If the headlines were to be believed, the 2022 Peak season was expected to be a low-spending affair by historical standards. There was no shortage of pundits predicting that consumers would respond to the cost-of-living crises by reducing online spend. However, some recently released Peak 2022 statistics from James and James Fulfilment contradict the forecasts by confirming the highest volume of orders they’ve ever experienced.
So, what can we take from this? For those businesses that are getting it right, consumers are spending more, not less. Thanks to smart decision making, enhanced business insights and a willingness to adapt, intelligent retailers have been able to run highly effective campaigns and to deliver a satisfying customer experience with value at the front and centre.
From conscious purchasing to sustainability concerns, James Hyde, Founder and Chief Product Officer, James and James Fulfilment, shares his insights from Peak 2022 and offers predictions about the changes in consumer spending patterns.
Consumers across Europe were expected to reduce non-essential Christmas and Black Friday spending by £4.4 billion this year. The Metapack report cited a combination of the cost-of-living crisis, rising prices due to high inflation and a lack of consumer confidence as likely to squeeze customer spend. Almost two thirds (64%) of consumers expressed concern over their spending and over 70% of those interviewed expected to cut their non-food Christmas spending in some or all areas.
The reality for many retailers has been very different. While some retailers were hopeful of achieving marginal growth at best, in fact Black Friday spending increased in the US by 14% online, with VISA reporting retail sales up by 12%.
The James and James Fulfilment order profile for over 400 online businesses for the period 1st October to 31st December over the last five years confirms this; Black Friday was the largest yet, both in the UK and USA for overall sales. The uplift on Black Friday itself was 32% higher compared to the previous four years. Proportionally, the week running up to black Friday was 20% higher in volume than the previous year.
These figures underline the evolution in Peak Season trading in recent years. Cyber Monday, for example, has become ever more popular. Sales on Cyber Monday almost exceeded Black Friday for the first time in 2022, with only 2% less sales in the UK than Black Friday and proportionally up a massive 62% up on the preceding years.
Retailers are now able to utilise far more intelligence about both sales and inventory to maximise the peak season opportunity. This has encouraged many to spread Black Friday deals over a longer period of time, both to reduce the stress on the delivery network and extend the chance to engage with customers. In the USA, Black Friday volumes grew earlier to capitalise on the Thanksgiving break, peaking even higher than the UK briefly, at 38% up on previous years.
Given the context of the predicted decline in sales, what is driving this consumer confidence? While VISA’s growth figures confounded expectations, these online retailers have blown the pundits away. These high growth retailers typically have a strong social following. They have opted for a business model that is set up to scale and can run large campaigns quickly. Confidence to invest in and manage these bigger events has clearly paid off this peak season.
While consumers are still spending, it is clear that they are far more conscious about value. The cost- of-living crisis seems to have galvanised consumers to be on the lookout for the best deals and they have actively looked to make the most of Black Friday and Cyber Monday.
The indications are clear: rather than reducing spend, consumers are changing their spending habits. They are opting to purchase more practical items and thoughtful gifts that have a real use, for example. There are also clear signs of a growth in environmentally conscious purchases, reflecting the growing demand for products with sustainability claims, especially amongst Generation Z.
What does this mean for retailers looking to retain customers during 2023, when the cost-of-living crisis will continue to bite? With this shift in spending habits, it will be important to manage product portfolios – and engage effectively with consumers via social media. With consumers unwilling to sacrifice ethical values for a good deal, growing numbers of retailers are also looking for carbon offset delivery services.
Sales dropped back towards more usual levels in the run up to Christmas, however the trend towards buying ahead is expected to be repeated for the New Year sales. Customers are actively engaging with social media campaigns to gain access to early offers. They are also increasingly sophisticated, with high expectations of both the quality of experience and the environmental commitments of retailers.
While the overall outlook for 2023 is still challenging, as this peak season’s figures confirm, retailers offering consumers the right product, at the right price, with the right experience will be well placed to confound predictions and enjoy a successful year.