Retail Sales Are Shifting. Here’s Why.

It’s no secret that ecommerce has grown exponentially since the early aughts. Today, the online marketplace boasts approximately 7.9 million ecommerce retailers and two billion customers — a number that represents over 4.2 trillion U.S. dollars across virtual retail sales worldwide. According to the US Census Bureau report, retail sales reached $1.58 trillion in the first quarter of 2021 alone. While these statistics might sound optimistic for the future of ecommerce, they don't necessarily translate to good news for all companies.

The current pandemic pushed a record-breaking number of customers to shop online, but only a small number of large, “essential business” retailers like Walmart and Target reaped benefits from this growth. According to S&P Global, more than 8,400 stores saw closures during COVID-19. The lockdowns of 2020 led to a long list of retailers filing for bankruptcy, including some unexpected names like Lord & Taylor, Neiman Marcus, Pier One, Brooks Brothers, and Guitar Center.

2021 is similarly predicted to be a rocky year in retail, and not all companies are likely to benefit from the 766 billion dollar growth projected by the National Retail Federation. After weeks of closures, mall retailers are falling victim to hard times, facing greater risk as they head into the holiday season.

Scott Stuart, CEO of the Turnaround Management Association, recently told CNBC: “In the natural cycle of retail, Christmas is normally [definitive].” With the increasing possibility of more shutdowns ahead, last-minute shoppers — who make up a significant chunk of holiday sales — will be less likely to run to the mall for a gift.

Now, more companies than ever before are trying to strengthen their relationship with in-store clients virtually. Gene Spiegelman, vice chairman and a principal of Rico Real Estate, says: “Brands go [out of business] because they lose the loyalty and the connection with their customer.”

At SmartGift, we understand the importance of customer loyalty and ecommerce innovations. We’re here to offer smart ecommerce solutions to your retail problems. Our Holiday Merchant Series aims to assist retailers with gifting strategies and ecommerce fulfillment by expanding their digital capabilities. Let’s begin by looking at the top five pain points consumers face today.

Let’s begin by looking at the top five pain points consumers face today.

High Return or Exchange Rates

In 2020, holiday merchandise returns hit a steep 57 billion dollars. Retailers, in turn, faced billions of dollars in processing returns over the holiday season. Online returns especially saw higher rates than in-store purchases — a figure that surged due to the pandemic, so much so that FedEx’s package volume increased by 19%.

Ecommerce statistics reflect that returns are a top concern for virtual shoppers. 70% of consumers are more likely to make a purchasing decision based on a retailer’s return policy, and about 92% of customers said they would shop again if returns were made easier.

SmartGift recognizes this very pain point, which is why we’ve created our Send as a Gift technology. By allowing the recipient to select their own size, shade, pattern, color, or fragrance before shipping and payment, SmartGift leaves each party in the transaction feeling included and satisfied, which reduces the frequency of returns and exchanges for merchants.

Unsustainable Ecommerce Practices

According to Vox, ecommerce packaging is at an all time high. Corrugated box shipments have increased dramatically since the onslaught of the pandemic in March, jumping by 9%. The market research firm Technavio estimates that the demand for filled-air products is projected to swell by $1.16 billion between 2020 and 2024 as a direct result of increased online sales.

It is worth noting that approximately 3 billion trees are reduced to pulp each year to produce 241 million tons of shipping cartons, cardboard mailers, and void-filled wrappers. Of these materials, less than 14% are recycled; instead, the majority of related waste is used for landfills or left to pollute waterways.

With our consumer gifting product, SmartGift helps shoppers gift wisely by granting them access to discover new products and brands, while also significantly decreasing the waste associated with returns and repackaging. Learn more about our sustainability practices here.

Non-Engaging Gifting Funnels

This holiday season, a whopping 41% of online customers are projected to purchase from a new retailer. Yet, many companies are still struggling to optimize their ecommerce funnel. In other words, they’re facing trouble turning leads into customers who push their ecommerce shopping carts to checkout. Today, surveys show that the average conversion rate of ecommerce websites is a shocking 2.86%.

Studies demonstrate that product selection and timely delivery are two factors that play an important role in purchase conversion. This is only further amplified over the holidays as gifts must be purchased and delivered quickly. This seems to add up — who wants a Christmas present on December 27th?

A SmartGift’s instant delivery through text, email, or any other communication channel allows for same-day gifting and captures post-shopping cut-off revenue that would otherwise lay untouched. SmartGift makes 10% of the total online revenue on the day of a peak holiday and 4% during peak holiday weeks. Plus, the instant delivery to a recipient’s messages and flexible payment options offer a seamless shopping experience.

