Does it feel like the holiday shopping season started even earlier this year? You’re not imagining it. Store decorations are up and seasonal sales are gaining momentum, but the holiday buzz kicked off earlier, in the third quarter of 2022.
Why the early-bird shopping? As consumers worldwide face rising prices, they’re buying now to avoid further increases later. Based on our research, nearly half of consumers say rising prices will make them buy earlier than they did last holiday season.
We’ve spent the last several months forecasting what we believe will happen over the holiday shopping season. The trends we expected to see are clear: people are shopping more online, but they’re spending less. With Q3 global online sales down 2% over last year, ecommerce is still rebalancing after a sustained surge during the pandemic. As we look to the holidays, we expect online sales to stay flat. But people haven’t significantly pulled back on their shopping behavior. Online traffic was up 3% in Q3, despite a slight decline in sales.
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Why are sales down? Partly because of rising prices. Salesforce’s proprietary consumer sentiment research shows 62% of global consumers are buying less due to inflation. In fact, based on our Shopping Index data, order volumes declined for a fourth consecutive quarter, from July through September, as consumers worldwide received less bang for their buck.
What do these numbers mean for brands and retailers this holiday season? See the breakdown of our most important findings below, along with tips on how to remain competitive this holiday shopping season.
Discounts are back — and not a moment too soon
A combination of high demand and low inventory drove down discounts and promotions in 2020 and 2021, resulting in the lowest discounts recorded over the last few years. But discounts are making a comeback. The average global discount rate was 17% in the third quarter, up from 16% a year earlier, with the monthly average creeping higher as the quarter progressed. Consumers in APAC (excluding Australia, New Zealand, and Japan) and the Netherlands saw the greatest increases in the third quarter.
Discounting is essential this holiday shopping season. Thirty percent of consumers say they’ll buy an item only if they can apply a promotion or coupon to their order. And this rings true across all household incomes: high-, middle-, and low-income consumers are all feeling the pinch of inflation enough to bargain hunt.
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We’ve already started to see a very noisy season with marketing and promotions beginning early and continuing throughout the quarter. In fact, October’s Amazon Prime Day caused average discount rates in the U.S. to jump to 21% during the event, a year-over-year (YoY) increase of 25% and an 11% increase over the third quarter of this year.
Pro tip: How do you remain price-competitive without compromising your brand? Artificial intelligence (AI) can help take the guesswork out of the holiday shopping season. Personalized offers and discounts at the right time to the right customer can help you tailor your campaigns to drive the highest margins in this economically challenging time.
As inflation heats up, consumers go comparison shopping
Our data has shown steady inflation across all geographies – in the form of rising average selling prices – since the first quarter of 2021. In fact, global prices in the third quarter of 2022 have increased by 11% in two years. Let’s look at the regions with the biggest annual price increases:
- Q3 YoY: Canada (+13%); Australia and New Zealand (+10%); and APAC, excluding Japan (+5%).
- Q3 two years: Canada (+29%); APAC, excluding Japan (+20%); U.S. (+16%); and U.K. (+9% ).
This sustained double-digit growth has led consumers around the world to cut back on purchases. We found that 86% of shoppers — including 80% of high-income earners — are changing their buying habits due to inflation. The top change? More-frequent comparison shopping. That means more traffic, both digital and physical, before a consumer makes a purchase.
Pro tip: How can you maintain profitability as price-sensitive shoppers cut back on purchases? Streamlining operations is key to improving your bottom line. For example, you can find and reduce inefficiencies, such as in the buy-online, pick-up-in-store process, and offload high-service cases to chatbots.
Consumers demand a unified holiday shopping experience
Although consumers lived their lives in digital over the last few years – for dining, entertainment, and business, as well as shopping – the buying journey is not about digital or physical. It’s about both. Consumers want less friction across as many as nine touchpoints over the course of their journey, from discovery to purchase.
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Traditional thinking has segmented digital and physical channels into distinct categories that operate semi-independently, but that’s not how consumers view the shopping experience. Even as more shoppers head to physical stores to hunt for better prices, the hunt doesn’t end there. We found that 35% of shoppers who leave a store empty-handed say they’ll visit its online counterpart within a week to make their purchase. Another 6% say they’ll do so within a month. Meanwhile, 29% will go back to the brick-and-mortar location to complete their purchase — if they indeed decide to buy from that brand or retailer.
Saving the sale via digital channels is particularly important with younger generations. Although 44% of baby boomers and 35% of Gen X will not come back to a brand or retailer if they leave the physical store empty-handed, more than half of millennials and Gen Z are likely to seek out the brand or retailer on other channels before making a purchase. Only 22% of millennials and 15% of Gen Zers will seek out another brand or retailer altogether.
While many opine that consumers are ditching digital for the store, our research shows this is simply not true. Digital traffic has continued to grow in 2022 despite shrinking or flat revenues. Consumers already live in the omni-channel world. They don’t see walls between digital and physical properties. They expect one seamless and connected experience.
Pro tip: How can you deliver a connected experience across all your channels? Start by reassessing not only your customer journey, but also your data strategy. Joining customer data across all systems is essential for a consistent experience, but putting that data to work is the key to creating connected experiences that keep shoppers coming back all year long.
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Methodology
Powered by Salesforce platform data, the Shopping Index uncovers the true shopping story. We look at the previous nine quarters to uncover a deep understanding of how consumer behavior is evolving and how the market is moving. The Shopping Index analyzes the activity and online shopping statistics of more than 1.5 billion unique global shoppers from more than 61 countries. This battery of benchmarks covers both the recent history and current state of digital commerce. Several factors are applied to extrapolate macroeconomic figures for the broader retail industry, and these results are not indicative of Salesforce performance.
