The holiday shopping season — which normally would be “officially” kicking off as soon as the Thanksgiving dishes are cleared — is going to be quite a bit different than it has ever been before in 2020. It’s one that’s difficult to predict, as evidenced by all of the conflicting holiday spending forecasts. There are a lot more questions than answers out there at this point and consumers — facing lockdowns, a pandemic that’s getting worse by the numbers every day, employment concerns and anxiety about the state of the economy in general — have no lack of reasons to be worried.
And all that worry has dropped consumer confidence squarely into the basement, Upgrade CEO and Founder Renaud Laplanche noted during the most recent edition of On The Agenda with Karen Webster, PSCU CEO Chuck Fagan, Verizon Business Group Vice President Michele Dupre, Cybersource Senior Vice President of Strategy, Marketing & Small Business Michele Herron.
“A lot can still happen as soon as in the next few days and weeks, we’ve already seen how the news of vaccines has moved the stock markets and I suspect as they get closer they are going to move consumer confidence a lot,” Laplanche said. “So anything can happen.”
The panel was, however, certain that merchants will be able to help consumers find their shopping groove in time for the holidays and find the confidence to spend again this year. Though exactly how much spend will increase or decrease remains something of a jump ball going into the holiday season.
But the shifts in consumer behavior we’ve seen from consumers in terms of where they want to spend and how they want to pay, aren’t going anywhere. They are almost certainly going to intensify as the holiday rush continues to speed up. But merchants and issuers, Cybersource’s Herron noted, are in some sense ready for them — as they’ve been building up to full-service for what will be a very digital holiday season.
“I’ve been really impressed by the overall resiliency of merchants of all types this year,” Herron said. “And I do think that getting out of the holiday season I’m just impressed with how fast merchants have changed their different shopping modalities. We’ve worked with a lot of retailers this year to help them build curbside when they had no curbside at all as well as to create touchless payments experiences. And they did it really fast and I think that will be very compelling.”
Giving The Customer What They Really Want
The specifics of what customers want in terms of what they are buying are hard to judge in 2020. The supposition right now, for example, is that consumers will be buying things in 2020, not experiences. Laplanche noted a few more pieces of good vaccine news could start seeing a big pick-up in travel bookings for 2021 at the last minute.
But beyond the specifics on shopping choices, the overall theme of the year thus far that is almost certainly going to be carried right through into the holiday shopping season is “shift.” That means the great digital shift we’ve already seen so far, with consumers reorienting their shopping to online channels and away from within the physical stores themselves. But simply counting out the physical stores, said Verizon’s Dupre is a little bit overly simplistic. When they look at mall foot traffic over the last few weeks, she noted, it is down year-on-year, but up 59 percent over what it has been over the course of the pandemic. It’s not that consumers are eschewing stores entirely, she said, it is that they are relating to them differently.
“It’s the ability to do fulfillment from those local stores that accounts for the increase,” Dupre explained. “It wasn’t that long ago that retailers fulfilled through a distribution or fulfillment center. But as we’ve seen, the adoption of digital exploding in the last few years, also gave retailers the opportunity to really repurpose those stores and that’s where we’ve seen a number of retailers increasingly turning throughout COVID.”
Forced to up their game, she said, they’ve learned to leverage those physical stores alongside the prevalence of mobile technology to initiate a transformation in customer interactions. That transformation will be incredibly relevant to the 2020 holiday shopping season as consumers run into narrower shipping windows for ordering online and having goods delivered to their door by the holiday. Building a multichannel option should allow consumers many paths to the goods they want — based on their preference and convenience, the panel agreed. That might mean choice of channel: online, in store, on mobile or a hybrid of those. It could also apply to choice of payment method, including card, mobile wallet and installment offering. What matters most critically, Herron noted, is the consumer’s desire remains central.
“Consumers now expect to interact with retailers and be offered the tools they want to use,” she said. “Retailers are definitely investing in building them — but they build what they think consumers like and use. We need to make sure those two things sync up and close the gap between consumers and what they want and merchants and what they’re investing in because they think it’s what consumers want it.”
What Comes Next
Consumers, with a new found appreciation for financial responsibility in 2020, have started favoring the use of their debit cards over their credit cards, as they are increasingly looking to avoid the risk of interest bearing debt. That, PSCU’s Fagen said, will likely carry on to some extent during the holiday season, but he suspects we will see credit continue to make something of a comeback as the season carries on, driven by consumers making some of those larger ticket gift purchases online, and looking for the rewards, benefits and extra sense of securing that goes along with them.
“A lot of that choice still depends, I think, on the size of purchase. For financial institutions, the direction is clear; they need to be catering on both sides to have that safety and ease of use with both credit and debit,” he noted, with a particular focus on loyalty and rewards, and what reasons they are giving consumers to allow their card of either variety to reside at the top of their wallet.
And, the panel agreed as the conversation was wrapping up, though the pandemic period will end, the great digital shift will not reverse course. The demand for choice, safety and flexibility across the shopping channel, they agreed is not going back. Which means the only way forward for retail is going through digitization ready to enter on a transformed frontier on the other side.
“I don’t think it goes backwards. I think there is a desire for normalcy. People will get back into the store, but I think the store has to dramatically change,” Herron said. “I don’t think that merchants are prepared enough to get rid of the counter, to get rid of the lines, to make it a totally nimble, flexible experience. But I think the learnings that we get this holiday season will tell us the changes that merchants are going to invest in for 2021. And I think it’s all going to be about creativity and flexibility.”