ONLINE TO THE RESCUE
E-commerce saved the holiday for retailers last year.
Not even a global pandemic could halt what Americans love to do best— shop. In 2020, when our lives were turned upside down and when businesses had to pivot to reinvent themselves, Houstonians and consumers across the country made the annual holiday shopping season a success, albeit at a modest clip.
It was feared by retailers that the holiday shopping season would take a significant hit in 2020, but the opposite happened. Based on holiday sales data, the holiday shopping season was slightly higher than the previous year.
Why is that? As the pandemic spread across the country, and state and local lockdowns came into play, consumers had fewer options to spend money. That meant vacations were canceled, going to your favorite restaurant or pub was not going to happen, leisure activities such as going to ball games, concerts, movie theaters, amusement parks or local festivities — all were not happening. The result: Consumers saved money, paid down debt to historical levels and shopped.
E-commerce is strong
Online shopping was solid all year and continued to be the preferred shopping method for many consumers throughout the holiday season. While the e-commerce platform has been in play for big box retailers, smaller retailers that historically relied on foot traffic had to quickly pivot and create their online presence. Even as consumers have shifted toward e-commerce in recent years, the pandemic forced retailers to accelerate their shift to online shopping by years.
Overall, e-commerce sales are projected to grow by 30 percent in the fourth quarter as consumers accelerate their online shopping while turning to stores for pickup, local delivery, and in some cases, returns. The demand on the digital platform should only increase for the next holiday shopping season as consumers become more comfortable with this shopping platform.
Strained system
As online sales surged, it added pressure to shipping vendors to deliver before the holidays. In some cases, shipping vendors limited big retailers on the number of packages that could be shipped daily to not inundate their systems. For smaller retailers, shipping added another dimension to their playbook that they didn’t have to worry about in the past: packaging and shipping.
Even my own local UPS driver noted how busy it was all year, with the holidays requiring additional hiring to accommodate the increase in package deliveries. The downside, some packages didn’t arrive on time. All of this provided another learning moment for everyone in the holiday shopping supply chain — when online sales go up, the demand on shipping will increase and will max out the capacity of the shipper.
With many consumers still wary about travel and crowded public spaces, sales of goods saw a resurgence last year over spending on experiences. This represents a significant shift. It was only a few years ago that spending on experiences was growing at four times the rate of spending on products.
As they have since March, essential retailers continued to drive overall sales through the end of the year, with spending heavily weighted toward retail lines such as home improvement and household goods. And with evidence continuing to indicate a “K-shaped” recovery, well-off consumers continued to increase their spending on big-ticket home and recreational purchases, which have already been running higher since summer.
As the COVID-19 vaccine becomes widely available, economists across the country anticipate that the pent-up energy of consumers will catapult the economy in the second half of this year. My colleague Kenneth Kim, KPMG’s senior economist, recently said, “In 2021, President Biden’s fiscal relief plan is key in preventing lasting scarring among impacted sectors. The economy should improve as more people get vaccinated.”
For retailers, restaurants, bars and every business in the hospitality sector, that’s potentially great news, and perhaps we’ll see the 2021 holiday shopping season be the best year ever for retailers.