Will the holidays be merry and bright for retailers?
As U.S. merchants prepare for what they hope will be a profitable holiday season, you might be unsure what to expect. Will there be significant retail traffic, or will customers stay home and shop online for their gifts? Since the onset of the COVID-19 pandemic, many consumer behaviors have changed. These behaviors are likely to carry over into the way people shop for the holidays.
The economy isn’t deterring consumers.
Although most states have reopened the majority of businesses, a significant number of people are still out of work. The national unemployment rate for September was 7.9 percent, which is an improvement from recent months but significantly worse than 3.6 percent in January before the pandemic.1 Although, consumer discretionary spending has fallen since the pandemic, there is hope for the holidays. Consumers expect to spend between $1,000 – a drop of just $50 from last year – up to $1,400 on gifts, food and decorations this year.2,3
The holidays could still be happy for retailers.
There is no consensus on how much will be spent in the retail sector this year; COVID-19 has made predictions difficult. Deloitte, one of the few willing to make a prediction for the season, projects retail sales will rise between 1 and 1.5 percent over 2019 holiday sales.4
According to Mastercard SpendingPulse, U.S. retail sales (excluding autos) grew 3.4 percent for the 2019 holiday season to about $879 billion.5 For the 2018
holiday season, retail sales grew 5.1 percent to $850 billion, which at the time was the strongest growth in six years. Although Mastercard doesn’t forecast
2020 sales, applying Deloitte’s 1.5 percent growth estimate for 2020 provides a retail sales forecast of $892 billion for the 2020 holiday season.
Online retailers will bag up more sales.
A survey of consumers shows that 71% plan to do most of their holiday shopping online this season.6 Online shopping offers convenience, time savings and a contactless shopping experience – which is important during the pandemic. Deloitte estimates e-commerce holiday retail sales will grow between 25%-35% from November through January, totaling up to $196 billion.7 So, merchants need to ensure their marketing drives as much online traffic as possible.
Will that be cash or card?
Holiday shoppers say they plan to pay for their purchases with debit cards, credit cards and cash (including checks), but the mix of payments is shifting according to Creditcards.com.8 Payments by debit card are the most popular and have been growing steadily (46% for 2020 vs. 42% in 2019).
A word about younger shoppers: Generation Z and Millennials prefer debit card payments. A recent Deloitte survey of consumer payments reports that 52% of Gen Z and 41% of Millennials prefer to pay using debit cards.9
Credit card payments are the next most popular means and are holding steady (39% for 2020 vs. 40% in 2019). Payments by cash or check are falling and are likely to drop even more this year (15% for 2020 vs. 18% in 2019) due to the increase in online shopping activity.
Shoppers want it their way when paying.
It doesn’t matter whether they are in the store or online, strive to provide a seamless, pleasant experience for shoppers in every channel. What do consumers expect?
Speedy payment processing: No one wants to wait in line or spend too much time on an online purchase. Make payment processing fast and customers will reward your efforts. Eighty percent of consumers said they are more likely to return to a retailer with a quick payment process.10
Multiple ways to pay: While debit cards are the preferred payment method, consumers have many options. Among them, PayPal is the next most popular at 63% and store credit cards follow at 40%.11 Businesses should be prepared to accept a range of payments.
Contactless acceptance: COVID-19 has helped ignite growth in contactless payments. Fifty-one percent of U.S. consumers are now using tap-and-go credit cards, mobile wallets or some form of contactless payments.12
Secure transactions: Payments fraud is prevalent, and consumers know it. Eighty-two percent said they are “somewhat” or “extremely” concerned about the security of their account or personal information.13 Consumers believe merchants have a responsibility to protect their payment data. Seventy-nine percent also expect their financial institutions to take measures to secure their information.14The Payment Card Industry (PCI) has explicit requirements for how merchants and processors are to manage card data. Credit cards are considered the most secure online payment method. Consumers also believe PayPal and debit cards are secure.15
It’s important to ask customers about their payment preferences and offer a variety of options to address their needs. Consult with your payment processor to determine which options are best for your business. This will make it easier to attract more customers and improve the customer experience.
Prepare for shoppers with care.
With the expectation that online shopping will be more important this year, businesses should be prepared for seamless payments with a range of options. But don’t forget shoppers who visit in person. Upgrading to terminals that accept contactless payments not only makes collection easier in stores, but also increases customer satisfaction – especially during a time when consumers are sensitive about hygiene.
Businesses should also strengthen their digital presence and capabilities. Even basic features, like a site that loads quickly and has complete product descriptions, can be a hit with consumers who are always looking to save time. Other practical tips to attract online holiday shoppers include:
Provide home delivery and free shipping. Sixty-two percent of shoppers ranked direct delivery as a top reason to buy online.16 Sixty percent don’t want to pay for shipping.17
Offer enticing deals. Shoppers are searching for retailers with great bargains (61%).18
Make it easy to compare prices since shoppers are looking for the best deal.
Secure every transaction to protect yourself from theft, along with the costs and burdens that come from lack of PCI compliance.
Because of the pandemic, this year has been much more challenging than others. Many merchants temporarily closed their businesses and have been patiently waiting to reopen. A crucial time, the holidays could bring glad tidings to merchants who offer the right mix of convenience, payment options, and security.
Contact your Relationship Manager to learn more about how Synovus Merchant Services can help you prepare for holiday shoppers.
Important disclosure information
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
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