Holiday Shopping 2024: Retailers Face Challenges Amid Lower Consumer Spending Power and Rising Competition

This year’s holiday shopping season may be particularly challenging for retail merchants, as they compete for customers with lower purchasing power than in previous years. A staggering 43% of consumers are also more in debt compared to 2023, making the struggle for customers more difficult for sellers.

How can retail merchants respond?

New data from Salesforce’s Shopping Index report suggest that shoppers are currently very price sensitive. Two-thirds of consumers claim that price will determine where to shop in 2024 (compared to 46% of shoppers in 2020). It is worth noting that the importance of quality is diminishing from a consumer perspective, with less than a third of shoppers considering it a priority.

• As consumers seek the best price deals, retailers should apply substantial discounts to attract customers and encourage them to make purchases.
• Retailers can also use artificial intelligence to improve productivity, boost operational efficiency, build deeper relationships with customers and generate higher margins. For instance, AI-based personalization, such as product recommendations and tailored promotions, can help retailers deliver the right offer at the best price when a customer is ready to make a purchase.

Forecasts for the holiday shopping season in 2024 (1 November–31 December)

Moderate sales growth is expected to continue:

• Considering that 47% of shoppers said they are purchasing as much as last year, and 40% are purchasing less, it is estimated that holiday sales growth will be lower than in 2023, when it rose by 3% year on year (YoY) reaching a total of $1.17 trillion.
• Salesforce forecasts a global YoY sales growth of 2% in November and December, reaching a total value of $1.19 trillion, along with a 2% YoY sales growth in the United States, hitting sales of $277 billion.

Chinese shopping apps are increasing competition for retailers:

• Salesforce predicts that one in five (21%) purchases this holiday season will be made via Chinese shopping apps, such as Temu, Shein, AliExpress, and TikTok.
• This prediction reflects the recent surge in popularity of these apps: over a third (35%) of shoppers claim they made more significant purchases using these apps in the last three months compared to the same period in 2023.
  • TikTok may be an app to watch in the upcoming holiday season.
  • Since the last survey conducted in April 2024, the number of shoppers admitting to shopping via this app has increased by 24%.

Discounts drive demand among shoppers

• • Two-thirds of shoppers admit to holding off on making larger purchases until Cyber Week, mainly because they consider this period to have the best deals and promotions.
    • Salesforce predicts that global discount rates will briefly surge in October and peak at an average level of 28% during Cyber Week. In the US, the average discount rate is expected to reach 30%.
  • During the 2024 Prime Day event, for the first time in years, retailers who significantly increased discount rates recorded a 3% sales increase in the US and positive order volume growth. This indicates the existence of pent-up consumer demand for shopping, and discounts will be key to unlocking it.

Both customers and retail merchants benefit from using artificial intelligence to deliver more personalized experiences:

• • • • Salesforce predicts that 18% of global orders during the 2024 holiday season will be influenced by a combination of predictive and generative AI, equating to $201 billion of global online sales.
      • More than half (53%) of shoppers surveyed by Salesforce express interest in using generative AI to find gift inspiration. Other reported benefits of this technology include price comparison and holiday budgeting.
      • Retail merchants also utilize artificial intelligence to improve service quality in stores, online, and during customer service interactions.
        • Short order fulfillment times and quick responses are the two most crucial features shoppers value during customer service interactions. They pave the way for AI-based chatbots, to improve CSAT results.
        • On-site search using artificial intelligence achieves almost a 3-fold better conversion rate compared to online shoppers who don’t use a search tool.

BOPIS offers retailers and consumers speed and savings:

• • • • Retailers trying to maintain low prices will need to find cheaper ways to deliver products to customers quickly.
      • “Buy online, pick up in-store” (BOPIS) will become a popular retail strategy to meet this need. It is expected to account for 33% of global online orders in the week before and after Christmas due to a shortened shopping season.

Source: https://managerplus.pl/nizsza-sila-nabywcza-rosnaca-konkurencja-swieta-2024-beda-trudnym-sezonem-dla-e-commerce-81057