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Holiday Customer Demand has Changed: How Small Businesses Can Meet People Where They Are

December 9th, 2020Small Business Resources

Smart business leaders are taking note as consumer behavior shifts to satisfy the market’s newest wants and needs — especially now that the holidays are here.

Nearly 60% of consumers say they anticipate their holiday plans to change this year, and another 15% say they’re not yet sure what will happen, according to Progressive Grocer. Analysts at McKinsey say the number of consumers changing holiday plans is closer to 80%, indicating a huge shift in how the country will celebrate this season.

Source: Progressive Grocer

Businesses must apply the lessons we’ve learned (about how 2020 has changed customer demand) to this year’s holiday season. The takeaways are unique foresights that let you proactively meet people where they are — so the holiday season can still be special for consumers and small businesses alike.

Customer demand change #1: Deliveries will outperform gift exchanges

For centuries, the celebrated gift exchange has been a way for all groups to observe the season and honor one another. Sports teams, family members, circles of friends, student groups, office workers, and more have all enjoyed this ceremonial ritual — until now. In 2020, customer demand indicates that deliveries of gifts will surge ahead of the traditional in-person exchanges.

Do we mean that people will spend less on gifts? Actually, no. Experts at PYMNTS and the Financial Times report that, yes, retailers did indeed cut inventory in Q1 and Q2 of 2020 to compensate for an anticipated dip in consumer spending. However, the rebound in Q3 consumer spending surprised businesses, many of whom now find themselves unprepared.

Customer demand still shows we’re honoring one another with presents, gift cards, and even stocking stuffers. In fact, data compiled by Statista shows that this year’s growth of Christmas holiday shopping sales has already surpassed five of the last eight years:

Source: Statista

We know that new consumer behavior almost always starts with digital content consumption: People search online for information to determine the best course, especially when mulling over purchases. And because many people are choosing safety, more of us plan to shop online this year than any other way:

Source: Statista

Prepare by nailing your deliveries and learning mass reverse logistics now

Your takeaway in all this is not just to be prepared for the potential onslaught of sales — that you (hopefully) already know. What business owners must do now is revamp their DIY fulfillment processes or take the leap and outsource this aspect of the business.

This consumer behavior shift means that the vast majority of this year’s gifts will be shipped instead of hand-delivered. FedEx and UPS are already suffering delivery-van shortages under the weight of the holiday package-sending frenzy.

This new, touchless tradition is a rare opportunity for businesses to steal market share. We’re all looking at a unique chance to connect with new shoppers who will prioritize their loyalty again once they’ve established new shopping routines. Because for now, brand loyalty has taken a back seat to safety and compliance, and as a result, delivery service is an expectation. That means that consumers will try new brands now for their delivery service. Then, if those new brands ace the whole experience, customers may never return to their former favorite brands.

Source: Think with Google

Again, you can take one of two routes here (no pun intended): you can rework your own fulfillment processes, or you can invest in a third-party logistics (3PL) vendor to handle your shipping and delivery ops.

If you go for an in-house logistics operation, take inspiration from Panera Bread, a company that credits its in-house delivery machine with double-digit growth and customer demand so hot, they had to hire 20,000 more workers between 2017 and 2019. If you’re still interested, then read all about this fulfillment method’s pro’s and cons, best practices, and how-to advice from an expert voice like the U.S. Chamber of Commerce.

A common misconception about hiring a 3PL vendor is that with these partners, you needn’t bother yourself knowing all the details. While this is partly true, how else will you negotiate a fair cost-value trade and ensure your customers (and margins) stay happy? No, for any small business to grow, it’s imperative that the decision-makers learn the ins and outs of 3PL operations.

Whatever method you choose, give it your best. Your business depends on it. Researchers at the delivery experience solutions provider Convey have confirmed this trend, stating, “[89% of consumers] say that on-time delivery is important to the overall online shopping experience — up from 84% who said the same last year.”

