All eyes on Peak

ALMOST TWO years into the Covid-19 pandemic, and the world has seen unimaginable change—in part from the pandemic itself, but equally the result of a series of global events. Amid the domination of coronavirus, the repercussions of Brexit, and freight problems in Asia, the world of shipping and distribution has endured enormous amounts of pressure to deliver, having a knock-on effect on eCommerce. And as we approach Black Friday (at the time of writing), the impact may be felt keenly. 

Current trends

We may already be seeing some signs of this in the changes in conversion rate (the percentage of retail site visitors who complete a purchase), as well as the amount of money people are willing to spend in one purchase. Chart I shows the difference in conversion rate between 2020 and 2021 for each month of the year.

Conversion rates have dropped by as much as 25% in recent months, one reason for which could be customers not finding what they’re searching for as a result of supply chain issues.

CHART I

However, on the plus side, there’s been an increase in the average basket volume, see Chart II, which was up by 60% in June and July, meaning shoppers are spending more in one shop.

This may be due to less reliance on discounting as a means to drive sales. This is likely related to those stock shortages, meaning buyers might be more willing to pay full price for an item when they find what they need. 

However, regardless of this past year’s very strong online growth, it’s important to look to the future in order to make some predictions about what could be expected over the coming months leading into 2022.

What lies ahead?

At a recent IMRG event Matt Walsh, data and retail director at IMRG, said that ‘in order to understand the future, it’s pretty useful to look into the past to give you some clues.’ Based on data from IMRG’s index of 200 retailers, some predictions and analysis can be expected regarding the future of eCommerce sales for the rest of this year. 

The main event on everybody’s mind is Black Friday, as it’s not long until retailers will be releasing their extended sales and discounts ahead of the actual day — the biggest day of the year for many retailers and buyers alike. Trends from previous years show that retailers have been marketing their Black Friday events earlier and earlier, across longer spans of time (this trend spiked in 2020). Two weeks ago, we polled 60 top retailers to indicate when they’ll be starting their campaign, with the most popular answer being the third week of November (35%). We’ve predicted to see a further extension of the Black Friday period in 2021, as most retailers are expected to launch campaigns far in advance of the day.

CHART II

If our poll proves to be accurate, that would mean an even greater share moving into the weeks before Black Friday week.

In conjunction with longer sales, another expectation is that due to the supply chain issues and shortages, retailers may be forced to push sales on the more niche items of stock which they do have. 

Other trends expected within online retail include a continuation of the higher basket checkout prices that have been seen throughout the last year. In addition, the actual overall year-on-year growth in Black Friday sales will probably be negative, but that is due to the huge spike in 2020 and does not mean volumes are low. Research shows that 4/5ths of shoppers said they’re ready to spend more money on Christmas this year, than any year previously. After the UK Prime Minister’s U-turn on the Christmas period in 2020, people may well be ramped up and ready to get merry with their spending.

What in the world?

While it can’t be said for sure exactly what is responsible for each blockage in the supply chain, there are many factors that will have taken their toll on the ease of distribution around the world. For example, it is thought that the fallout from the Suez Canal blockage and delays will continue to ripple through the system for up to a year after the container was cleared. In some cases it’s now ten times the usual price to get goods on a shipping container.

The Brexit vote occurred back in the summer of 2016, but the implementation of some policy and trade deals are only coming into effect now. With negotiations between the UK and Europe still underway, online ‘supermarket shelves’ have been left looking a little empty – a real potential problem for Christmas trade. 

Another predominant issue within shipping comes from a lack of delivery drivers. Currently, HGV drivers are down by a third and seasonal workers are hard to find, with 1 million unfilled positions in the UK alone. Amid the chaos, retailers and suppliers are struggling to keep up, as one retailer commented that it took them six months to fill one vacancy in their warehouse.

On a positive note, despite current uncertainty, retailers are more prepared than ever for high volumes of traffic. Gone are the days of Black Friday website crashes (hopefully!), and retailers are ready to meet surges in demand when it comes to tech.

The current climate 

Unsurprisingly, conversion rates are highest on the day of Black Friday itself, due to the pressure customers feel to get the best deals on the day. Retailers have suggested that ease of purchase will be key to making the sales, and having a strategy to engage with the returning customer over time, instead of bombarding them generically straight away. Early campaigns and different campaigns from what may have been intended several months ago are likely to define the character of Black Friday 2021.

So, what can we conclude about the relationship between handling, shipping and distribution, and eCommerce? With current stock issues and lower conversion rates, customers are buying the products they want, when and where they can find them, or compromising on their choices. It’s been the most challenging 18 months anyone in retail can remember, and it almost certainly won’t all be cleared up before peak trading starts in earnest. 

Andy Mulcahy, Strategy and Insight Director, IMRG

For more information, visit www.imrg.org