Holiday commerce 2020: Sales success in uncertain times - Klarna
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Holiday comm e rce 2 0 2 0 : Sales success in uncertain times.
Whether it’s Black Friday, Cyber Monday or the fast-moving run up
to Christmas, there’s no doubt the holiday period can be a make or
break for retailers. And it’s never been more challenging – or crucial
– than during the strange and unpredictable year of 2020.
It is predicted in all markets that shoppers still intend Additionally, to resonate better with shoppers or
to spend this holiday season, but will be planning that demographics, retailers should highlight specific items
spend more thoughtfully and buying earlier. Recent or categories, depending on the channel. Shoppers
data from Klarna US shoppers revealed that 68% this year will be significantly more likely to purchase
plan to start holiday shopping this year well before their holiday gifts online, meaning that retailers will
Cyber Monday. Recently, IMRG, the trade organisation benefit from merchandising their products better.
for online retail in the UK, publicly urged shoppers By combining these efforts with messaging about buy
to start buying early. "We think the volumes are now, pay later availability they will be able to boost
going to be really very excessive this year," said consumer purchase power at the point of sale.
Andy Mulcahy from IMRG. "Whilst that in itself is not On average retailers see a 40% increase in average
a problem, getting too much of it too close to order value when Klarna instalment services are
Christmas is going to be a problem." Since Covid-19 integrated into the checkout process.
hit, UK online numbers have soared, with growth rates
of around 40-50%, according to IMRG. And they've
remained high ever since. "At this point, I think we can
expect an increase of at least 30% for the peak festive “Consumers are a demanding lot, we’ve
trading season.” (BBC, 25 September). never expected so much in return for our
So, are there still things a merchant can do right
transient loyalty – a trend that will only
now to maximise Q4? Absolutely. It’s not too late, be amplified over the coming months
but you have to move quickly to capitalise, by and years. Our tolerance for average is
tailoring your in-store and online experiences to non-existent and with so much choice
your shoppers’ preferences. available to us, competition for our custom
is fiercer than ever. Customer-centric is no
The experience matters. longer enough: if the proposition isn’t easy,
convenient, intuitive and quick, retailers
It’s clear that consumers now demand a seamless
will rapidly need to rethink and rebuild.”
transition between ecommerce and brick-and-mortar
channels. They expect to see the same items available
at both destinations and continuity of the brand – Andrew Busby, Top 20 global
identity. Many customers will now begin their shopping retail influencer, CEO of Retail
on one channel and complete their purchase at Reflections and IBM Futurist
another, underlining the importance of a consistent
journey. Retailers need to forget friction when it comes
to the checkout process and focus on convenience,
speed and payment choice to win loyalty.
How to tailor your experience this holiday season:
1. Make it fun and inspirational. 3. Listen to your customers’ needs.
Have a look at your brand and shopping experience Do you know your customers well enough?
and ask yourself: Is it exciting? Maybe you can add If you can’t answer with a confident “yes”, you
some spice to it by giving your customer something should get to know them better. They want an
fun and unexpected. emotional connection to your brand and the
feeling that you have listened to their needs.
2. Share your customers’ values.
This has been particularly true during the
It’s a common misconception among retailers
pandemic, when consumers have been shopping
that shoppers don’t care much about a brand’s
with brands that might be new to them or in
value; actually, they do – now more than ever.
unfamiliar channels (online).
An increasing amount of shoppers appreciate
a brand showing what they stand for socially 4. Offer a better checkout experience.
and ethically. As a brand, it’s profitable to be Last but not least, payments have to be flexible,
transparent and clear about your values. fast and seamless. When customers have made
their decision on what to buy, they expect a
convenient checkout with payment options that
suit their needs. A long and cumbersome checkout
process with limited payment choice is the largest
driver of disloyalty amongst shoppers.
Deep dive: What’s happening in the UK?
Retail Economics and Klarna partnered up to ask 2,000 UK consumers about
their 2020 holiday shopping. Here’s what we found:
No surprise, online wins. Black Friday boom.
