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09/10/2021

2021 Holiday Retail Forecasts and Predictions

Another holiday season is here and retailers still have a lot of uncertainty to contend with when crafting their holiday retail strategies. Here to help, RIS is arming retailers with our second annual guide to peak selling season.
Jamie Grill-Goodman
Senior Editor
Jamie Grill-Goodman profile picture

Another holiday season is quickly approaching and with the rise of the Delta variant retailers still have a lot of uncertainty to contend with when crafting their holiday retail strategies.  

One thing is certain: Retailers should be preparing now to react to changing shopping behaviors. To help readers develop their peak selling season plans, RIS spoke with retail experts to get their predictions and forecasts. We also scoured recent retail surveys and research to provide the top data needed to prepare.

Some of the biggest takeaways? Consumers are prepared to start shopping early this year, so be ready to roll by October to be safe. While most retailers are concerned about supply shortages, transparency with consumers will go a long way. Building safety stock now based on data will be an important strategy. Creative fulfillment will also be necessary to meet demand. And finally, even if shoppers return to stores, it’s a given e-commerce and the digital journey will be a large part of this shopping season, which includes buy-online-pickup-in-store and curbside pickup.

Below, RIS is pleased to present retailers with our second annual guide to the peak selling season.

[See More: 2020 Holiday Retail Forecasts and Predictions]

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"There isn’t a perfect solution for any shortages, but partnering at a much deeper level with vendors has helped the entire supply chain anticipate and get ahead to a great degree," says Robert Gerwig, SVP of distribution and logistics at Sweetwater.

What Experts Say

“No one is immune from the shortages that so many industries are experiencing right now,” Robert Gerwig, SVP of distribution and logistics at Sweetwater, tells RIS. “Many overseas suppliers have been hit with container and trucking shortages, as well as rate hikes. To help offset different issues, it’s important to bolster your planning and forecasting algorithms, and to pay close attention to how you are making your vendor workflow more efficient. There isn’t a perfect solution for any shortages, but partnering at a much deeper level with vendors has helped the entire supply chain anticipate and get ahead to a great degree. Additionally, let’s not forget that customers are people and people sometimes just want to know what’s going on. The simple answer is, go ahead and tell them what is happening. Update your customers on shortages and keep updating them regularly. By that I don’t mean email blast your entire customer base and tell them you’re out of a product, but communicate one-to-one and let them know that your people are working hard every day to try and get them the products they have on order.”

“As holiday purchases accelerate digital commerce sales, there is greater demand for additional fulfillment options,” says Joanne Joliet, head of WW apparel & apparel retail at Amazon Web Services. “Retailers are exploring establishing new or converting some existing store locations (when there are multiple locations in a single market) into dark stores during this holiday season to help fulfill orders more quickly and efficiently. The converted dark stores allow retailers to optimize the physical store’s square footage, inventory, labor, and geographic proximity in the local markets to get orders to customers more quickly and efficiently. This also preserves the in-store experience of their other store locations that continue to operate as regular stores without the intrusion of in-store fulfillment to customers. Ultimately, this deepens customer loyalty and improves the experience of both online and in-store customers. While setting up a dark store isn’t as easy as flipping a switch, retailers who have made initial investments in cloud services are better positioned to deploy the solutions needed to bring a dark store to life.”

"Omnichannel is going to be more important than ever,” says Nikki Baird, VP of retail innovation at Aptos. “Maybe before the rise of the Delta variant, there was going to be a guessing game as to how much business will come back to stores vs. sticking with online; but now I think most retailers can be assured that there will still be a very high volume of omnichannel orders. For the holidays in particular, retailers have a big incentive to place inventory in stores and fulfill from there rather than keep higher levels of inventory in the e-commerce distribution center – that way, as they get closer to shipping deadlines, they will already have inventory positioned to drive consumers to stores for in-store pickup."

“Effective demand planning today requires high-speed decision making,” cautions Dan Mitchell, global director of retail & CPG at SAS. “Demand cycles used to happen in one- to three-month spans. Now demand planners work in 14-day increments, and they need technologies like analytics to help them make accurate demand planning decisions faster. That shift in planning time spans is exacerbated by logistics planning challenges. Global logistics giant C.H. Robinson says they don’t expect the pressure on global supply chains to go away any time soon. The company sees shipping vessels arriving on time about 40% of the time now compared to 80% on time arrival a year ago. Plus, the composite cost of shipping a 40-foot container on major East-West routes has increased by as much as 360% compared to 2020 rates.” 

