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Salesforce’s Top 5 Predictions for Holiday 2022

Holiday 2022 predictions from Salesforce

Editor’s note: This article has been condensed and repurposed from an existing article from Salesforce.

With rising gas prices, food shortages, skyrocketing interest rates and ever-present inflation, consumers are worried and that means retailers are worried, too. In the face of these challenging factors, the stars are aligning to deliver another “unprecedented” holiday season for the retail industry.

We’re already seeing online shopping demand level off, with consumers finding a new balance between digital and physical channels. In fact, Salesforce has already predicted that the modest growth of the 2021 holiday shopping season could foreshadow this year, with Q1 data showing a 3% YoY decrease in global digital sales. But, given the significant surge of the last two years, there’s no cause for alarm relative to the health of online shopping.

We also can’t ignore inflationary pressures. In the first quarter, the average selling price (ASP) increased by 11% in the U.S. and shoppers placed 12% fewer orders worldwide compared to the same period in 2021. A peek at second-quarter data indicates this trend is accelerating, with April and May showing a 7% increase in ASP on top of a 17% increase during the same period in 2021. This scenario sets up a battle across all sectors of the economy for brands looking to tap into consumer wallets as they shop for fewer items at fewer retailers.

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Despite these economic headwinds, it’s no secret that the industry is seeing continued growth. In fact, record inflation has historically been a tailwind in catapulting revenues. But this era of inflationary pressure is unique because the cost of goods is rising faster than what can be reasonably passed on to consumers. For the  2022 holiday season, the trillion-dollar question is how do brands and retailers maintain growth, but do it profitably with an omnichannel approach?

Here are our five holiday shopping predictions to consider as you develop your strategy for the 2022 season.

1. Shoppers will Buy Even Earlier to Avoid Price Hikes

While shopping sprees leading up to Black Friday happened before 2020, more shoppers bought in early November over the last two years due to inventory and supply chain issues. But this year, the main motivating factor driving early purchases will be inflation. According to Salesforce research, 42% more shoppers worldwide and 37% more in the U.S. plan to start buying gifts earlier – the No. 1 behavioral change this holiday due to inflation. They hope to snag their holiday gifts before prices rise too much.

While we predict that ASP will increase monthly between 8% and 12% for the remainder of 2022, there is a silver lining for holiday shoppers: the return of discounting.

The inventory crisis of 2021 drove retail buyers to purchase too much in certain categories. Now that this 2021 inventory has finally reached warehouses, retailers have a new inventory problem: too much product, many in the wrong categories. Now, to increase inventory turn and remove excess stock from their balance sheets, retailers will likely launch a highly promotional season starting in late summer.

2. Loyalty Shifts to Value

In 2020 and 2021, customer loyalty saw a huge shift to convenience and safety as consumers demanded a frictionless experience – often buying online from home and having the order fulfilled in or from the store. Now, as inflation rises, consumer loyalty is shifting again — this time to experience and value.

In fact, according to Salesforce research, half of all shoppers will switch brands this holiday due to pricing. This means that 2.5 billion shoppers worldwide could ditch their brand for a lower-priced competitor.

Pricing and discounting strategies will be more crucial than ever to holiday success, as 17% of global shoppers (850 million) and 15% of U.S. shoppers (31 million) are unsure if they will buy any gifts this year. Try these tactics to compete in an economy with an increasingly price-conscious shopper:

Personalization: By leaning into intelligent segmentation and personalization – driven by artificial intelligence – retailers can ensure they deliver the right product at the right price at the right time to the right customer.

Digital marketplaces: With 16% of shoppers saying they will increase their use of digital marketplaces this holiday, consider marketplace approaches this holiday to expand assortments on your site or offer products on third-party platforms.

3. Physical Stores will Drive Growth Across all Channels

Up to 60% of digital orders are now influenced by the store – whether demand is generated or fulfilled. This holiday season, with stores fully operational once again, we’ll see consumers gravitate to physical locations in even greater numbers. We predict that retailers with physical stores will grow online sales at a rate 1.5Xfaster than those without.

While there is an upside for those with brick-and-mortar locations, there also are potential operational challenges as well:

Experience versus cost: Consumers are gravitating to stores for the in-person experience they’ve missed, but labor costs have skyrocketed. The pressure on labor costs may only continue to mount this winter as we predict workers will face a nearly 200% increase in costs to work.

Demand versus inefficiencies: Online fulfillment through physical channels will continue to propel the store’s growth, but unresolved inefficiencies threaten to undermine this lift. For example, store associates should get measured on fulfillment metrics if they are picking and shipping.

Service versus complexity: Stores will once again be customer service destinations this holiday – whether shoppers interact in a physical store or via text, email, chat or video. Based on our research, 25% more customer service engagements this holiday – both physically or virtually – will involve associates compared to 2019. To maximize these opportunities, retailers must arm store associates with digital tools and online access.

4. Shoppers will Gravitate Toward Sustainable Options

We’ve found that 88% percent of consumers now expect brands and retailers to clearly state their values. And shockingly, 64% will stop doing business with a company if corporate values don’t align with their own.

This is especially true when it comes to the environment. According to Salesforce research, 83% of shoppers will seek out sustainable brands and products this holiday. In fact, after a company’s treatment of customers and employees, its environmental practices are the top factor influencing buying decisions, placing the importance of sustainability initiatives ahead of actions around racial and economic justice.

Consumers expect brands to be honest about their carbon footprint, so be prepared to account for your emissions. We are still in the early innings, though, so don’t despair. Today, 81 of the Digital Commerce 360 top 100 online global retailers publicly report sustainability initiatives regularly. However, based on our analysis, only 23% will promote sustainable practices – in shipping options, on the homepage or within the product detail page – this holiday season.

5: Retailers will Test NFT Drops

This season’s hot collectibles come straight out of the metaverse. In fact, 46% of shoppers said they would consider purchasing non-fungible tokens (NFTs), a digital asset that represents something unique or scarce stored on a blockchain. This could be a virtual version of a real item or a digital collectible. Younger shoppers particularly are drawn to “digital twins” — a digital version of a physical good. Gen Z is 4X more likely than Gen X to buy a physical good if it is paired with a digital twin this holiday.

Nonetheless, NFT purchases are still in an exploratory phase. And while the market for digital assets is small, expect retailers and brands to test new ideas and capitalize on the buzz this holiday season. We predict that approximately half a million NFTs will be purchased from retailers and brands between November and December, with a potential total market value of $54 million.

Put Salesforce’s Holiday Shopping Predictions to Work

For retailers, 2022 is about playing the long game. Economic challenges and shifting consumer preferences mean that leading with a data-driven strategy will be critical to reacting to conditions in real time. And while we can’t stop inflation, we can recession-proof our businesses by improving profitability and solving for operational inefficiencies.

Get our new Holiday Planning Guide for a year of happier shopping and discover strategies for delivering holiday happiness all year long.

Get the Salesforce 2022 Holiday Planning Guide for Retailers

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