022

Rob Garf

Consumers to face higher prices this holiday season

DUBAI, November 15, 2021

Global digital sales are likely to once again top $1 trillion, but consumers, retailers, and suppliers are predicted to face rising costs and decreased inventory due to pressure on the global supply chain, a report said.

While online sales growth is expected to be moderate compared to last year’s historic 50% surge and more in line with pre-pandemic growth trends, digital shopping habits formed during the pandemic will persist and drive total sales to record rates for this holiday season, said Salesforce, a global leader in CRM, in its “2021 Salesforce Holiday Insights and Predictions”.

Salesforce forecasts:

•    7% year-over-year overall growth in global digital commerce for November and December (slowing down from 50% year-over-year growth in 2020)
•    Total digital sales are expected to reach a record high of $1.2 trillion globally.
•    Digital commerce growth will be driven by a 20% rise in consumer prices despite fewer global (-2%) holiday orders expected.

“While last holiday was defined by the last mile, this year is expected to be dominated by the first mile,” said Rob Garf, VP and GM of Retail, Salesforce. “With persistent global supply chain disruptions, retailers must draw consumers to their online and physical stores early in the season to fulfil demand and capture holiday spending.”

As retailers and consumers grapple with the challenges of the ongoing pandemic for a second straight holiday season, Salesforce predicts:

Retailers, suppliers, and consumers will bear the burden of rising costs

Increased costs appear to be front and centre this year for retailers, suppliers, and consumers — for a multitude of reasons.

•    Retailers and suppliers: Three key forces that have exerted significant pressure on the global supply chain are: manufacturing capacity, logistics costs, and the labour shortage.

•    Consumers: With inventory issues and higher costs fuelling inflation and cutting into margins, expect to see higher retail prices for merchandise. In fact, Salesforce projects consumers will see a 20% rise in prices during the holiday and beyond. As consumers contend with these higher prices, global “buy now, pay later’’ usage will likely account for 8% ($96B globally of online orders this holiday season, up from 4% of orders during the 2020 holiday season.

Product availability takes over shipping delays as this holiday’s spoiler

One of last year’s biggest challenges was fulfilment delays to consumers’ doorstep. While concerns persist this year, it is much less pervasive. Overall, Salesforce projects a 94% decrease in packages at risk of being delayed, or 40 million packages worldwide, down from 700 million last year.

These predictions come as consumers place larger and fewer orders. Last-mile carriers have also added year-over-year capacity.

Bottlenecks at ports and skyrocketing container costs, two of the key pressures shaping the holidays, should cause consumers to be concerned about product availability. Retailers are responding by consolidating Stock Keeping Units (SKU) — online product catalogs are predicted to shrink by 5% over last year as supply chain challenges continue to play out. And consumers are predicted to come out early again this holiday season to avoid out-of-stocks, with pre-Cyber Week shopping growing 3% globally (to $129 billion).

No more Christmas ‘cookies’: marketing departments disrupted by new change

With global legislation and changing consumer preferences giving way to increased internet privacy, marketing departments are facing one of the greatest disruptions they’ve seen in the last five years. Tracking user activity through third-party data across the web and mobile applications is expected to become more expensive, if not impossible, and first-party data — data that organizations collect and manage on their consumers — will be king.

Loyalty programs, social media engagement and personalized email marketing are expected to offer opportunities to marketers in the battle for first-party data, with Salesforce projecting 30% growth in ecommerce traffic from social referrals and an 18% rise in email marketing across November and December, compared to last holiday season.

Brick-and-mortar locations become a critical part of digital strategy

The combination of store associates — fulfilling online orders, offering an endless aisle of products, serving digital shoppers, and becoming social influencers — along with shoppers making purchases on mobile devices while in the store, indicates that physical locations will serve as a critical component of digital strategies this holiday.

As a result, more than six in ten global online orders are predicted to be influenced by brick-and-mortar locations — either by helping to place an online order or by fulfilling it via curbside pickup options. At the same time that labour shortages are wreaking havoc in the lead up to the holidays, it’s becoming more critical than ever for store associates to meet rising consumer expectations. – TradeArabia News Service


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