Don’t neglect reverse logistics

New and improved fulfillment processes — like what we just described — can be exciting. But don’t dismiss the opportunity to build a loyal customer base this year by outperforming your competitors in the area of returns and exchanges. According to experts at CBRE, the return rate for e-commerce purchases is between 15% and 30%, much higher than transactions made in brick-and-mortar stores.

Source: CBRE

If you need a step-by-step tutorial to learn this new skill, start your research today. Merchant services aggregator Square offers a full guide on handling postholiday e-commerce returns, which is a great place to start.

Finally, be sure your bookkeeping processes are ready for the multiple, often complicated transactions of reverse logistics. To prepare your processes, start by getting a free trial of the best tool to capture and reconcile financial tractions: Neat. The Neat app grabs files, documents, and images of your transactions and automatically organizes the data from each into a searchable database for effortless matching, reconciling, and recalling. This is especially handy during this busy season and the days (of returns and exchanges) ahead. Best of all, your new, tidy books will also mean you’re more ready for tax time.

Customer demand change #2: First-time holiday “hosts” will need support

People will compensate for fewer in-person celebrations (community, work, school, sports, and hobby group parties) this year. Specifically, people will be making up for the missed fun and comforts of traditional family gatherings.

For the sake of safety and smarts, many Gen Xers, millennials, and even Gen Zers will forgo gathering with elderly family members this year and instead organize their own, smaller, celebration. Many will interact with only the family members encountered daily — also known as support bubbles.

Naturally, they’ll want entertaining best practices — even if they’re organizing a celebration for themselves or just one or two others.

Where will these first-time 2020 holiday hosts begin their merry-making, then? With holiday decor. As people play both organizer and guest, they’ll treat their “guests” (themselves) by splurging on more and more charming decor. This prediction for customer demand is based on a few telling signals.

First, we saw a spike in Halloween home-accessory spending. Earlier this year, analysts predicted a constriction in spending as consumers hunkered down. But customer demand for Halloween 2020 decor was up as people instead inspired themselves to enjoy the day vivaciously — yet safely — at home.

Another indicator? Retail shops already report booming sales of fall- and winter-themed home accessories. In an article titled “Without Events, Decorations Dominate 2020 Holiday Season” the Los Angeles Times tells the story of Traditions, a store that doubled its staff to accommodate a completely unanticipated influx of sales.

Source: LATimes, “Halloween and Christmas items sell out as we go all in on decorating”

After nailing their festive decorations, new hosts will be ready to recreate their extended friends’ and families’ holiday meals. But these budding new hosts will not come to the job without adding their creative twist on a few old traditions.

Progressive Grocer predicts unconventional proteins will steal the spotlight this year. Why? Because the pandemic was the excuse many in younger generations needed to go beyond conventional ham and turkey. We’ll see more online searches for roast chicken, pork, and lamb.

The reason this is a unique opportunity for small businesses is that more of these new hosts say they turn to social media (31%) than a cookbook and recipe sites (25%), according to Progressive Grocer. With their own creative social content, businesses can expand their audiences while meeting customers in the moment.

Prepare to serve new hosts by supporting and assisting their festive work

Millennials and Gen Zers don’t want to put their elderly family members at risk. They’re taking more precautions and plan to stay away until it’s safe to gather. The businesses that help customers achieve this difficult endeavor will win their loyalty.

For example, McCormick, maker of spices, extends humor and empathy in their new ad called “It’s Gonna Be Great.” The spot shows our collective sacrifice of staying apart and acknowledges the comforting benefits of learning family recipes and encouraging new holiday hosts.

To meet your own customers where they are, first think about the messages that will resonate. And don’t stop at ads; create helpful content that will support people in an ongoing way. If food and beverages, housewares, or even lifestyle messaging is within your communications strategy, then . . .

  • Consider producing online shopping, prepping, and cooking classes. First-timers will relish basics, while seasoned (yet isolated) home chefs will appreciate more advanced, interactive, inspired digital experiences.
  • Go beyond the one-feast event, and produce a whole holiday week of creative content. After all, many of us are still away from the office for a few days between the holidays. What culinary adventures will your domestic audience want to tackle with the leftovers?
  • Help online audiences discover new local restaurants they may never have thought of. Customers may be more open to unique or ethnic flavors as they experiment. Meet them by guiding them through their takeout and delivery options.

