2021 Holiday Shopping Predictions for the Retail Industry

Even amid the ongoing COVID-19 pandemic, the holiday season continues to be critical for retailers. In November and December 2020, the National Retail Federation noted an “unexpectedly high” 8.3% growth to $789.4 billion in sales versus 2019. Given the gravity of Q4 on annual planning and the lingering epidemic, we can’t help but wonder: what will happen this year? Here are our 2021 holiday shopping predictions and how retailers should prepare.

Holiday shopping prediction #1: a longer selling season starting in October 

The acceleration of online shopping, coupled with holiday volumes, strained the carrier networks last year and was dubbed “shipageddon” by industry pundits. In 2020, retailers started pulling up their holiday promotions to start in October, in an effort to ensure gifts were delivered on time and that carriers could accommodate their growing package volumes. 

We’ll continue to see the same trends this year: ecommerce holiday sales will surge, putting pressure on fulfillment teams and carrier networks, and retailers will encourage early sales with enticing promotions and loyalty offers. 

Holiday shopping prediction #2: retailers seek to diversify their carrier networks

To further balance capacity, we predict retailers will expand their delivery networks to include more international, national, and regional carriers this holiday season. Tapping more carriers helps increase efficiencies for retailers: goods are delivered faster and more sustainably.

Regional carriers have been growing quickly alongside demand, especially during the pandemic. American Eagle credited regional carriers for part of their fulfillment success. “We shipped to customers about two days faster. We reduced our delivery costs, because our e-commerce shipments were coming from local markets, in some cases, using regional carriers,” said COO Michael Rempell on a recent earnings call

For retailers looking to diversify their carrier mix, start by looking at your shipment data. Look for areas with a concentration of customers or trending slower delivery times. Being thoughtful about the regional carriers you start with will help ensure your investments have the biggest impact. 

Holiday shopping prediction #3: more personalized VIP services

Loyalty and VIP programs are a great way for retailers to attract customers during the holiday season. For one, consumers are inundated with sales in Q4, and may turn to retailers that have already earned their trust. In addition, tiered VIP programs encourage consumers to spend more with a retailer in order to earn greater benefits.

One example of a relationship-savvy retailer is DSW (Designer Shoe Warehouse). This company carries thousands of brand-name shoes for men and women, and is focused on satisfying customers at every touchpoint.

As an example of their customer-first offerings, DSW has a tiered returns program based on the buyer’s membership status. Loyal consumers get longer return windows and free return shipping as a thank you for their valued business. 

DSW tiered return policy
DSW's Return Policy

The future of retail is personalized. Retailers ought to look at all aspects of their buyer journey—including the post-purchase and ecommerce returns management experience—for ways to reward their best customers and limit the effects of potential fraudsters. 

Holiday shopping prediction #4: connected, omnichannel retail will have a competitive edge

It’s no longer news that ecommerce absolutely skyrocketed during 2020. Online shopping accounted for nearly one fourth of all retail sales, at 21.3%, with consumers spending more than $861 billion online with U.S. merchants. 

We foresee connected retailers with an omnichannel presence making the most of the acceleration of ecommerce this holiday season. These retailers may initially engage with customers online, but they’ll also provide convenience and customization that leverages their physical store network for offerings like Buy Online Pickup In Store (BOPIS), curbside pickup and returns, etc.  

Edge by Ascential reports, for example, that stores may soon use up to one-third of their space for online fulfillment. When retailers’ fulfillment networks seamlessly include both distribution centers and stores, they’re able to tap into deeper savings and efficiencies, and offer customers greater choice in their post-purchase experience. [Editor’s note: Narvar helps its retailers optimize and automate their post-purchase operations. Learn how we helped Levi’s quickly adapt during the pandemic.] 

Holiday shopping prediction #5: supply chain challenges will continue

The pandemic weakened supply chains, and, unfortunately, many retailers are still grappling with the effects. Reasons why this occurred range from a shortage of raw materials, import and export issues, and panic buying. 

For retailers facing supply chain disruptions, consider leveraging your returns processes to help fill a supply gap. While new sources of inventory may be valuable, don’t forget about the inventory being returned and look for ways to get returned products back on the sales floor (both virtual and physical) quickly. 

Finally, make sure your customer communications are up to snuff. Consumers proved last year that they can be patient with disruptions as long as they are kept well-informed. Looking at our platform data, we found that brands who provided more messaging during the holiday season saw a significantly higher average feedback score of 3.23 stars (out of 5) compared to just 2.72 for those who didn’t.

Holiday shopping prediction #6: proliferation of more return methods

From returning items curbside to designated return locations, and from boxless to printerless choices, we expect retailers will continue to embrace convenience and choice when it comes to their return solution

Curbside pickup, for example, was used more frequently during the pandemic than the previous six months by 21% of consumers, according to Narvar’s 2020 State of Returns report. Curbside returns are a natural outgrowth of that trend. It’s convenient for the customer and can reduce the cost of returns for them through a simple method that requires no labels and no shipping for the consumer. Through this method, retailers can save money via bulk returns to warehouses or immediately process and enter the product back into the store’s available inventory. 

Boxless or paperless returns are other options that allow savvy retailers to differentiate themselves from other stores, providing customers what they want: genuine convenience. In fact, Narvar’s State of Returns report revealed 21% of customers say they’d pay up to $5 to have the hassle of packaging and labeling associated with returning items taken care of for them. 

This holiday season is shaping up to be another major opportunity for ecommerce and omnichannel retailers. While challenges with supply chains and carrier networks still exist, transparent communication and shorter return loops can make for happy holidays this year. 

David Morin

David is Sr. Director of Retail & Client Strategy at Narvar, with over 10 years of experience in Retail & Technology.

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