Which lessons from the holiday season 2021 can be applied to 2022?

We are now fast approaching the end of Q1 2022, but it’s been an unusual quarter because so many people opted to take more time off than usual over the Holiday season - it feels like 2022 has taken some time to get started. It certainly is going now though, so what are the lessons we should take from this unusual Holiday season into the rest of the year?

First, it’s worth noting why this Holiday season was so unusual. 2020 was almost entirely a wipeout. With Covid lockdowns and stay-at-home measures in place there was almost no Holiday season in 2020. Even families were discouraged from getting together back then. So, 2021 was always going to see some pent-up desire to enjoy the time off that was previously lost.

This feeling that it is now possible to start having fun again may also have influenced consumer spending. Some brands have certainly noticed. Walmart said that their Q4 2021 revenue exceeded $150 billion. It’s the first time ever that Walmart has broken that target in a single quarter and the Holiday season was their best ever.

Many retail brands have been struggling with supply chain issues related to the pandemic, but Walmart started thinking ahead at least a year back. They started chartering their own ships to bring in stock, they raised wages three times in the last year to acknowledge the contribution of the team, and they have been exploring how their retail network can be used to develop new revenue streams.

Another big issue this year has been the Holiday returns. They are now becoming overwhelming for some companies. Even in February, many retailers are still accepting unwanted gifts and clothing that is the wrong size. The National Retail Federation said that around $158 billion of gifts purchased in November and December will be returned - that’s a 56% increase in a year.

All these returns also cause a sustainability problem. For lower cost items - under about $25 - it usually costs more to process the return than to just discard it or pass it on to a discount warehouse. Analysts estimate that over 5 billion pounds of waste from returns is now being dumped into landfill every year. It’s not waste when the item is ordered and delivered, but if it can’t be sold again then it may end up just adding to this mountain of trash.

Based on all these experiences, I believe there are a few key lessons for retailers that they can build into their strategy for 2022 and plans for the Holiday season this year:

 

• Advising customers to shop earlier worked. By spreading the Holliday season over a couple of months pressure was reduced for retail companies and shoppers.
• Managing returns is becoming critical. Brands need to explore how they can continue to offer flexibility while also discouraging deliberate returns - like customers ordering five items and only ever intending to buy one.
• Sustainability will be a differentiator. Leading on from the issue over returns, customers are paying more attention to the circular economy and some younger consumers are now focused more on the re-use of clothes - rather than always buying new. Be aware of these trends and improve your supply chain.
• Customer service is critical. It’s always been true, but in recent times customer expectations have been elevated at the same time as the pandemic was making business processes more challenging.
• Omnichannel. Customers have become far more used to a strong blend of physical and e-commerce and options such as in-store or curbside pickup - all these options need to blend seamlessly.

2021 was a strong recovery from the very muted end-of-year period in 2020, but even though spending was up, there are still some important lessons for retailers to use when planning Q4 this year.

 

Published first on LinkedIn by Katrin Langley, March 2022.