As we all breathe a collective sigh of relief that 2020 is over, I want to take this moment to take us back in time. We just wrapped up the most consequential digital shopping season in history. Global online revenues in November and December grew by an unbelievable 50% year-over-year (YOY). Consumers spent a record $1.1 trillion online worldwide compared to $723 billion in 2019.
Every January we look back in order to look ahead. But this look back is different. We collectively experienced the most challenging year in modern human history. For the retail industry, this meant undergoing rapid changes in both digital and physical commerce. As organizations embraced digital transformation, consumers moved at an even faster speed, adopting new normals across every aspect of their lives.
And while the entire year was an important case study in digital and physical transformation, the holiday shopping season was even more consequential. Over the better half of a decade, the holiday season has been a key indicator for trends that will dominate the following year. That is especially true for the 2020 season. Here, we break down the five key trends that emerged and what it means for the future of commerce in 2021.
Trend #1: Buy online pick up in store is here to stay
When retail stores shut down and grocery stores reduced capacity, consumers turned to buy online pick up in store (BOPIS) or curbside options in order to get the items they needed and wanted safely and easily. In fact, retailers offering BOPIS on their websites saw more growth than their peers from the very early stages of the pandemic and beyond. The role of BOPIS took on even more imperative for consumers as the holiday season approached. As digital surged and logistics carriers were backlogged for weeks, BOPIS was the clear alternative. U.S. retailers that offered BOPIS options this holiday season increased digital revenue by 49% on average YOY, while retailers that didn’t only saw 28% average growth YOY. Retailers offering curbside, drive-through, and in-store pickup options also had 54% digital revenue growth YOY in the five days leading up to Christmas, compared to 34% growth for those that didn’t. BOPIS was a clear differentiator for consumers.
Our data also shows BOPIS extended the life of the digital shopping season well past the shipping cutoff. An analysis of online spending share broken out by week between November and December shows that spending shifted in the last two weeks of the season. In fact, Cyber Week lost some share of spending this year as consumers turned out early to avoid shipping hassles or late thanks to BOPIS.
As you round out your 2021 plan, consider ways to break down the barriers between your physical and digital experiences. Consumers are growing accustomed to one unified experience, make sure you’re able to deliver.
Trend #2: Consumers are unique — market accordingly
Consumers not only traded in their work shoes for slippers but their entire approach to how and when to spend their money changed in 2020. As consumers shifted to work from home attire, footwear and apparel brands, as well as retailers saw the lowest growth rates, especially across the holiday shopping season. Products and services that made quarantine weekends at home more enjoyable were the biggest spending categories. Home fitness, decor, and sporting and outdoor goods were the most in demand for shoppers last year. But a new category emerged online that unseated even the most popular splurging categories. Online buying for food and beverage skyrocketed last year.
Beginning at the early stages of the pandemic, and sustaining through the end of the holiday season, consumers found the convenience of buying their groceries online and never looked back. Even on Black Friday, one of the biggest gifting days of the year, Food and Beverage was the fastest-growing product category. There are still plenty of opportunities to make the online food shopping experience even better as we head into 2021. As this experience becomes better and more intuitive (think artificial intelligence), we expect online grocery shopping adoption to continue to grow.
But priorities went beyond just what was purchased. There was a global collective shift in how people spent their time. With no commute, people shifted their focus to other things, like spending more time with their loved ones. How do we know this? A look at online shopping trends by hour confirms to us that consumers took a different approach to when they consume and when they sign off. Based on our data, pre-pandemic consumers were most active during commuting hours in both the morning and evening. As late as 8 p.m., consumers were online en masse browsing and buying. But in 2020 there was a consistent and monumental shift. Online shopping activity declined sharply in the evenings and rose in the midmornings.
What does this mean for your brand? While every audience is different, pay attention to what your shoppers are doing. Respect evening hours and focus your outreach on working hours.