[See more: 2021 Retail and Consumer Goods Analytics Study]

“No one knows how this holiday season will unfold so that’s why retailers will do everything they can in advance to eliminate uncertainty in their operations,” says Bill Inzeo, Global Retail Technology Strategist, Zebra Technologies. “The easiest way to do that is to augment store associates and warehouse workers with both intelligent automation and intelligent workflow automation solutions that can assess what’s happening ‘right now’ and tell associates exactly how to handle the situation at hand. Prescriptive analytics software can mine the data flowing into point of sale (POS) and inventory management systems to help find other issues that workers may be too busy to notice. For example, when certain SKUs are in high demand – or when they’re becoming stagnant – staff can be alerted via task management apps on their mobile devices so they can immediately change displays, promotions, and supplier orders. Smart robots will increasingly keep an eye on shelf stock levels and help move ‘shopped’ items for e-commerce orders to packing stations so associates can stay focused on pricing, replenishment, picking, and delivery-oriented actions.”

“Successful retailers will need to lean into scenario testing and audience segmentation to succeed this holiday season,” says Meyar Sheik, president, Kibo Commerce.For example, retailers ought to strategize for what we call ‘retained customers,’ or the segment of shoppers that purchased last holiday season but have not returned as a customer since. In 2020, the ‘add-to-cart’ rate for retained customers was more than 150% higher than in 2019, with a conversion rate that was also more than 160% higher YoY. To reach this group of shoppers and convert them into loyal, year-round fans, retailers should work quickly to test personalized offers and messaging to them specifically and across multiple delivery methods, most notably email, social and SMS.  By testing and iterating at all touchpoints, such as home pages, product pages, and at checkout, retailers will gain useful insights on these shoppers, as well as other valuable customer segments, that will help them capitalize on this holiday season.”

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"Government stimulus money no longer flowing, changes to unemployment checks, and increased savings during the pandemic are all unknown variables that will impact consumer spending this holiday," says Brad Eckhart, partner, Columbus Consulting.

“This upcoming holiday season, retailers can expect significant store growth over last year from a traffic perspective, since shoppers are likely to feel safer returning to shopping malls,” notes Brad Eckhart, partner, Columbus Consulting. “Retailers who have managed their inventory tightly during these past months of unpredictable demand must now begin building up their safety stock, carefully determining to what magnitude this increase should be. Furthermore, BOPIS was a success last year and will continue to be heavily used throughout this holiday. However, there will be some unknowns. Government stimulus money no longer flowing into the marketplace, changes to unemployment checks, and increased savings by the consumer during the pandemic are all unknown variables that will impact consumer spending this holiday.”

[See more: Consistent Store Execution Delivers Your Brand Promise]

“The last couple of months have shown some positive signs toward increase visitation across key categories such as malls and children clothing stores,” says Dan Silver, SVP marketing, GroundTruth. “But growing concerns surrounding the Delta variant have the potential to make some consumers take a more cautious approach to the upcoming holiday shopping season. This means that brands will need to continue offering flexible shopping options such as curbside pickup to accommodate health and safety concerns and reach their customers with personalized messages that align with the way they want to buy. Offline behavioral data can help retailers understand brand preferences among their customers and how much time they are spending with competitors. These strategic insights can guide how and when brands spend their marketing budgets during what is likely to be a flux holiday season.”  

“The entire sales channel will be affected, from overseas to the end consumer,” predicts John Gilbo, enterprise account executive at Pricefx. “Be prepared by obtaining data in a way you can easily understand to make decisions. It’s wise to also obtain external data so you can make informed decisions about inventory, price segments, market share, and bi-directional data. If pricing needs to be increased, provide transparency throughout the chain, noting that delays may be caused due to the current conditions. And rather than point out a problem, it could be wise to share alternative solutions, or products on partner sites, etc.”

“Sellers should calculate expected holiday demand based on prior benchmarks and recent data from marquee sales events including Prime Day 2021,” says Dani Nadel, president and COO, Feedvisor. “During the event, third-party sellers saw a 100% year-over-year sales increase and had the biggest two-day selling period yet, according to Amazon. By adding a 20% inventory increase for non-seasonal items and ensuring inventory arrives at Amazon's fulfillment centers weeks in advance, sellers can curtail potential supply chain concerns. Furthermore, it is important for sellers to understand the relationship between pricing, advertising, and inventory for optimal holiday performance. It is only by understanding the correlation between these metrics that sellers will be able to make the most informed strategic business decisions and instantly take profitable actions during this peak sales season.”

