How Retailers Can Succeed This Holiday Season: Value is Key
The last two holiday shopping seasons have been a strange environment for consumers and retailers alike. If comfort spending, a surge in online spending and navigating supply chain disruptions were hallmarks of the 2020 and 2021 holiday shopping seasons, then inflation is the theme for 2022.
Last year, consumers planned to spend nearly $1,000 on gifts, holidays items and other purchases during the holiday season, according to the National Retail Federation. But inflation continues to reshape their behavior. Many are buying less, searching for deals, switching brands, and buying more in bulk, according to a recent RetailMeNot survey.
Consumers are changing their shopping habits in noticeable ways — and retailers must be more responsive to their needs in an increasingly price-conscious environment.
Here’s how they can adapt.
Price is Now Top of Mind
As of July, inflation stands at 8.5%, just shy of the 40-year high of 9.1% the U.S. reached in June.
Consumers are now spending more on everything from gas to groceries, so they’re even more focused on price. Though 53% of respondents in RetailMeNot’s survey plan to begin their holiday shopping before November, most (52%) say it’s because they want to spread out their budget. Another 29% say they’re shopping early to reduce the risk that economic, political or other factors impact product pricing or availability.
Inflation likely has worsened budget concerns consumers typically have around the holidays: 43% of consumers say budget and finances are a major source of holiday stress, while increasing prices are a key stressor for 50%.
Even with pricing concerns, the upside for holiday-focused retailers is that consumers are more likely to shift their budgets this season to make room for gift spending.
Brand Loyalty Has Taken a Back Seat
With sky-high inflation, many consumers now prioritize keeping money in their wallets over brand loyalty:
- 72% would gladly switch brands to use a coupon, up from 58% in April 2022;
- 70% agree price is more important than brand, up from 63% in April 2022; and
- 58% are more likely to spend money with a brand or retailer if they offer the lowest price
This holiday shopping season, it’s clear consumers are searching for value. Brands and retailers that meet them where they are will win big in the coming months.
Meeting the Moment: Opportunities for Brands and Retailers
After seeing inflation steadily rise this year, brands and retailers are becoming more attuned to consumers’ price concerns. Some 67% of retailers plan to offer more discounts for the 2022 holiday shopping season.
Along with discounts, companies that want to convert clicks and store visits into revenue can use several strategies to entice consumers.
These include the following.
- Deals, deals and more deals: I’ve said it before, but it bears repeating — consumers are laser-focused on deals: consumers intend to shop with brands and retailers who provide the best sales, discount offers and/or cashback rewards during the holiday season. The data indicates consumers want a plethora of options to save money, and companies that deliver will grow their margins.
- Start early: 37% of consumers also say they're getting a head start on holiday shopping because they want access to more deals. Though Black Friday officially kicks off the season, there’s nothing preventing savvy, industrious retailers from offering deals in the beginning of November or even October to attract the early birds.
- Offer free shipping: 50% of consumers say they’re likely to shop more frequently with a brand or retailer if they offer free shipping, while 47% won’t complete their online purchase without free shipping. To curb shipping costs for consumers, companies can provide time-sensitive free shipping offers, offer free shipping on their first purchase if a consumer enrolls in their loyalty program or with lower purchasing thresholds, such as free shipping with a $50 purchase.
- Deliver a true omnichannel experience: 55% of consumers are planning to shop in-store and online equally between October and November. However, the omnichannel shopping experience traditionally hasn’t been seamless.
Twenty-five percent of consumers say they’d be more likely to shop with a brand that offers buy online, pick up in-store options, so this is one way companies can connect their online and offline channels and make shopping more convenient. Additionally, free returns may be a draw for shoppers — 36% say they’re more likely to purchase from a brand or retailer that allows free returns regardless of whether they purchased online or in-store.
The 2022 holiday shopping season is shaping up to be another moment when brands and retailers must throw out the traditional rules of engagement. Historic inflation has upended consumers’ usual buying patterns, so companies that want to win their business will need to give consumers more value for every dollar they spend.
