Consumers expected to suffer higher costs — Salesforce Digital Forecast

For the 2021 Christmas shopping season, Salesforce released fresh consumer insights and predictions. Digital sales are expected to reach $1 trillion globally again, but consumers, retailers, and suppliers are expected to suffer higher costs and lower inventories due to global supply chain pressure.

“While last holiday was defined by the last mile, this year is expected to be dominated by the first mile,” said Rob Garf, VP and GM of Retail, Salesforce.

He added, “With persistent global supply chain disruptions, retailers must draw consumers to their online and physical stores early in the season to fulfill demand and capture holiday spending.”

While online sales growth will be mild this year compared to last year’s historic 50 percent increase and more in line with pre-pandemic growth trends, digital buying habits developed during the pandemic will endure and boost total holiday sales to record levels. Forecasts from Salesforce:

• November and December saw a 7% year-over-year increase in worldwide internet commerce (slowing down from 50 percent year-over-year growth in 2020)

• Globally, total digital sales are likely to hit a new high of $1.2 trillion.

• Despite fewer global (-2%) Christmas orders projected, a 20% increase in consumer prices will boost digital commerce.

As businesses and customers cope with the challenges of the ongoing epidemic for the second holiday season in a row, Salesforce predicts:

Retailers, suppliers, and consumers will bear the burden of rising costs

For a variety of reasons, increased costs appear to be front and center this year for retailers, suppliers, and consumers.

• Retailers and suppliers: Manufacturing capacity, logistical costs, and the labor constraint are three important variables that have put enormous pressure on the global supply chain.
• Consumers: Expect higher retail pricing for products as a result of inventory concerns and rising costs, which are boosting inflation and eroding profitability. In fact, Salesforce predicts that prices will jump by 20% during the holiday season and beyond. As a result of the rising prices, global “buy now, pay later” usage will likely account for 8% ($96 billion) of online orders this holiday season, up from 4% in 2020.

Product availability takes over shipping delays as this holiday’s spoiler

Fulfillment delays reaching customers’ doorsteps were one of the year’s top issues. While there are still concerns this year, they are far less widespread. Overall, Salesforce expects a 94% reduction in goods at danger of being delayed, or 40 million items worldwide, compared to 700 million last year.

These forecasts are based on the fact that customers are placing larger and smaller orders. Last-mile carriers have also increased capacity year over year.

Consumers should be anxious about product availability due to bottlenecks at ports and soaring container costs, two of the primary factors defining the holidays. As supply chain difficulties continue to play out, retailers are responding by condensing Stock Keeping Units (SKUs) – online product catalogs are expected to drop by 5% over last year. And, in order to avoid out-of-stocks, shoppers are expected to purchase earlier this Christmas season, with pre-Cyber Week sales up 3% globally (to $129 billion).

No more Christmas ‘cookies’: marketing departments disrupted by new change

Marketing departments are seeing one of the most significant disruptions in the last five years, as worldwide regulation and shifting customer preferences give way to enhanced internet privacy. Third-party data tracking across the web and mobile applications is projected to become increasingly expensive, if not impossible, and first-party data – data collected and managed by companies on their customers — will reign supreme.

In the battle for first-party data, loyalty programs, social media engagement, and personalized email marketing are expected to provide opportunities for marketers, with Salesforce forecasting a 30% increase in e-commerce traffic from social referrals and an 18% increase in email marketing in November and December compared to the previous holiday season.

Brick-and-mortar locations have become a critical part of digital strategy

The combination of store associates fulfilling online orders, providing an endless aisle of products, serving digital shoppers, and becoming social influencers, as well as shoppers are making purchases on mobile devices while in the store, suggests that physical locations will play an important role in digital strategies this holiday season.

As a result, brick-and-mortar stores are expected to impact more than six out of ten global online orders, either by assisting in the placement of an order or by fulfilling it via curbside pickup alternatives. At a time when labour shortages are wreaking havoc in the run-up to the holidays, store workers are more important than ever to meet rising consumer expectations.