New shopping trends: could this be the end of ‘shop ‘till you drop?’

Despite the roller coaster of vaccine distribution and a new administration, it certainly feels good

Despite the roller coaster of vaccine distribution and a new administration, it certainly feels good to see 2020 in the rearview mirror. It goes without saying that last year was anything but a normal year. In addition to the devastation that the COVID-19 pandemic caused, not to mention its unprecedented impact on global economic activity, the past year saw a number of major changes in consumer shopping patterns. And that affects this industry.

Now that the holiday shopping season figures are out and ready to be analyzed, we can take a long look at the patterns to determine what habits and changes are expected to continue to play out for the rest of year, particularly as it relates to e-commerce.

The online shopping boom is here to stay
Social distancing restrictions kept most consumers home and away from stores and other businesses in 2020, pushing many new customers into the online channel. That pattern was clearly evident during the 2020 holiday season; the e-commerce share of holiday shopping jumped from just over 13{409126f2c1f09c9e510a010c163a4bce2c3ccfc4019bdf864d6cb2d5d8752f38} in the prior year to nearly 20{409126f2c1f09c9e510a010c163a4bce2c3ccfc4019bdf864d6cb2d5d8752f38}, according to an early report from Mastercard.While the distribution of vaccines offers retailers the hope that consumers will finally begin returning to stores in force in 2021, that process will likely take months if not most of the year. Even then, a recent survey from McKinsey found a 40{409126f2c1f09c9e510a010c163a4bce2c3ccfc4019bdf864d6cb2d5d8752f38} increase in consumer intent to purchase online even after the COVID-19 crisis ends.

Seasonal shopping spikes will be longer and flatter
Withe-commerce penetrationskyrocketing during 2020 and retailers offering earlier sales and discounts, the traditional Black Friday/Cyber Monday holiday shopping spike was lower as sales started as early as October, and then were more evenly distributed through November and December. In the past, we observed 20{409126f2c1f09c9e510a010c163a4bce2c3ccfc4019bdf864d6cb2d5d8752f38} YoY growth in Black Friday volumes. Because of the inflated spending in Q2 and Q3, we expected lower YoY growth, and in fact saw 15{409126f2c1f09c9e510a010c163a4bce2c3ccfc4019bdf864d6cb2d5d8752f38} YoY growth in Black Friday volumes this year. As many consumers are now conditioned to shop online earlier, that pattern is likely to continue.

Smaller retailers embracing online channels will limit risk signals
Even as many consumers tried to “shop local” over the holidays in order to support hard-hit small and independent businesses, in-person shopping is likely to be much slower for months to come, so smaller retailers need additional ways to reach their customers. For some, this means trying out new channels, such as Facebook or Instagram, where they can post their entire inventory, making it easier for customers to shop in the apps they already use. However, since these channels don’t always get the same data and risk signals as an e-commerce site, smaller retailers will have to look at their data carefully to determine where risk exists.

New customer acquisition increases risk for merchants
Ordinarily, consumers like to shop with merchants who they know and trust, and that’s especially true during major holidays and events like Back to School. But during the pandemic, many people shifted their shopping behaviors to include new digital shopping methods or new retailers. In fact, 56{409126f2c1f09c9e510a010c163a4bce2c3ccfc4019bdf864d6cb2d5d8752f38} of consumers tried a new retailer during the pandemic, according to customer experience platform Narvar. While this period is usually considered “low risk” with the most established and least risky customers transacting, the amount of new customers created much higher risk for retailers in 2020 compared to previous years. With no prior history to inform fraud risk assessments, there is a higher likelihood that new customers will be exposed to friction in the shopping experience, creating a bad first impression for merchants. This could have an effect on customer satisfaction and loyalty.

Buy-online, pick-up-in-store (BOPIS) is a strategic advantage
While consumers flocked to the online channel during the holiday shopping season, many opted to pick up purchases themselves rather than paying for shipping or relying on shippers that struggled to guarantee the delivery of packages in time for the holidays. A survey from Adobe found that in-store and curbside pickup surged by more than 52{409126f2c1f09c9e510a010c163a4bce2c3ccfc4019bdf864d6cb2d5d8752f38} on Black Friday 2020 vs. the previous year. Again, until such a time comes when consumers feel safe to return to the malls and major department stores and retailers in large numbers, this is a trend that will continue. And since BOPIS interactions are typically card-not-present transactions, merchants that do not offer a seamless experience from online purchases to in-store pickup will be at a disadvantage versus those that do.

Despite the challenges facing both consumers and merchants, the 2020 holiday shopping season proved to be mostly successful, with sales up 3{409126f2c1f09c9e510a010c163a4bce2c3ccfc4019bdf864d6cb2d5d8752f38} over an expanded 75-day holiday shopping season according to data from Mastercard. For merchants, there are several takeaways that will help them throughout this year. The demand for entirely digital shopping experiences or those paired with safe in-store options will continue to present challenges for merchants looking to minimize both fraud risk and friction for new and returning customers. With consumers indicating both a willingness to try new retailers and shopping methods (and the intention to continue those behaviors), understanding potential new risk signals this year is essential to creating seamless experiences and building customer loyalty.