As the holiday season approaches, there’s going to be a continued surge in demand for items like furniture and appliances as consumers continue home improvement projects,” says Brenda Stoner, CEO and founder, PICKUP. “And though replenishment has been slow (with up to six months lead time for upholstery), we can expect that as products become more available, there will be a steady growth in high value purchases through the end of the year. As a result, some of the best e-commerce providers have added filters to their sites to screen for product availability. They have also invested heavily in solving for speed, flexibility and convenience.”

"This year, retailers face a new challenge: increased competition for a smaller pool of employees," says Toni Thompson, RRD’s president of retail solutions. "Standing out in the crowded employer marketplace takes more than increasing wages, although that undoubtedly helps. In order to attract and retain staff this year, retailers must take a page from their customer marketing playbook and focus on the employee experience. Take the time to find out what your staff really cares about, such as safety, flexible scheduling, quality of life, a fun or purpose-filled working environment AND elements of pay – and meet these needs. More than ever, it’s critical to listen and invest in your team, making them feel engaged and part of a greater mission."

[See more: E-Fulfillment Race In Tight Labor Market Means Efficiency Trumps All]

"The keys to success for retailers will be preparing stores and digital channels, keeping key items—and alternatives—in stock, offering compelling promotions and managing orders alongside persistent shipping issues due to FedEx and UPS capacity constraints and surcharges," says Rick Maicki, a managing director at Berkeley Research Group.

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KPMG expects that 2021 holiday sales for U.S. retailers will be 7% higher than last year’s.

Holiday 2021 Spending

For the November-January timeframe, Deloitte forecasts that holiday retail sales are expected to increase between 7% and 9%. Overall holiday sales will total $1.28 to 1.30 trillion during the November to January timeframe, reflecting continued growth from last year. E-commerce sales will grow by 11% to 15%, year-over-year. E-commerce holiday sales are expected to reach between $210 billion and $218 billion this holiday season, compared to $189 billion last season.

KPMG expects that 2021 holiday sales for U.S. retailers will be 7% higher than last year’s; The 7% growth is almost double the retail industry’s historical annual growth rate. Surveyed U.S. retail executives expect 2021 e-commerce holiday sales to grow 35% compared to the prior year. Retail execs anticipate that 2021 holiday sales will represent on average of 35% of their company’s total annual sales.

U.S. retail sales (excluding automotive and gas)  are anticipated to grow 7.4% this holiday season (Nov. 1- Dec. 24), according to Mastercard SpendingPulse. In-store sales are expected to see a rebound — rising 6.6% compared to 2020.

Sixty-five percent of shoppers are planning to spend the same amount or more online compared to 2020, according to a Radial survey. The 2021 data revealed that 57% of consumers plan to shop earlier compared to 2020. For one in five respondents, that means as early as August.

Shoppers who plan to spend more on holiday buying this year expect it won’t just be an insignificant increase, with a notable 18% planning to spend at least $500 more, according to Red Points “Holiday E-Commerce Guide.” On average, respondents plan to spend $265 more than last year.

Eighty percent of U.S. shoppers are planning to spend the same or more on gifts this year compared to last, according to an LTK study. Black Friday and Cyber Monday impact the entire holiday shopping calendar, with 45% of adults surveyed planning to do most of their shopping during the BFCM period.

Sixty-six percent of shoppers say they plan to spend over $400 on gifts this holiday season and 43% plan to spend over $600, according to Inmar Intelligence’s consumer holiday survey.

Fifty-eight percent of Gen Z will spend more this year; with Boomers (67%) and Gen X (65%) spending about the same as last year, according to Sitecore's Holiday Shopping Trends 2021 report. 

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Two out of five U.S. online customers say they are much more likely to buy when they have visibility into delivery dates in advance, according to Forrester.

The Retail Supply Chain

Eighty-two percent of U.S. retail executives in a KPMG survey are somewhat or very concerned about inventory shortages and 59% plan to invest more heavily in safety stock (extra inventory to have on hand in case demand increases unexpectedly). Fifty-five% plan to set up alternate suppliers.

