As England heads into another lockdown, retailers are preparing for yet more uncertainty.
While some predict we will see another big wave of online spend in Q4, others suggest a more mixed outcome. It depends on the category, of course, as we’ve seen from earlier on in the year.
According to PI Datametrics’ ‘A Year in Retail’ report, there was a 65% increase in electrical searches and a 75% increase in homeware searches between Q2 2019 and Q2 2020. On the other hand, fashion retailers have seen a decline in demand for items including party wear and wedding dresses. Overall demand for womenswear was the lowest it had been for years during Spring, with searches falling -9.2% between Q2 2019 and Q2 2020.
In a recent webinar run by PI Datametrics, Ian Jindal; Founder and Editor in Chief of Internet Retailing; and Roman Sadowski, SEO Lead for Smyths Toys, gave their predictions on how the year will end – and the consumer behaviour that might drive it.
The ‘I deserve it’ mentality
Jindal suggests that consumers will be split into two groups in the run up to this Christmas. Some will be tightening their belts due to the negative financial impact of Covid, which has been amplified by a second lockdown. More financially stable consumers will be able to divert their spend (from things like monthly travel, or food and drink out of the home) to gifting and self-gifting, providing an opportunity for product-based retailers.
As well as the focus on Christmas, Jindal says, “we are seeing a rise in self-gifting… an ‘I deserve it’ mentality; ‘A little treat for me, to make up for these months of being locked down at home.’” This could translate into demand for retailers that fall into ‘self-care’ categories, such as beauty, fragrance, loungewear, and homeware.
“I really think it is going to be the peak season for the ‘haves’ and the ‘have nots’, the spenders and the savers (or people who are trying to hang on to cash),” says Jindal.
Black Friday less of a peak
Smyths Toys SEO Lead Sadowski echoes this view, also suggesting that retail brands who typically see Christmas demand (due to gifting) will do well, but that Q4 won’t follow the traditional path, which tends to be a peak on Black Friday and a subsequent drop off.
From the perspective of Smyths Toys, Sadowski explains: “We have already had PS5 and XBox Series X releases this year. These were high ticket items that people were waiting for, but they didn’t wait for Black Friday to purchase them – everything is now sold out. The other reason is that retailers don’t have much reason to discount, because the demand is much higher than supply.”
Again, on the flip side, we could see retailers who are struggling to shift stock resort to discounting, particularly in fashion where items are seasonal (and therefore retailers have greater incentive to sell as soon as possible).
Lowering of delivery expectations
Delivery is a big draw at this time of year, with retailers such as Argos and Amazon winning over consumers with next-day and same-day delivery, as well as click and collect services. While consumer expectations for grocery delivery will likely still be demanding – with many supermarkets increasing capacity to keep up with demand – other retailers might find that delivery is now less of a deal-breaker for consumers (and therefore less of a competitive advantage).
“We are also going to see a shift in delivery expectations,” explains Jindal. “Some of this is because of capacity – there are no more couriers to deliver things any quicker. But more importantly, we are all at home all day. So those dead spaces, when no one wanted a delivery between 9:30am and 6:30pm…now all of a sudden it’s a case of ‘hey I can’t wait to see the DPD delivery guy.’”
A recent study by PFS backs up this notion. In a survey of 2,000 UK consumers, 90% of consumers (before March 2020) expected their online purchases to arrive within one week, 36% expected them in three to five days, and 29% expected them in two days or less. However, after the pandemic began, 71% expected purchases to arrive in a week, 29% in three to five days, and just 14% in two days or less.
This lowering of expectations is likely due to greater consumer understanding about the impact on businesses (and subsequent affect on fulfilment), but it is a behaviour that could potentially stick, for the time being at least. This means that ecommerce retailers need to ensure that other elements of the customer experience, and those which are now more visible, are up to scratch in order to stay competitive.
A further push for sustainability
Covid alone is not the only thing to impact consumer behaviour this year. However, it is likely that certain trends which were emerging or starting to emerge pre-Covid will have been accelerated by the pandemic.
One of these is sustainability, as well as a move away from mass consumerism, which is also another reason why Black Friday is predicted to be smaller this year than in the past. The combination of spending money on big ticket items, as well as buying into products that might be unsustainable (in terms of both manufacturing and packaging) could appeal less to consumers in the wider context of Covid.
With that said, Jindal suggests that consumers might be more passive rather than reactive when it comes to this topic. “The bad thing for retailers is that in all customer surveys, they will say simultaneously that ‘yes, it is a priority for me, but really it is the retailer’s problem,” he says. “This is the squeeze that retailers are in.”
Shopping at supermarkets and small local businesses
Finally, we could see consumers continue to shop locally this Christmas, as well as be more considered about where they are shopping from and why. Both Jindal and Sadowski highlighted the growing favour towards big supermarkets such as Tesco, which has impressed the public with its flexibility and purpose in the face of big challenges.
At the same time, local businesses have somewhat benefited from the pandemic, as Jindal says, “especially in the areas just around city centres, where the commuters are no longer commuting into town, but they are living and shopping locally.”
Many of these small and local businesses have also effectively capitalised on tools and online platforms such as Shopify, which can enable retailers to shift their stores online with relative ease and minimal digital expertise. With consumers both willing to shop online and from small and independent retailers – now is the time for many more to react and adapt to the ecommerce boom, if they haven’t already done so since March.