And finally, learn everything you can about improving your customer service — and execute what you can. Use Traditions (the retail store mentioned above) as inspiration — remember, they doubled their staff to care for 2020’s destabilized consumers.

For more creativity, Zendesk (the customer service solutions provider) has a library of inspiring examples of companies that provide top-tier customer service for ongoing (and increasing) loyalty.

Customer demand change #3: New, socially distanced traditions will emerge — and stick

As folks stay safely separated, this year’s consumer behavior will involve more social media activity, video messages, and competitions. It will also feature changed benevolent giving and volunteering.

Traditional activities like church and Festival of Lights gatherings will be replaced. In their stead, many circles are creating and hyping other celebratory rituals. For example, many communities are coordinating an orchestrated, civilian-led bell ringing to spread Christmas solidarity and cheer. People in many regions are banding together to perform benevolent outreach activities and efforts, such as feeding families and gifting toys to kids in need.

Other traditions, like touch football with all the uncles and cousins, will be replaced by board games and interactive activities. How do we know this? Because there’s already been a rise of analog activities in response to pandemic-induced screen fatigue. And kids’ combined screen-time leisure and online schooling create a condition parents will look to counteract.

Physical competitive and collaborative games have seen a rise in interest as in-person gatherings are postponed.
Source: Dec. 1, 2020 email newsletter

Prepare by brainstorming to creatively support these new activities

Businesses can use this opportunity to meet people where they are. If religious services and extended-family football games aren’t happening, position yourself near what is happening. Look at these new activities, and ask yourself where your small business can help.

For example, create a branded photo filter or holiday frame, and encourage cooped up people to share their activities with you using a special hashtag. For analog activities, think: Is there a simple holiday scavenger hunt or word-play game you can publish to challenge your audience to connect? St. Jude Children’s Research Hospital published a coloring book for families earlier this year, which served people’s new analog activities as well as their own commercial interests.

You can support folks’ new benevolent activities, too. A healthy cash reserve can be offered to match donations for a charity of your choice. General Mills is executing a great example of this partnering idea, but you don’t need to be a mammoth, high-profile company to make an impact. The Small Business Administration says that local nonprofits and charities receive 250% more from small businesses than their headline-making, heavyweight counterparts.

Yes, the events of 2020 have been nearly impossible to bear for many small businesses. You may not be in a position to support all your customers financially as they give back. But educators at Babson College say that’s exactly when business leaders are most creative.

Remember, if you’re short on one resource, like cash, you’re likely overstocked on another right now. Look to that overabundant resource to give. For example, unused retail space can be donated to charitable groups looking to administer touchless meals to those who need it. You may be strapped financially, so consider giving resources like warehouse space, technology, or even inventory. The people who replace religious services and family outings with benevolent work will be forever grateful.

Good corporate citizenship (and doubling down on it during the holidays) is a profitable move. Research shows that the higher the social responsibility of a company, the more competitive they are in the marketplace.

Changing customer demand in the 2020 holiday season is a unique opportunity

The shifts in customer demand we’ve seen here can indeed be a rich chance for creative small businesses to shine. But just the thought of being that creative can also be overwhelming.

So take a breather. Keep in mind that these recommendations can’t all be done by one small business. Some will excel at customer service while another aces benevolent outreach, for example. Others will try to chase all these opportunities and be spread too thin. If you try to meet every customer in every unique situation, you may burn out yourself and your team. Burnout means you’ll have to settle for mediocre instead of achieving a standout, buzzworthy holiday moment.

That said, each effort a small-business owner makes now will pay off in a captured opportunity. No one wants to look back at December 2020 with regret, so start with one of the ways mentioned above to meet consumers where they are this season.

To supercharge your business’s productivity, get your bookkeeping processes in place now — before the onslaught. As we’ve seen, a free trial of Neat can help you organize your transactions and automate many of your bookkeeping tasks. Get started by downloading the app today.

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