Consumers are still shopping but searching harder for bargains

This year there are specific challenges to the traditional festive gift-buying season.
Despite inflation and shortages, Black Friday sales are rising in countries free of lockdowns.
The bad news for retailers is that customer loyalty is waning in the search for bargains.

'Tis the season to go shopping. As a slew of holidays and festivals crowd the end of the calendar year, consumers tend to spend more. But 2021 poses challenges to traditional festive gift-buying trends.

This year, the flow of products into the shops and online retailers is being disrupted by widely publicized supply chain problems. In the United States, container ships are still queuing for access to the West Coast ports.

Meanwhile, inflation is on the rise and some countries are experiencing a shortage of truck drivers. In the European Union, new lockdowns in response to surging case numbers are also posing challenges to retailers.

But some shortages that were forecasted have either failed to materialize or have been less acute than feared, thanks largely to both retailers and shoppers starting their seasonal buying earlier than usual.

Black Friday, now a fixture in the retail calendar around the globe as well as its native US, has morphed from a single day of price reductions to a month-long festival of special offers. But the first of the annual shopping festivals to arrive in the calendar is China’s Singles’ Day.

Described by Forbes magazine as the biggest shopping event in the world, Singles’ Day - 11 November - saw record sales again this year.

Forbes reported that leading online retailers Alibaba and JD.com posted an increase in gross sales of 8.4% and 28.6% respectively compared to 2020.

Like Black Friday, the 11/11 shopping bonanza has grown into a month-long festival with pre-sales starting on 20 October.

A survey of 2,100 Black Friday shoppers in the US by McKinsey predicts that fourth quarter retail sales in the US will be 7% higher than 2020 and 9% above the level for 2019, before the pandemic started.

But the way people are choosing to buy Black Friday bargains is also changing. Loyalty to particular sales channels - physical shops versus online - is weakening and “omnichannel” shoppers are buying earlier than usual to avoid shortages, says McKinsey.

“They’re also more willing than ever to switch brands or retailers, especially when items are unavailable,” says the firm. The decline in brand and retailer loyalty means retailers need to do more to meet consumers’ demands despite supply and labour challenges.

McKinsey also found that social media is now the biggest single influence on US consumers’ holiday buying decisions. In the case of younger buyers, social media inspires 80% of their purchases.

What is the World Economic Forum doing about digital trade?

The Fourth Industrial Revolution – driven by rapid technological change and digitalization – has already had a profound impact on global trade, economic growth and social progress. Cross-border e-commerce has generated trillions of dollars in economic activity continues to accelerate and the ability of data to move across borders underpins new business models, boosting global GDP by 10% in the last decade alone.

Embracing Digital Trade

The application of emerging technologies in trade looks to increase efficiency and inclusivity in global trade by enabling more small and medium enterprises (SMEs) to repeat its benefits and by closing the economic gap between developed and developing countries.

However, digital trade barriers including outdated regulations and fragmented governance of emerging technologies could potentially hamper these gains. We are leading the charge to apply 4IR technologies to make international trade more inclusive and efficient, ranging from enabling e-commerce and digital payments to designing norms and trade policies around emerging technologies (‘TradeTech’).

In the UK, where consumers face rising taxes and inflation, the British Retail Consortium reported sales 1.3% higher for October than 12 months ago and said shoppers were returning to physical stores with online sales down on the month.

S&P Global reported in November that world supply chains remain disrupted by soaring demand and shortages of workers, which the firm said was increasing freight costs. However it added that companies had brought forward orders to cope with holiday shopping demand.

“Global non-financial corporates appear to be taking supply chain disruptions and soaring cost inflation in their stride,” said the firm in a 22 November update on global trade. Companies were able to pass on cost increases and S&P forecast that retailers’ 2021 profits would hit a record high.

The World Economic Forum’s Global Competitiveness Report 2020 foresaw the long-term impact of the pandemic on supply chains and called on business leaders and governments to lay the foundations for “strategic local resilience in supply chains”.