Here is the forecast: Santa Claus will be buying nearly everything online in 2020. In fact, there will be a historic 30% growth in global online sales and up to 700 million deliveries could be delayed around the world. Welcome to the most digital Christmas of all time.

We have made a habit of shopping for gifts at certain times of the year, but particularly during the Christmas season. In fact, one of capitalism’s greatest achievements is disguising as tradition what is, in reality, a major stimulus to the economy. Thus, following the same logic, the findings of the latest study by Salesforce, the leader in CRM (Customer Relationship Management) and AI (Artificial Intelligence), are truly remarkable. The study predicts consumer behaviour during the Christmas period and the results are there for all to see: digital purchases hitting record levels, increased pressure on logistics capacity, and all this at a time when the retail sector is scrambling to survive the restrictions and economic impact of the pandemic.   

COVID-19 has forced many companies to go digital, since such large sections of their customer bases have shifted to e-commerce during lockdown. Based on the trends over recent months and putting things into perspective, Salesforce has released figures that (should they come to pass) will shatter all previous records:

  • Global online commerce will grow by up to 30% this holiday season (compared to an increase of 8% in 2019).
  • Digital sales will rise to a record $940 billion globally.
  • Up to 15% of all sales will come through social media.

And how is Salesforce able to predict these numbers?

Through the analysis of data from 1 April to 30 June cross-referencing e-commerce activity with total sales figures from over a billion buyers in more than 40 countries worldwide. Furthermore, Salesforce always employs additional data hygiene systems to guarantee consistent metric calculation.

The explosion of e-commerce

Businesses typically make about 30% of their annual sales during the Christmas season, but 2020 has been anything but typical. Traditional shops are rushing to make sales and begin their recovery, and the volume of sales today will determine the future of a great number of establishments. Many companies have lowered their shutters permanently and others are in need of economic relief if they are to stay open.    

There is indeed an obvious trend. More than 65% of small businesses have jumped on the bandwagon and will be making some sort of digital sales system available to their customers (online shops, mobile applications, social media, etc.) during the Christmas period. In fact, according to research, three of every four Google users report that they will be making purchases through their screens rather than in a brick-and-mortar shop. The reasons for this are many: during the COVID-19 pandemic, a significant number of consumers chose or discovered the benefits of shopping online; many people are still concerned about the crowds in physical shops; and lastly, there is now a considerable percentage of the population that is no longer commuting because they work remotely, which encourages shopping from home.

However, it is important to remember that the bigger the growth in digital purchases, the more products will be returned. 280 billion dollars’ worth of purchases are expected to be returned globally, which is approximately 30% of all sales. For this reason, and in an effort to limit these high rates of return, an increasing number of e-commerce businesses are now providing more thorough descriptions of their products along with videos, reviews and smart assistants that guide shoppers on the website towards a more suitable purchase, for example through live chat facilities.    

This explosion in online commerce must be properly planned for. Businesses must be equipped with the tools required to improve the User Experience (UX) and handle requests quickly and en masse with regard to transaction security, the availability of products or services, the tracking of shipments and their status.

Consumer polarisation

Will this be a successful Christmas season? It is very hard to say if we consider the consumption factor. On the one hand, there are consumers in stable employment with few financial difficulties who have saved over the course of the pandemic (in the last week of November, the Bank of Spain announced that the saving of Spanish families had reached 22.5% in the second quarter of 2020, an all-time high in its historical record); while on the other hand, there are thousands of people who are without an income, who were made redundant from their jobs during the crisis or who are in very unstable employment. Against this background, fear of the future and uncertainty are of course key factors influencing consumption.

In consideration of all these factors, we can analyse the data from the most recent study by the RBD Consulting Group, published by the Government of Catalonia in late November 2020, which showed that 50% of consumers are conscious that the pandemic has made them change their shopping habits; 84% buy products in local shops, which provide local employment and boost the economy; 73% value quality; 65% of those surveyed value price, and only 47% consider offers and promotions.

The pandemic has changed a great many things. It is clear that following the onset of COVID-19 consumers are not the same as they were this time last year. This sudden change in behaviour has given rise to new needs that must be met. Last Christmas, the footwear, fashion, jewellery, beauty and electronics sectors were thriving. By contrast, the top spending categories for Christmas 2020 are expected to be furniture and home décor, fitness products and toys, as well as categories such as beauty and electronics, which are naturally replicating their success this year.   

All these shopping and consumption habits must be monitored to identify which behaviours are likely to be more temporary and which could become permanent. In this regard, these studies give us the clarity and tools we need in these times of uncertainty. For this reason, it is extremely important to know how, when and why consumers make purchases so strategies can be devised to help the relevant sectors to grow. 

Logistics on the brink of collapse

In the COVID era, digital consumers now have 3 priorities when making an online purchase: availability, shipping and delivery times. It is clear that considerable pressure will be placed on the transport sector due to the huge increase in demand for online orders. According to Salesforce, the volume of packages will exceed shipping capacity by 5%, which translates to 700 million packages being delayed this Christmas.

To prevent a collapse, e-commerce continues to fall back on alternatives such as “in-store collection” and “last mile delivery” to ease the pressure on shipping companies. But knowing the percentage of customers who regularly use such alternatives is quite another thing.

Another important detail related to logistics and package delivery centres should also be noted. The boom in e-commerce during the pandemic has sparked a change in the Christmas employment market. Traditional shops are no longer recruiting so heavily and many of them are having great difficulty sustaining their existing workforces, let alone expanding them. The huge increase in electronic commerce has brought to light something that we already expected, but which has grown and intensified during the 2020 Christmas season: the most in-demand jobs are no longer temporary positions in retail, but are in logistics centres as order pickers, warehouse assistants, delivery drivers and forklift operators.   

The victor in all this is, of course, the all-powerful Amazon. The pandemic’s big winner is expanding its power in the market right from the de facto starting point of the Christmas season, its “Prime Day”. Meanwhile, due to the health crisis and its restrictions, we are left with a model that is less in-person, more polarised and more seasonal.

Merry Digital Christmas

Author: Joan Margarit, Marketing and Communication Analyst.

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