2019 Holiday Retail Sales Wrap-Up Part One: Digital
LiveArea’s Elliott Jacobs highlights the key takeaways from the crucial holiday retail season such as mobile commerce, investment in AI, inventory management, and omnichannel operations.
January 21, 2020
Author: Elliott Jacobs
It’s that time of year when the retail results start flooding, and we’re once again confronted with the ‘winners’ and ‘losers’ of the golden quarter. Starting with online and, as expected, in general digital sales showed strong YOY growth, with some standout numbers:
Global online spend increased 8% over the 2019 peak season, with $723 billion spent worldwide.
Early marketing activity proved key in the days before Cyber Week with digital traffic growing 13% over this period.
AI-powered search and product recommendations drove additional revenue for retailers, driving 10% of online orders and 5% of online revenue.
In the US, smartphones accounted for 58% of traffic to websites and 84% of the holiday season’s eCommerce growth.
US purchases via smartphones accounted for a record-breaking $50 billion in sales, an increase of 14% over 2018.
BOPIS (buy online pick up in-store) increased 35% over last year, with consumers using this option most frequently during the seven days just before Christmas.
Retailers that offered BOPIS saw 56% more active digital users during the final five days of the season.
Investment in digital
However, even in digital, there were winners and losers this year. Starting with the winners, Boohoo’s revenues surged 44% compared to 2018 in the four months to December 31. The USA and Europe led the way with a 57% advance in each market and sales in the UK – Boohoo’s biggest market – rose 42%.
What Boohoo has done so effectively is combine outstanding online and mobile experiences with rapid speed-to-market and efficient logistics. A focus on technology and automation has seen them become a shining light globally.
Its brands are incredibly hot on trends and compressed production cycles. In the space of two weeks a catwalk look can be turned into an affordable fashion item that’s all over social media and available for purchase online. Shoppers can refresh wardrobes in an affordable way, at speed, keeping up with the latest fads – roughly 200 new items are added online daily.
A tight grip on supply chain and fulfillment is essential to support this approach, and Boohoo has invested heavily in automation and global distribution logistics. New items are appearing faster, consumers are buying, and receiving their goods quicker, and even returns and refunds are processed quicker than ever.
Stuck in the middle
Brands tend to do well at either end of the retail scale. Luxury brands – take Canada Goose or Moncler – are successful because of high quality goods, and investment in their digital strategies to convey this quality across all channels. At the other end of the scale, fast fashion retailers like Boohoo see success through churn of lower-cost items that are hot on trend and fly off the shelves.
However, we’ve seen the likes of Superdry, Ted Baker and Jack Wills – that fall somewhere between luxury and fast fashion – struggle recently. In terms of Superdry’s retail strategy, it is struggling both online and in-store. Clearly, a 15.8% drop in overall sales over the peak retail period is alarming for any brand. We might expect to see a single-figure drop here, as many retailers are still struggling to adjust to the challenges of brick-and-mortar retail at the moment. However, a 9.3% drop in online sales is alarming, as most brands are looking to grow online at the moment, particularly over such a critical trading period.
The average processing time for pick-ups is now 2.5 hours. 88% are processed on time, beating 72% in 2018. Retailers who can’t cut fulfillment times will find shoppers looking elsewhere.
This suggests a lack of investment in the brand’s digital and omnichannel capabilities, whilst competitors are driving ahead. If the brand’s intention is to be seen as premium, its online channels jar with this perception. There is heavy discounting online, which is quite intrusive on the homepage and could possibly cheapen a ‘premium’ brand. Social media and content marketing efforts are unexceptional.
Superdry’s fulfillment options such as click-and-collect aren’t particularly enticing, with a wait of up to four days for orders to arrive in-store. Free home delivery is three to five days. The on-demand economy means customers want fulfillment in the shortest possible time, and retailers who can’t cut fulfillment times will find shoppers looking elsewhere.
So, how should retailers react?
In these conditions, retailers need to be asking themselves questions like:
- If growth isn’t going to be huge, how can we save costs?
- Which efficiencies and processes can we optimize to improve profits?
- What does AI really mean for us and how can it increase revenue?
- Are we doing enough to keep pace with our competition?
Retailers who have seen success are those who have invested in the right areas to improve business efficiencies. For example, investment in AI – whether that be site search, product recommendations or logistics automation – can be a smart move if it drives additional revenue or improves efficiencies.
Inventory management and omnichannel operations are also vital. Not all retailers have the war chest or distribution capabilities to compete with free same- or next-day shipping. But retailers who can’t cut fulfillment times might well find themselves cut out of people’s shopping lists.