Trend #3: Consumers are discovering and researching on new platforms
Last year was the year digital took over. From Zoom dinners to workouts, to Instagram lives and Netflix binges, digital was our lifeline to the outside world amidst global lockdowns. And in the absence of literal window shopping, shoppers turned to social media and other media platforms to discover new brands and products. Since the 2019 holiday shopping season, online shopping visits from social referred channels grew by 45%.
But social media hasn’t been an equal opportunity player just yet. Makeup, Active Footwear, and General Apparel brands consistently saw the highest rates of social referred traffic, especially during the holiday season.
Social is still an acquisition tool (think mobile in its early days). While you may not be able to attribute many conversions directly to social, it is still one of the main ways consumers are discovering new products and brands. Experiment with different strategies to best engage your audience and get your brand in front of the right shoppers.
Trend #4: Loyalty is critical — make a plan for your VIP shoppers
Everyone knows that brand loyalty is important. Acquiring new customers is expensive and time consuming. It’s easier and more cost effective to cultivate your existing relationships. But what does a loyal shopper look like? And why is it important to nurture and convert more brand loyalists?
A loyal shopper does his or her own due diligence. They make 24% more online visits, view 50% more digital pages, and spend 40% longer on site before making a purchase. And after all this research, they are the least likely to utilize discount codes. In fact, last year the top 20% of buyers made up nearly a third of all online orders and 54% of online revenue. Even amidst economic uncertainty, these loyalists doubled down. Loyalty isn’t just important, it’s critical.
The digital momentum that we saw last year also meant that there were 40% more shoppers buying online than in 2019. How do you convert all these new customers into loyal shoppers? John Strain, the chief digital and technology officer at Gap, Inc. said it best: “ … the more we can know our customers, the better we can support them to engage them, to reward them.” A loyalty program is only as good as the effort that you put into it. Use the data that your shoppers share with you and reward them not only with great products but also with great experiences.
Trend #5: Consumers seek alternative forms of payment
Economic insecurity went hand in hand with health insecurity in 2020. This posed a unique challenge. How do you keep store associates and shoppers safe in stores while processing payments? And how do you help shoppers get the items they need while they wait for stimulus payments? These challenges put a renewed spotlight on mobile wallets and other alternative payment methods. Two methods became critical: digital wallets and alternative financing tools.
Digital wallets (from providers like ApplePay, PayPal, and GooglePay, to name a few) have been gaining traction over the last few years. By the end of 2020, the percentage of online orders processed using one of these platforms represented around 24% of all orders. When an order was placed over a mobile device the usage was even more frequent, with upwards of 28% of orders utilizing a digital wallet. In 2020, digital wallet usage made the greatest gains ever. As the pandemic hit, orders placed using a digital wallet increased by 135% in Q2 and 74% in Q3.
The second method that gained traction last year is the modern-day version of a layaway program for online buyers. Shoppers are able to split their purchases into four equal payments, an attractive option to help shoppers make larger ticket purchases. These financing options, while not a new concept, evolved in the modern digital-first arena. With Buy Now, Pay Later offerings through platforms like Affirm and AfterPay, consumers now have even more options for making online purchases. Buy Now, Pay Later usage saw a YOY increase of 109% this holiday season, with the biggest increase taking place the week before Christmas. In fact, the overall share of orders processed using a finance tool rose from 3.6% during the 2019 holiday season to 4.5% this past season.
Digital wallets and modern financing options are just the beginning. As we head further towards a cashless economy and Bitcoin and other cryptocurrencies gain traction as legitimate currencies, be ready to meet your customers on these new technologies.
The final word on 2020
We are all ready to shut the book on 2020. But in many ways, 2020 was the year that digital needed. It accelerated behaviors that had been changing slowly for the better half of a decade. Nearly every generation was propelled into a digital-first world and adopted new behaviors as a result. As we look forward to 2021, don’t look back to 2019. Holiday shopping trends are always an indicator of the future ahead. Continue to advance your digital-first agenda this year and prepare for consumers to stick to digital.
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