The 2023 holiday season is shaping up to be a mixed (gift) bag of discounts, savvy spending, and shifts in consumer behavior. As the retail industry contends with last year's lingering economic shadows, consumers in the US and Europe are grappling with the challenges of inflation and the climbing costs of everyday life. European consumers have become vigilant bargain hunters, downtrading and spending cautiously to stretch their wallets. Meanwhile, in the US, consumers are displaying mixed messages when it comes to their perspective on the economy and readiness to splurge.
As the thrifty consumer seems here to stay, 2023's holiday season marketing will be built around efforts by brands to differentiate their offerings and meet consumer priorities for value and convenience. In this challenging environment, it’s more critical than ever for brands to strengthen their connection with customers in the face of some difficult headwinds. To help navigate through the upcoming holiday marketing period, we’ve put together some key insights into the trends that will impact consumer behavior and offer up some holiday marketing strategies to help empower brands during The Most Wonderful Time Of The Year!
As we move further into 2023, the rollercoaster of consumer behavior continues, with shoppers embracing budget-friendly brands and hunting for deals while still indulging in occasional spending sprees.
On a brighter note, McKinsey reports that economic optimism has been on the rise since last summer as inflation eased, with 46% of Gen Z and 27% of all consumers expressing a more positive outlook on the economy.
As we emerge from a tumultuous 2022, European retailers are bracing for another bumpy ride in 2023, grappling with the steepest rise in business costs in recent memory. Price hikes remain the top concern for 58% of European consumers, who are already adapting their shopping habits by exploring private-label brands, shifting to discount stores, or pivoting to online shopping. There's a silver lining, though: inflation is anticipated to ease throughout 2023, potentially sparking a boost in consumer confidence.
As we look ahead to 2023, despite glimmers of optimism, discounts will still reign supreme in the holiday retail landscape. With consumers showing increased price sensitivity compared to pre-pandemic years, a relentless quest for value will continue to be a key trend for their spending.
With a staggering 81% of all consumers now choosing to research and browse across multiple channels before making their purchases, we can expect the 2023 holiday retail period to adapt to an increasingly omnichannel approach throughout the entire customer buying journey. The demand for convenient ordering and fulfillment models is here to stay, as consumers expect a more cohesive shopping experience across all digital and physical touchpoints.
Despite economic uncertainties casting a shadow over retail, McKinsey reveals that American consumers remain enthusiastic about the 2023 holiday season. Across the pond in Europe, consumer confidence is rising, yet price sensitivity and bargain hunting will dominate the festive period. Faced with intensified competition for wallet share, brands must have clear strategies to navigate the extended, promotion-fueled holiday marketing season this year. With that in mind, for marketers, ‘TIS THE SEASON TO….
Get Granular and Segment Strategically Along the Way:
As the big sales roll on, expand customer datasets and pinpoint preferred channels, shopping days, and times for shoppers to enhance holiday marketing campaigns and channel strategies. Utilize CRM and marketing automation tools to dynamically segment customers to better understand and target them in future holiday promotions.
Personalize Communications To Connect and Convert:
Brands and retailers can utilize their collected customer data to ease holiday shopping stress with tailor-made promotions. By utilizing advanced analytics and generative AI, highly-targeted recommendations that tap into individual purchase histories, and current basket selections can be offered to consumers. A Forrester survey indicates that almost two-thirds of US adults value such personalized product suggestions from companies.
Optimize for Mobile:
Most customers are not only browsing, but checking out on their phones, too. Mobile accounted for 60% of 2022’s Black Friday sales in the US, and with mobile becoming the preferred shopping channel for consumers, a mobile-first approach is now more critical than ever.
Enable Social Shopping:
43% of Americans believe buying items online straight from social media is convenient and half of Gen Zers choose to buy via social. Instagram is the most popular, with 22% purchasing on the platform, but TikTok is the primary reason social commerce is expected to grow by 29.8% in 2023. Make a holiday catalog shippable via social to tap into this trend.
Consider Shoppable Livestreaming:
2023 can expect to see an uptick in shoppable live streaming, where audiences can purchase directly from a live video feed.
Tap Digital OOH:
Brands are increasingly investing in programmatic, contextual DOOH campaigns because they can be quickly deployed and scaled up or down based on holiday season marketing needs. Audiences can easily be targeted on DOOH screens in a variety of environments and offered QR codes, URLs, or other call-to-action strategies to drive engagement on other channels.
Add Sparkle With Holiday-themed Activations:
The sights and sounds of the holiday season are like no other, and shoppers flock to retail outlets to be transported and wowed with lavish displays and activations. A prime example is Harrods’ annual ‘Christmas World’ which provides holiday buyers a festive wonderland to walk within, with in-store events and opulent window displays.
Embrace Experiential Retail For The Season:
Retailers are embracing the movement toward more ‘Phygital’ retail settings, marrying physical spaces with digital elements like AR and VR to surprise and delight customers. For online shopping, these tools can enable customers to visualize holiday products in their spaces, virtually try on clothes, or even experiment with makeup, potentially helping to reduce return rates.
