By the XPO:TMA eCommerce Team
This year’s Black Friday and Holiday shopping season is one shrouded in intrigue, largely due to the recent interest rate increase that has further exacerbated the cost-of-living crisis.
Will this lower consumer spend over the holidays? Or will it drive consumers to be more bargain-centric and spend more whilst prices are down? Prominent retailers like Myer are anticipating strong performance whilst remaining cautious due to “macro headwinds”.
Largely the consensus is that sales will continue to improve year-on-year but how will the current economic climate impact consumer behaviours?
Don’t forget to check our in store holiday unwrapped post to see how these online trends translate in store.
Holiday Spending Projections Unwrapped
PayPal recently conducted their 2023 Holiday Survey, concluding that 75% of Australians are planning on spending less this Christmas compared to 2022. This doesn’t necessarily pertain to retail spend, with the survey showing 35% intending to cut their spend on alcohol, 39% saving on decorations and lights and 34% cutting spend on travel around the holiday period. The key areas of concern for Australian consumers are the cost of food (63% concerned), the cost of fuel (52%) and cost of energy/utility bills (51%).
More promisingly for those focused on their eCommerce sales strategies, 4 in 5 Australians plan to buy gifts online, and a whopping 62% intend to buy at least half of their presents online.
Buy Now Pay Later for Seasonal Splurges
We are seeing Buy-Now-Pay-Later consumer behaviours on the rise, likely driven by the cost-of-living crisis. In the past 6 months, 1 in 4 Australians have used BNPL, which is a 7% year-on-year increase from 2022. Drilling into the most popular verticals for BNPL usage, we see Clothing & Accessories at the top, with 14% of Australians having purchased through this method, closely followed by Computer & Electronics at 10%.
Essentially, what this ladders up to is if you are a retailer, ensure that you have relevant BNPL payment formats to capitalise on this behaviour, with the most prominent in Australia being Afterpay, PayPal and Zip.
Deal or No Deal: Holiday Shoppers on a Budget
In a similar vein, we are seeing growth in consumer behaviours when it comes to shopping around for better prices. A study conducted by IAB on Australian eCommerce in 2023 saw the following behavioural changes related to purchase drivers when asked ‘Why do you purchase online?’:
- Convenience – Compared to 2022, we see a decline from 77% to 67% in 2023
- Lower Prices – 45% in 2021, 46% in 2022 and now 48% in 2023
- Discounts – 34% in 2022 up to 44% in 2023
- Price Comparison – 29% in 2022 up to 37% in 2023
- Free Delivery – 48% in 2022 down to 46% in 2023
The summary from these findings is convenience is a declining purchase driver and price-related drivers are very much on the increase. Bear this in mind when it comes to your pricing strategy over the holiday period as consumers are much more active this year when it comes to seeking the best price, often forgoing convenience for cost.
Key Categories for Holiday Growth
Based on 2022 spending habits, the following are predicted to be the categories where the most money is spent online during peak sales periods:
- Fashion & Apparel (+108% uplift in spend for peak periods versus off-peak in 2022)
- Athleisure (+139% uplift)
- Footwear (+121% uplift)
- Specialty Food & Liquor (+92% uplift)
- Specialty Food (+110% uplift)
- Books, Print & Stationery (+89% uplift)
- Print, Stationery & Magazines (+131% uplift)
- Hobbies & Rec Goods (+88% uplift)
- Sporting & Outdoor (+114% uplift)
- Other notable inclusions
- Beauty (+124% uplift)
The key takeaway is if you operate within any of the above categories, ensure you have appropriate stock levels in place to satisfy the expected increase in demand.
Does A.I. Dream of Electric Santa?
One of 2023’s buzzwords must be A.I. or ChatGPT, and adoption of artificial intelligence shows no signs of abating, with it predicted to have a strong influence over online sales during the holiday period. According to a report produced by Salesforce, generative and predictive artificial intelligence will influence a huge $194 billion (USD) in spend online globally over the holiday period!
Looking more locally, research shows that more than half of Australians under 40 would use A.I. to help them shop online.
More specifically:
- 30% would use A.I. search to find the best prices
- 29% would use A.I. to find relevant promotions and discounts
From a business perspective, 42% of businesses have used A.I. for their eCommerce activities.
Drilling down deeper:
- 15% have used A.I. to provide recommendations to customers
- 12% have used A.I. to provide personalised deals/discounts based on customer behaviours
To coin a phrase from an Mi3 report, “A.I. won’t take your job, people who learn to leverage A.I. will”.
The Wrap Up: The Christmas Clock Doesn’t Stop
The same applies to your eCommerce strategy – what are you doing to make the most of current technologies and how do you plan to use it to stay ahead of the curve? Reach out now to start planning for 2024!
