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Salesforce Predicts Just 1% YoY Online Sales Growth for U.S. Holiday Season

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U.S. ecommerce sales this holiday season are forecasted to reach $273 billion, a 1% year-over-year growth rate, according to the Salesforce Shopping Index, which tracks online data and preferences of 1.5 billion consumers worldwide. The U.S. growth rate lags the projected global growth rate of 4%, which Salesforce forecasts will generate $1.19 trillion in online sales.

The holiday prediction is in line with data from the 2023 back-to-school (BTS) season, which also have shown a 1% YoY growth rate in the U.S. (measured from July’s Prime Day through mid-August). “For the back-to-school season, 42% of consumers say they are spending more, but 57% are trading down for lower prices,” said Caila Schwartz, Director of Consumer Insights and Strategy for Retail and Consumer Goods at Salesforce during an Aug. 22, 2023 briefing.

Retailers looking to buck this low-growth forecast will need to focus on a few key themes:

  • Caution about implementing stricter return policies: Salesforce data indicated that 21% of online orders are at risk due to poor return experiences, and that 93% of consumers research a company’s return policy before making a purchase;
  • Not skimping on customer-facing convenience in stores: 39% of shoppers seek out BOPIS as a pickup option when shopping online, and it’s a particularly strong draw closer to Christmas, after shipping cutoff dates; and
  • Resale hitting its stride: More than one-third (35%) of shoppers plan to gift a resold item this holiday season — and 48% plan to buy a used item for themselves within the next six months.

Consumers carefully watching their spending will be a theme throughout Q4, according to Rob Garf, VP and GM for Retail at Salesforce: “Retail executives I’ve spoken to are factoring the possibility of a recession into their holiday forecasts, and consumers are more mindful of their budgets and trading down,” said Garf during the briefing. “It’s less ‘Are they going to buy?’ and more ‘What are they going to buy?,’ which might mean a private label product or trying a different product or retailer.”

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To maximize both sales and profitability this holiday season, both retailers and brands will need to focus on customer retention and loyalty: “A lot of switching happened over the past few years, and now consumers are looking for value and quality,” said Garf. “Retailers are trying to create ‘stickiness’ and increase their share of wallet,” along with focusing on alternate revenue streams such as retail media networks, delivery, services and repairs.

The Challenge of Managing Returns

“Returns were a huge issue in 2022, and consumers are looking at return policies as a key component of their purchasing decision-making,” said Schwartz. She noted that 21% of online orders are at risk due to poor return experiences, 81% of consumers stopped buying from a retailer after a bad return experience and 78% abandoned their carts if free returns were not available.

But returns are costly for retailers to manage, soaking up time, money and resources, so it’s little surprise that 88% of retail executives say they are revising their return policies to be stricter, according to Salesforce.

One popular way to throttle back return rates is to shorten return windows, but during the holidays this can result in a zero-sum game. “Retailers with return windows of 30 days or less will see 7% fewer sales in October and November,” said Schwartz. “Shorter return windows generally mean more sales taking place in December.”

“Last year we saw that the highest rate of returns was during Cyber Week [encompassing Thanksgiving, Black Friday and Cyber Monday],” said Garf. “Those buying earlier in the season saw that they weren’t getting the best prices, so they were first buying, then returning items to get a better price, which creates a triple whammy for retailers.”

Even with all their negatives, retailers should make a sincere effort to streamline return processes, said Garf: “A return could be the last experience a consumer has with a brand, so they will want to make sure it’s a good one.”

How to Maximize BOPIS Benefits

“Many retailers are questioning whether to keep their BOPIS [programs] in place, saying they’re expensive and disruptive, with associates spending too much time,” on them, according to Garf. But BOPIS is projected to drive $28 billion in incremental in-store sales this holiday season, and Salesforce reported that 39% of online shoppers seek out a BOPIS option.

BOPIS’ value increases even more after holiday shipping cutoff dates, when as many as one in three orders are fulfilled via BOPIS. Online, BOPIS generates a 5X growth rate after these dates, allowing retailers to sell items up through Christmas Day.

“Consumers want shopping that’s fast, frictionless and personalized, from retailers that know who they are and what they’ve bought [in the past],” noted Schwartz.

The brick-and-mortar store remains a crucial part of the shopping equation, even for online purchases. “Store associates will influence $714 billion in global online sales, [60% of the $1.19 trillion total], encompassing demand that’s generated by the associate or an order fulfilled by them,” said Garf. “Associates are becoming social media managers, promoting and doing livestreams; they’re becoming service agents, with calls being routed to them, either [from] people specifically calling them or as ‘overflow’ of general calls; and they’re being fulfillment agents, picking, packing and shipping orders.”

In fact, 74% of associates’ time is on non-checkout functions. But “retailers are not giving them the tools or scheduling [needed] to perform these non-checkout activities,” Garf explained.

Resale Goes Mainstream

Resale has been one of retail’s hottest trends for the past few years, and its impact will be strongly felt this holiday season: more than one-third (35%) of consumers plan on gifting a resold item this season, and an even larger group (48%) plan to buy a used item for themselves during the next six months.

17% of holiday gift sales this season will be resale,” said Garf. “This has mostly been through third-party platforms like GoodwillFinds, ThredUp or Facebook Marketplace, but now we’re seeing retailers lean into it as well,” Garf added. “Companies like Canada Goose, which allows its customers to trade in gently used jackets for store credit. Even though it’s a luxury item, the retailer can resell it as an aspirational purchase.”

The overall takeaway from the briefing is that retailers are concerned not just about topline sales but about profitability this holiday season. “They’re looking to drive costs out of the business in areas that won’t impact customer service,” said Garf. And to do so they’re “literally looking at things line by line,” said Schwartz.

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