Planning and execution can help online retailers shift their retail strategy over the holidays. At SmartGift, we help retail companies capitalize on holiday shopping with ecommerce analytics. The data behind every SmartGift is fed into the Gift Genome™ to provide you insights around demographics, peak gift occasions, product giftability, and key ecommerce metrics. This way, you’ll have full visibility into consumer behavior and conversion data.

Lack of Personalization Options

COVID-19 has seen a major shift in consumer gifting behavior. Online searches for personalized items and handmade goods have been increasing on platforms like Etsy and Pinterest. Data from 2020 shows that shoppers are actively seeking personal and thoughtful gifts to connect with their loved ones during the pandemic. Now, 62% of Americans want to receive a personal gift that comes straight from the heart; more than 50% of consumers are interested in buying customized gifts.

Ashley Houck, the founder of Gift Box Love Co., reports that business increased dramatically in March of 2020, with orders shooting up from 15-20 per day to about 200. “It got to the point where we were running all the time just to get orders out,” said Houck. “There are so many places you can buy things from online — Amazon or Target or whatever. But people want that connection.”

Houck’s ecommerce growth reflects the transition of shoppers during COVID-19, especially during the holiday season. Since long distance trips to see friends and family pose extreme risk, many festive traditions such as bakeoffs and holiday parties have been compromised.

Per CNBC, “In a time of social distancing, financial hardship and illness from COVID-19, online searches and purchasing patterns indicate that holiday shoppers are seeking meaningful gifts, from personalized items to handmade goods.”

At SmartGift, we understand and prize the importance of personalization. It is central to our consumer gift experience and we include recipients in the decision-making process so they can be part of a tailored experience. Furthermore, we let the recipients have the final say, customizing and swapping their gift until they’re fully satisfied with the product or service and they have crafted the perfect gift.

Low Consumer Confidence

According to data from the Forbes Advisor-Ipsos U.S. Consumer Confidence Weekly Tracker, nearly 56% of Americans felt less comfortable making household purchases in 2020 than they did six months ago. This level of discomfort was unmatched by the preceding years. Additionally, shoppers were reported to have spent 14% less over the five-day Thanksgiving shopping weekend than they did in 2019.

This low consumer confidence is a direct result of the pandemic and its related anxieties — but there are other factors, too. Forbes reports that we are “seeing a significant disconnect on apparel and footwear when it comes to online shopping preferences.” Only 16% of senior executives believe consumers are exclusively shopping for apparel online, compared to 31% of consumers who say they plan to.

Similarly in the footwear category, only 11% of executives believe consumers are planning to buy footwear online only, compared to 25% of consumers who reported they planned to.

In spite of growing ecommerce trends, digital retailers can’t rest easy. While the pandemic drew millions of new shoppers to online shopping, it also highlighted some core ecommerce paint points. According to Bloomberg, these are “clothes that don’t fit, returns that take ages to process, groceries that arrive nearly expired and tiresome customer service.”

When it comes to gifting, shoppers are less likely to buy clothes, shoes, and other products; they remain unsure about the specificity of their recipient’s size, preferred color, and other attributes. At this rate, strategists and executives worry many retailers won’t be able to retail customers when the pandemic ends and physical stores reopen.

It’s time for the retail industry to develop and finetune their ecommerce best practices. Retail businesses have access to a lot more data that lets them tailor their offerings to customer preferences. This is where SmartGift comes in — with every purchase of a SmartGift, recipients can confirm their preferred delivery address, item, size, color, or attribute specific to their catalog.

The ability to browse products and make attribute edits to items directly mirrors the in-store experience customers once enjoyed. Much like a shop salesperson, SmartGift helps customers and recipients find exactly the right product for them, lowering purchase inhibition.

Online shopping and retail business services may have boomed in 2020 but to really preserve their base of customers, it’s time for even the best ecommerce sites to take stock of what shoppers really want.

Here at SmartGift, our mission is simple: we want to make every gift a frictionless path to purchase. Together, let’s realize the potential of the gift market, reduce ecommerce gift returns, grow post shipping cut-off revenues, and increase customer satisfaction. It’s time to create the perfect gifting experience.

For more ecommerce ideas and solutions, check out the SmartGift platform or request a demo here.

SmartGift’s Holiday Merchant Series aims to assist retailers with top gifting problems like high return rates, unsustainable practices, and non-engaging gift funnels by expanding their virtual capabilities.