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Report: Consumers Will Spend 51% of Holiday Dollars Online — Really?

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Consulting firm Deloitte is out with its annually “holiday retail survey,” which polled roughly 5,000 consumers on a range of shopping related topics. The finding that’s getting considerable attention is the prediction that consumers will spend more online than in stores this year:

  • Expectations of online spending (51% of budget) exceed those of in-store spending (42%) for the first time, after reaching parity last year
  • Respondents report that online outperforms in-store along critical customer satisfaction dimensions of search and product quality and variety

This is based on consumer sentiment, which is a reasonable but not entirely accurate predictor of behavior. On one level there’s nothing in this report that’s new or news.

But let’s say the 51% prediction is generally correct, that would mean about $510 billion would be spent online this holiday season — out of more than $5 trillion in total US retail sales. That in turn would mean online sales reached about 10 percent of total US retail.

US Government Retail Spending Data

E-commerce

Last year (Q4 2016) e-commerce was about 9.4% of total retail sales. So 10% would be a modest increase, though it would be meaningful in terms of real dollars.

What’s more accurate and important (than the 51% prediction) is the fact that consumers appreciate the convenience, inventory and shipping options available online vs. stores. Store experiences have in many cases not kept pace with digital. This is something some retailers are now trying to change.

The Deloitte survey analysis (and those running with it) makes the common mistake of juxtaposing online and offline as entirely distinct and opposing categories and oversimplifying consumer shopping accordingly. It’s “and” not “or” in most cases — except for Amazon.

A majority of searches are now on mobile devices and a higher percentage of those lookups carry local intent. Google has also said that “where to buy” searches have grown 85% in the past two years. These behavioral data support the “and thesis.” Therefore it’s much more accurate to say that consumers will be using digital tools and stores to make purchase decisions this holiday season.

Large numbers of people will buy products online but many of the top e-commerce destinations will also be branded brick-and-mortar retailers (e.g., Target, Best Buy, Walmart, Macy’s, Kohls, etc.). Stores support e-commerce by giving consumers confidence to buy and the option to return online purchases locally. The danger for many retailers is leakage: someone shops in a store to investigate a product but buys elsewhere online.

Finally, for all the positive attributes of certain online shopping destinations, there are many that simply don’t work well and are painful to use, especially on a phone. Traditional retailers with high-quality digital assets have a considerable advantage over most online only retailers — except Amazon, which represents more than 40% of online commerce.

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