Venture Into The Metaverse:
The metaverse provides retailers with unique holiday season marketing opportunities to deliver memorable experiences and personalized engagement for tech-savvy shoppers. Luxury brands are exploring these new platforms to allow customers to “live the brand,” and build loyal communities with the use of Web3 technology and NFTs.
Use Smart Inventory Management:
During high-volume holiday retail periods, accuracy and speed are vital when it comes to restocking inventory to keep up with sales. AI is increasingly being plugged into ordering systems to automatically analyze sales data during peak shopping moments to adjust for increased demand, and to identify shortages to help keep aisles stocked.
Facilitate One-click and Buy Now Pay Later (BNPL) Payments:
One-click online payments and BNPL options are increasingly becoming the norm, as BNPL services saw a 17% increase YoY from October to December in 2022, and more than a third of Cyber Weekend shoppers indicated they would use BNPL to finance their holiday shopping. The introduction of Apple Pay Later is likely to expand the adoption of BNPL in physical retail.
Accommodate Buy-Online-Pick-Up-In-Store (BOPIS) fulfillment:
BOPIS is becoming increasingly popular among consumers and has been adopted by 85% of US retailers. In the final days leading up to Christmas, U.S. companies offering BOPIS grew their online sales nearly seven times faster than those without this fulfillment option.
Make the Return Process Painless:
The continued dominance of online shopping means retailers should prepare for a wave of January returns-- especially among gift buyers. According to the NRF, retailers expect 17.8 % of merchandise sold during the holiday retail season to be returned. Interestingly enough, 92 % of consumers will buy again from a brand if their returns process is easy, so making the return process seamless is crucial for keeping customers on board.
This holiday marketing season, brands should reward loyalty strategically, in some of the following ways:
Provide Early Access To VIP Members:
Allowing members special access to sales and curated experiences help convince them to make purchases ahead of the holidays. Members will feel appreciated because they will be able to get a good deal before everyone else.
Offer Exclusive, Member-Only Deals:
Lure in membership to loyalty programs via exclusive sales that require a customer to be/become a loyalty member. Ace Hardware, Dick’s Sporting Goods, Kohl’s, LEGO, and PetSmart, for example, offered exclusive discounts or bonus-point promotions for their loyalty members last year (e.g., double points on purchases). Others, including Nike, offered free shipping on all orders but only for their loyalty members.
Make Gift/Cash Cards Accessible For Points:
Gift cards can serve as a means of supporting cash-strapped consumers looking to make the most of loyalty points or rewards. By linking gift cards to loyalty points, customers can save
on essential items like groceries and fuel. Among young Europeans, half prefer money or gift cards for the holidays – a sentiment particularly strong in Germany. To connect with these consumers, brands should prioritize promoting gift cards, aligning with young shoppers' need for pragmatic support during crunch times.
Gamify With Giveaways And Sweepstakes:
Gamification is a low-cost way to engage members and generate excitement for upcoming sales events and can run the gamut from hashtag contests to festive quizzes to purchase-based sweepstakes.
Experiential Rewards:
The homebody economy is softening in 2023, and people are heading out more to eat in restaurants and spend on entertainment outside the home. Loyalty marketers can leverage this trend by offering reward experiences such as concert tickets, travel packages, or gift certificates for spa treatments, enhancing the emotional connection associated with gift-giving.
Campaign with a Purpose:
By championing charitable endeavors as part of the holiday season, brands can encourage shoppers to feel positive about their purchases – every little bit helps!
Foster Diversity and Inclusivity:
Major brands are adapting to mounting public pressure to be more inclusive and diverse -- not just in their holiday marketing campaigns, but in their operations.
Emphasize Sustainability:
Environmental concerns increasingly shape consumer choices, even during the holidays. The 2022 Deloitte Holiday Survey reveals that 39% of gift-givers plan to select sustainable presents, while 41% favor retailers with eco-friendly practices. As the holiday retail season, known as 'The Most Wasteful Time of The Year,' sees a surge in packaging waste, especially from online shopping, brands can set themselves apart by providing environmentally conscious packaging solutions and contributing to waste reduction, and also by promoting greening efforts from customers.
As we enter the 2023 holiday season, businesses face the challenges of rising costs, margin pressures, and consumer downtrading. In response, effective holiday marketing strategies become crucial for not just boosting short-term sales, but also nurturing customer loyalty that drives long-term success far beyond 2023. To stay ahead in this competitive space, retailers and brands need to captivate customers with seamless shopping experiences that are intuitive, streamlined, and swift. The most promising opportunities lie in harmoniously blending physical and digital channels, crafting AI and data-driven customer interactions, and fostering brand loyalty through personalized and interconnected customer journeys. By embracing these strategies, brands, and retailers can adeptly sail through the ever-changing holiday season marketing landscape and 'sleigh' the competition!
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