The Customer is King (AGAIN!)
Moving into the critical holiday sales period, consumers will continue using technology and online shopping to make gift purchases. According to a recent consumer survey conducted by BRG professionals, shoppers expect to purchase a higher proportion of their gifts online this year. Our survey also reveals the need for retailers to identify and react to customers’ preferences if they want to drive holiday sales growth, because clearly all consumers are not the same.
If retailers expect to benefit from the predicted holiday sales increase, they must provide a nimble, real-time response capability to address distinct differences among groups of shoppers. The good news is that even with the window on holiday closing, retailers can react to BRG’s customer journey findings to drive sales this season.
The Consumer Mind-Set
Regarding their personal financial situation, 42 percent of respondents say theirs is better than last year; 41 percent rate it about the same; and 17 percent feel they're at least somewhat worse off. A positive sign for retailers, right? Generally, yes — but of particular interest was the response for baby boomers. Older consumers, as well as lower-income shoppers, are less comfortable with their personal financial situations than younger shoppers.
When asked about overall gift spending, survey respondents expect to spend about the same as the 2017 holiday season. Those most likely to spend more were in the 18–34 age group (NOT necessarily the higher-income consumers). So while younger consumers may think of spending more, the overall impact on year-over-year sales could be negligible, as younger shoppers tend to spend less overall.
Online Retail Continues to Grow
The importance of omnichannel capabilities continues to expand. Retailers can expect higher online traffic and a greater percentage of sales from e-commerce channels. Nearly 80 percent of respondents expect to spend the same or more as last year on holiday gifts online. Furthermore, consumers said they expect to purchase nearly 50 percent of their holiday gifts online. Younger-age and higher-income shoppers are more apt to increase online spending this year. The bottom line: Retailers must understand their customers’ preferences and be prepared to communicate, promote and service appropriately.
Meeting Shoppers 'On Their Terms'
One message came through loud and clear from survey respondents: why they shop, what they shop for, and when they do their shopping varies widely.
- Why They Shop: Clearly, online shopping attracts all types of consumers. But why they shop online varies, and understanding the differences will help retailers to react to and personalize the experience. When we asked survey participants why they plan to shop online for gifts, the top responses were centered on convenience, free shipping, avoiding crowds, and better pricing and promotions. No surprises here. But the responses from millennial and baby boomer consumers have some stark differences, providing opportunities for retailers to address specific shopper needs and cement the loyalty of various consumer segments.
- What Products They Buy: Top categories for holiday shopping did not vary much from what we expected. Clothing and accessories is the top category for gifts, followed by gift cards, electronics, and toys. Shoppers of different ages vary in their gift choices, however. Younger shoppers index higher for clothing, consumers age 25–54 will buy more toys, and older shoppers index high for gift cards.
- When They Shop: Twenty-eight percent of shoppers planned to begin their holiday shopping in November, with 14 percent saying they will start on Black Friday (November 23). Thirteen percent indicated they would wait until December. Who is most likely to procrastinate? Or to shop on Black Friday? Older shoppers (age 54-plus) are the most likely to procrastinate and start shopping in December — but remember that these shoppers are more likely to target gift cards, so the late start may not matter to them. Millennials are more apt than their parents to start shopping on Black Friday. And speaking of Black Friday, is it becoming less attractive to holiday shoppers? Survey says … yes.
Be Nimble to Satisfy Divergent Consumer Preferences
Meeting consumers “on their terms” isn’t a notion to be taken lightly. It's glaringly apparent that holiday shopping has long since ceased to be a one-size-fits-all experience. The importance and impact of Black Friday is diminishing as shoppers continue to tap into online capabilities to find the best deals and avoid the hassle of crowded stores.
Consumer expectations are different, and drivers of consumer satisfaction are wide ranging. Can retailers manage the complexity? Yes, and they must if they want to drive sales and cement loyalty to their brand. Holiday sales can make or break the year. To drive results and maximize performance, retailers must be ready to track results in real time and make adjustments over the coming weeks.
Keith Jelinek is the managing director in Berkeley Research Group’s (BRG) Retail & Consumer practice.
Related story: Retail Sales: Temporary Surge or Continued Recovery?