Amazon’s decision to move its Prime Day to Oct. 13–14 this year will pull the whole holiday shopping season forward by more than a month and help make online retail bigger than ever, as more families shop electronically and jostle to get presents purchased ahead of December holidays.
Why it matters: The reality of the coronavirus pandemic pushing people toward e-commerce combined with the pull of Amazon Prime Day and the Christmas shopping season this year are setting up a bonanza for retailers — but only those with the ability to offer steep discounts, delivery and an attractive online platform.
- Others are set to be left out in the cold.
By the numbers: Global online holiday sales are predicted to grow 30% from 2019’s strong levels and digital revenue is expected to grow by roughly 90% for companies offering the option to buy online and pickup in the store, new projections from Salesforce show.
- They expect the introduction of Prime Day in October will pull 10% of November’s Thanksgiving, Black Friday and Cyber Monday sales forward a full month.
- That translates to $26 billion globally and $6 billion in the United States.
What we’re hearing: “This is something we tried to do for decades,” Rob Garf, Salesforce’s VP of industry strategy and insights, said during a presentation Wednesday — online retailers’ tried to offer smaller discounts in autumn hoping to lure customers through a game of “discount chicken.”
- “In that case the consumers always win and it often cuts into the margins. But in this case there’s a real compelling event smack dab in front of us and that is Prime Day.”
Between the lines: The jump in sales online comes largely at the expense of brick-and-mortar retailers and consumers, many of whom will have to cut back on other purchases to afford holiday gifts, Deloitte noted in a recent report titled “A Tale of Two Holiday Seasons.”
- The upcoming shopping season also will test the trend of increased savings that has sent the U.S. personal savings rate from 7.6% in January to 17.8% in July.
The big picture: The holiday shopping season will likely go one of two ways, Deloitte says.
- One scenario with 0% to 1% year-over-year sales growth (well below the recent average) in which consumers “continue to experience mounting anxieties, related to both their finances and health.”
- Or another with 2.5% to 3.5% year-over-year growth, where a federal pandemic relief bill and an effective vaccine combine with dramatically reduced spending on travel and experiences that are redirected to spending on holiday gifts.
Yes, but: The dramatic increase in online shopping is going to place a heavy burden on the postal service and companies like FedEx and UPS, Garf says.
- “We are anticipating a significant strain on the carrier system given this huge surge in digital demand.”
- “In fact, we anticipate a 5% overcapacity for the traditional carriers over the holiday season.”
That may not sound like much but it translates to 700 million packages at risk of being delayed and not hitting doorsteps in time for the holidays, he says.
- Further, Garf is expecting companies to levy around $40 billion in surcharges as a result of consumers scrambling to get packages to their destinations in time.
Zoom in: “The carriers had no preparation at all, when the COVID-19 pandemic shut down the country,” Jerry Hempstead, president of Hempstead Consulting, recently told Logistics Management magazine.
- “And when everybody was forced to go hunker down, our lifeline to the outside world was the parcel industry. And if people had not learned before, they have learned now how to buy their things on the Internet and how to be an e-commerce customer.”
- “As a result of that, what normally takes 10 months of planning by the carriers before peak begins was thrust upon them overnight. The volume went up past what we normally see at the Christmas crush.”