In my previous blog, I shared a preview of what retailers should expect this holiday season. I had mentioned that online deals will dull some of the in-store Black Friday charm. This was indeed observed to be true and a point of discussion in the media as well around Thanksgiving.
Here are the other key findings of the WNS 2017 U.S. Holiday Report:
Spending Patterns
Despite the recent natural calamities, consumers seem to be optimistic in general. There are noticeable generational differences in the expected spending. Gen X has emerged as the biggest spender overall, followed by the generation of Seniors. Millennials come last with existing study loans curtailing their spending. Gen X is also predicted to be the largest spender in all sub-categories such as travel and leisure, entertainment, apparel and furnishing. The only exception is the gift category where Seniors are on top. Across generations, the highest spend is likely to be on gifts, followed by travel and leisure, and entertainment at home, both of which are experiential in nature.
Channel Preference
Online retail is clearly impacting in-store sales. The estimated customer allocation of spending is 49.2 percent and 46.2 percent across in-store and online channels respectively. As expected, Millennials, followed by Gen X have a higher preference for online shopping compared to Baby Boomers and Seniors, who prefer an in-store experience. However, while Baby Boomers prefer conventional stores, Seniors have a significantly higher preference for miscellaneous channels driven by catalogue retail.
Device Usage and Preferences
Overall, 87.8 percent of shoppers will allocate some budget to online shopping. It is therefore necessary to understand the buying behaviors across different devices. Desktops and laptops drive 79.1 percent of the online sales, well ahead of mobiles at 13.1 percent and tablets at 7.8 percent. Customers seem to prefer larger screen sizes for more complex tasks, whereas smartphones are the preferred medium for information such as store location, product availability, discounts and deals. Customers will use smartphones even inside stores to scan barcodes and navigate in-store. The stickiness of apps has been found to be higher than that of websites. It is necessary for retailers to ensure a seamless experience across devices, and a great app experience. It is highly recommended that direct marketing mailers provide a link to download the store app.
Shopper Cadence
There is a clear trend emerging where shoppers will spread their shopping across two months, and different channels. A large majority of shoppers have indicated that they will begin shopping by early November. Unlike last year, most people are likely to complete a majority of their purchases by early December, implying muted post-Christmas shopping.
Format Preference and Pathway
Our research indicates that the most preferred product categories will be clothing and apparel, followed by consumer electronics and food items — in that order. A key aspect for retailers, analyzed in our report, is the customer decision journey. Omni-channels being the order of the day, customers may begin their shopping online, and complete the sale in a physical store to try the product and buy it. Our analysis shows that 72.8 percent of customers are likely to demonstrate this behavior. Others may begin their shopping in-store, but complete the purchase online. In-store retailers will benefit from preparing to avoid inhibitors such as long waiting queues, slow check-outs and unavailability of desired merchandise. Price-checkers, self-service kiosks and mobile payments will be important enablers.
Implications for Logistics Partners
Shipping is an important aspect to understand given the significance of online shopping. Customers continue to prefer free shipping to fast shipping. Fast shipping is expected to be within two days. Subscription-based shipping such as Amazon Prime is gaining grounds. This could be a good model for retailers to offer priority shipping without eroding their margins. The other factor to be managed by online retailers is returns. Thirty-six percent of customers expect not to be charged any ‘restocking fee,’ 20.4 percent expect flexibility to return the purchase irrespective of location, and 19.7 percent expect refund options beyond store credit.
Behavioral Triggers
No two shoppers are the same, and our report uses segmentation techniques to identify five shopper archetypes, and how they respond to different triggers. The ‘mid-life savers,’ at an average age of 47.1, have the highest preference for coupons and discounts, to help them save on dollars for their impending retirement. The ‘omni-channel extravagants,’ consisting mainly of older Millennials and younger Gen Xers, have an average planned spending of USD 1722, which is 80 percent higher than other archetypes. They strongly prefer a seamless experience across channels. The ‘online deal hunters’ will attach high importance to free returns, and will shop across the holiday season. The ‘periodic deal-hunters’ will also give high preference to discounts. However, unlike the ‘mid-life savers,’ this archetype will shop more around specific days like Black Friday, Cyber Monday and Christmas Week. The ‘convenience-seekers,’ consisting mostly of Seniors and Baby Boomers, will look for excellent customer experience across channels and will require reassurance on information security.
Finally, as I had written in my previous blog, this holiday season brings good news for retailers in terms of positive customer sentiment and a higher average in planned spending. Yet, the approach will not be straight-forward, as all types of customers and their myriad preferences need to be understood.