Two out of five U.S. online customers say they are much more likely to buy when they have visibility into delivery dates in advance, according to Forrester’s “2021 Holiday Planning Guide.” As for delays, 70% of customers are less likely to shop with the retailer again if an item is delayed and the retailer fails to inform them of the delay.

To counter supply chain obstacles, retailers should be prepared to market and sell gift cards, which, according to Berkeley Research Group’s research, are on 50% of consumer shopping lists.

[See more: RIS’ Annual Supply Chain Technology Study 2021]

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70% of surveyed participants reported that their shopping journey involved online touchpoints, according to Google and Boston Consulting Group. "Digital will be a critical part of their journey, whether it’s online or in-store.”

E-Commerce Trends

Only 14% of U.S. shoppers say they will not shop in-store this holiday season, according to Google and Boston Consulting Group. “But as in-store shopping resurges, digital’s role in shopping has been cemented, as more than 70% of surveyed participants reported that their shopping journey involved online touchpoints. Digital will be a critical part of their journey, whether it’s online or in-store.”

Half of shoppers claimed that COVID-19 has influenced them to shop even more online. Nearly a quarter of shoppers (23%) surveyed in 2021 expect their items to arrive within two to three days, whereas only 14% of respondents expected their holiday gifts within two days in 2020, according to a Radial survey.

While all Fortune 50 retailers cover shipping costs, only 45% of omnichannel retailers and 22% of D2C retailers do so, according to Narvar’s “Returns Benchmarks Report.” The report also says 42% of retailers do not clearly communicate about refunds.

Sixty percent of shoppers say reviews and rating are the most important factors in an online purchase decision, even more than price, according to Red Points “Holiday E-Commerce Guide.”

Sixty-six percent of U.S. consumers are more likely to buy something online when they can return it to a local store, according to Uberall’s report “The New Face of Local.

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Consumers on average plan to do 12% of their holiday shopping this winter through curbside pickup services, according to Escalent.

BOPIS and Curbside

Consumers on average plan to do 48% of their holiday shopping this winter in brick-and-mortar stores, 41% via online retail and 12% through curbside pickup services, according to a Consumer & Retail study from Escalent.

More than 80% of consumers have utilized "buy online, pick-up in store" offerings, according to a survey from Treasure Data. This remains the shopping method of choice for 32% of consumers.

Retailers (55%) claim their companies will continue to invest in curbside pickup, while 44% will continue to invest in virtual queuing, based on customer demand, according to WBR Insights’ “The 2021 Future Stores Holiday Report.” 

[See more: 10 Retailers Ruling Curbside & BOPIS]

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Most shoppers (89%) said they would like to see connection and togetherness as themes in holiday advertising, according to an ENGINE Insights survey.

Holiday Retail Need to Knows

Omnichannel brand interactions continue to flourish, with marketing communications via email (73%) and text (45%) being favored the most, followed by social media (33%) and push notifications (24%), according to a survey from Treasure Data. Most people (82%) use their primary personal email address when creating accounts with retailers.

Of U.S. shoppers, 96% state they search for a promo code before making a purchase online, according to Coupon Follow research. Furthermore, 83% have used a digital promo code at least once when shopping online and about three in four (73%) reported they love receiving digital coupons.

Most shoppers (89%) said they would like to see connection and togetherness as themes in holiday advertising, according to an ENGINE Insights survey.

Fifty-five percent of retailers say their biggest workforce management challenge this year will be matching labor schedules to in-store customer demand, according to WBR Insights’ “The 2021 Future Stores Holiday Report.” 

[See more: What Frontline Workers Need to Serve Connected Consumers]

Almost half (46%) of retailers globally are considering cancelling their in-store Black Friday sales due to ongoing concerns with COVID-19, according to research from Emarsys. The survey suggests that over four-fifths (81%) of retailers will encourage customers to shop online rather than in store. Worryingly, more than a quarter (28%) haven’t started planning at all, and barely a tenth (13%) have actually finished their preparations.

With 57% of shoppers planning to start their holiday shopping in October, brands need to start battling for consumers' attention, according to Celtra’s 2021 Holiday Marketing Survey. Over half (66%) of brand marketers plan to design more creative assets this holiday season than last year. Still, 38% noted that having creative assets ready on time and producing more personalized content are the biggest challenges to deploying campaigns.

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