Here’s a stat to share at the dinner table tonight; American consumers will cumulatively spend 414 thousand years shopping online this November and December. The average consumer will spend 12hrs shopping online this season which translates to 3.6B hours or 414K years.
That summary comes from the Digital Economy Index, powered by Adobe Analytics, which analyzed one trillion visits to retail sites and over 100 million SKUs. Record demand for ecommerce is expected to drive holiday spending online to $207B, the first-time online spending will surpass $200 billion in history.
That’s the good news. The bad news is that out-of-stock shortages are expected to persist in the face of elevated seasonal demand and out-of-stock notifications will continue to remain high throughout the rest of 2021. Out-of-stock messages are up 172% compared to January 2020 and up 360% vs. January 2019 pre-pandemic period levels. Adobe predicts as consumer demand and shipping networks get into the holidays and this problem is only going to get worse. Apparel is showing the highest levels of out-of-stock views, out of any category tracked, along with sporting goods, baby products and most importantly to our industry, electronics.
With stock shortages, retailers have little incentive to discount and for the 2021 holiday shopping season. Inflationary trends and strong demand levels are leaving consumers with weaker seasonal discounts and savings for consumers are being reduced. As prices remain high, the trend toward “Buy Now Pay Later” has never been greater. BNPL is also being utilized for smaller ticket items where deferred payments were historically designed for more expensive items with a minimum order value of $225, reflecting a 12% drop from 2020 to 2021.
Consumers who have for years been educated to “shop around” to seek the best price, are now forced to buy immediately when they see a product being in-stock if they wish to secure that product, meaning the holiday shopping window has been pushed up to start much earlier versus the traditional starting date being after American Thanksgiving. More than four in ten US consumers already purchased holiday gifts by October of this year, according to a recent survey from The NPD Group. Retailers who do offer incentives, started deals earlier to avoid logistical shipping problems. Global spend for the holidays is likely to close in around $910B, with an estimated growth of 11% YOY. That would push 2021 over the $4T mark for the first time for online sales ($4.1T).
Pre-pandemic, before the holiday season discounts had even started, prices on goods such as electronics typically came down about 10% throughout the course of the year (products worth $110 in Jan would be worth $100 by Nov). Overall inflation, for all online categories, was usually down about 5% before the Q4 holiday season had even arrived. However, as inflation has been on the rise throughout much of this year, prices have been left at more elevated levels, ramping into the holiday season. Online prices are not rising as quickly as offline; the Consumer Price Index is up 5.4% YoY in September. Instead of overall online prices being 5% lower YoY, before seasonal discounts hit, they are up 3.3% YoY. This development reduces the total realized savings consumers can expect to experience on products this year (i.e., instead of consumers getting $50 off an online spend basket of $1,000, they’re having to pay an additional $30).
The consumer shift to using smartphones for shopping online has hit a plateau this year according to Adobe. Still, consumers will spend more than $86B online using their smartphones this holiday season, outgrowing the overall spend at +16.6% YoY. The growth in smartphone revenue share will be at a modest +5% this year.
Expect free shipping offers to peak again this year on Black Friday with a second, lower peak in the days following Christmas. Free shipping remains a strong added value for consumers. Retailers will leverage free shipping to incentivize consumers to spend with them but also to alleviate the stress on alternate shipping options over others. • The minimum order value for free shipping drops by 8% during the holiday season (Nov-Dec) compared to the rest of the year, driven by competitive deals on Black Friday and Cyber-Monday. • However, utilization of free shipping will rise earlier in the shopping season, over Thanksgiving week and post-Christmas, where value will be less constrained by urgency.
The takeaway for holiday shopping 2021 is to buy now, don’t haggle on the price and if you can find what you are looking for, count yourself one of the lucky ones.