The holiday season is one of the biggest events in the retail calendar and can account for as much as 30 to 40 percent of annual sales.  From Black Friday (2November) to Christmas, there will be four shopping weekends or just 27 shopping days. In China, retail sales start to soar with Singles Day (11 November), which is the biggest shopping day globally. This year, Alibaba’s Singles Day exceeded $56 billion in sales over a four-day event. This was 16 times larger than the sales for Amazon Prime Day (13& 14 October).

The festive period contributes a significant share of many retailers’ revenue for the year.  As the COVID-19 pandemic restrictions and health concerns are keeping consumers away from the high street, it’s natural that merchants will be focusing their attention this year by attracting festive shoppers through their online channels.

What about changing customer behaviour? We are seeing that their shopping patterns have evolved as a result of the pandemic. Not only is there more online shopping, but there is also a greater range of consumers that are now shopping online.  The over-55s, for example, who may have only shopped online a few times a year before, are now regularly buying online products that they would previously have bought on the high street.  As a result, shopping from the elderly segment for some online grocery stores has experienced a 300 percent growth in the last 10 months.

Non-food sales are growing very fast as many shoppers have turned to using the online channel to buy their Christmas gifts. Clothing is probably the one exception to this pattern, being the only sector where sales are still below pre-pandemic levels.  Some merchant verticals are reporting that sales are back to pre-pandemic levels, despite the fact that their physical stores have been forced to close. Table service restaurants are now offering home delivery and rapidly preparing to deliver whole Christmas hampers and ready-made meals for the festive period. When your customers are resigned to the fact that they can’t treat themselves to their favourite restaurant experience, why not have the restaurant deliver the whole experience to their home? Some of the top chefs are offering a personalised cook-along experience. A virtual festive celebration can now be purchased online for this Christmas, effectively connecting their guests via Zoom, whilst they prepare and enjoy one of the many festive meal kits available from hundreds of top restaurants from New York to Tokyo.

As certain merchant verticals have been forced to close their physical stores to help stop the spread of the virus, this has meant eCommerce became their only sales channel.  Luxury brands offering products such as watches, jewellery, high-end fashion have taken a significant dent in sales as a result of shop closures.  Chinese customers on vacation, usually the big spenders on luxury brands, are not shopping because they have not been travelling as a result of the pandemic. At home, they are not shopping for luxury items because essential items such as food, toilet rolls, paracetamol, and so on have taken a higher priority.

The pandemic has also had implications for Luxury’s own mega-deal of the century between Tiffany’s and LVMH, with the deal price vastly different to the one first declared 12 months ago.  Other luxury brands have re-directed resources to research and converted their factories to manufacture PPE, such as lab coats, gloves, and face masks.  Conversely, high-street brands have had a more turbulent time dealing with the pandemic, as lockdown resulted in people not shopping for clothing.  H&M, one of the leading international fast-fashion clothing brands, announced the closure of roughly 70 percent of its stores worldwide. Zara, part of the Inditex Group, said it will close 1,000 to 1,200 stores worldwide over the next two years and focus on digital.  Signet Jewellers, which owns Kay Jewellers, Zales, Jared, and H. Samuel, will close 380 stores before the end of the year.

There is no doubt Christmas 2020 will see an extra increase in eCommerce and online retail sales are expected to break all the records since eCommerce records have been kept. However, what does the pandemic mean for the overall eCommerce sales growth and are we going to see a long-term impact?  The following graphic summarises, by region, eCommerce sales:

Note: Based on GlobalData actual value and Edgar, Dunn & Company forecast

In just five years, global eCommerce sales are expected to double compared to the 2019 levels, reaching over $7.8 trillion in 2024. The highest growth rates will be in APAC and LATAM.

There is a debate on whether we will see a ‘new normal’ with significant changes to consumer behaviour, or we will see consumers returning to their usual shopping habits.  At Edgar, Dunn & Company, we believe there is something in between. The impact of COVID-19 has resulted in a big shift in the customers’ expectations, and their shopping experiences with merchants have changed. Interactions that were not online pre-COVID have moved online. Post-COVID, there will be some consumers preferring to return to pre-COVID shopping patterns, but there will be a meaningful segment of consumers, more than half of them, based on a variety of qualitative and quantitative research, who will not return to their pre-COVID shopping behaviour.

Merchants all over the world are adapting to their new online customer base, and this includes their approach to the last-mile delivery and pick-up.  The final stage of the eCommerce experience continues to be today’s biggest challenge for many merchants.  Inefficiencies in the delivery process create friction in the customer experience.  Home delivery, delivery to lockers, store pick-up, and delivery to third-party locations are all undergoing a thorough overhaul post-COVID. Delivery companies are concerned that continuing high levels of online shopping will add further pressure on them. Christmas recovering from a global pandemic will only add to this pressure.

The World Economic Forum’s Future of the Last-Mile report published in January 2020, too early to reference the global pandemic, does state that eCommerce is growing rapidly, and by 2023 eCommerce is expected to account for 20 percent of global retail sales.  Edgar, Dunn & Company’s Retail Payment Practice believes this could be a conservative estimate. This report states that by 2030, urban deliveries are expected to grow by 78 percent. This will place a huge strain on the last-mile fulfilment. Automated delivery, self-service pick-up, drone delivery, real-time parcel tracking, machine-learning software, and automated vehicle loading systems are expected to experience a further boost in investment to respond to the continued global growth of eCommerce.

The global pandemic is accelerating dramatic changes across the retail industry. 2020 has not been a great year to look back on, but Christmas may be a welcome distraction. In the New Year, merchants will be learning from the pandemic on their digital Christmas to re-think their payment acceptance strategies and the re-design of their customer journeys, from product discovery to payment checkout for a post-COVID generation of consumers.

‍Beatrice Sava, a Business Analyst based in the London office, provided additional research and analysis for this article.

The content of this article does not reflect the official opinion of Edgar, Dunn & Company. The information and views expressed in this publication belong solely to the author(s).