Three-quarters (71%) of UK Christmas shoppers have Adding to the disruption in trading patterns,
put off spending in-store due to Covid-19 restrictions, Christmas spending is expected to be more spread
drastically shifting the proportion they spend online. out this year. Black Friday set to be more disruptive
Christmas spending is expected to be pulled forward than ever as households look to stretch budgets
too, leading to a bumper Black Friday, as shoppers and take advantage of discounts, particularly online.
look to stretch their budgets. The pandemic has not Just under a quarter (24%) of consumers are planning
been easy for bricks and mortar retailers, and the to shop for Christmas earlier than last year, with
high street is set to face further blows during the most around a tenth (13%) shopping later. Critically, a third
critical months of the retail calendar. With restrictions of shoppers are hoping to grab a Christmas bargain
to control the number of people in stores and shopping during Black Friday.
centres in force, the usual scenes of bustling high
streets of yesteryear will not be repeated this year. Tighter belts.
More than a third (37%) say that they will avoid
physical shopping locations “as much as possible” Households are tightening their belts this Christmas,
over the festive period. as more than a third (36%) of shoppers expect to cut
back on their festive spending. Retailers had hoped
It’s a digital Christmas. that shoppers would splash out at Christmas following
a year of restricted spending. But this appears to
2020 Q4 is expected to bring the biggest online only be the sentiment of the minority, with just 12%
frenzy ever. Online sales accounted for a third of of consumers expecting to spend more on Christmas
overall retail sales in mid-June 2020, and while this this year than last.
dipped back over the summer months as Covid-19
restrictions eased, fears of crowded environments will Relying on personal finances.
see the proportion ramp up again around Black Friday
and in the run-up to Christmas. Usual festive trading As shoppers look to carefully manage their finances,
is expected to be highly disrupted as more than half over three quarters (76%) of shoppers will rely on
(56%) of shoppers expect to do a higher proportion personal finances – either earnings or savings –
of Christmas shopping online this year. to fund their Christmas spending this year, rather than
take on debt or spreading the cost. The cautiousness
Since lockdown, shoppers have had to overcome the
of consumers means that more than twice as many
barriers of setting up online accounts and are more
Christmas shoppers would prefer to make use of
comfortable with spending online. Such has been
deferred payments than enter into personal loans. This
the acceptance of home shopping in recent months
means that retailers who provide financial flexibility
that a staggering 48% of consumers have shopped
with pay later options such as Klarna’s will have a
online for products that they previously only ever
significant advantage over their competitors.
bought in-store.
“A successful Christmas trading period will be a make or break moment for many
retailers who remain in survival mode following the impact of the pandemic.
The major shifts in spending this Christmas will be towards those retailers who offer
the best online proposition and who have the capacity to cope with the levels of
demand. Christmas is likely to be much more planned this year as shoppers bring
forward their festive spending to avoid these challenges. Black Friday will be more
disruptive than ever as retailers extend the sales period to cope with demand.”
– Retail Economics chief executive Richard LimDealing with discounts. The majority of holiday shoppers are looking for a great deal – who isn’t? Price, discounts and free shipping are the most important factors when shopping during the holidays. Moreover, special deals will likely trigger holiday shopping for consumers this year, with the majority of Klarna shoppers saying they plan to take advantage of Black Friday and Cyber Monday discounts. For brands and retailers targeting a younger audience, our insights show that Gen Z is more likely to pay a premium for limited-edition items and drops than any other demographic. Younger consumers are also more likely to favour vintage and resale than other groups, so it might be a good idea to emphasise nostalgia and exclusivity in their assortment if targeting this consumer. But while the holiday season is likely to be a source of increased sales for brands, consumers are very much focused on the financial implications. The majority of shoppers believe price is key when deciding on whether to proceed with a purchase, so giving them the option to pay over time, interest free, will unlock higher conversion. “ Price, discounts and free shipping are the most important factors when shopping during the holidays.”
Some food for thought on holiday deals
and discounts:
Choose your bargains wisely. Social studies.
It’s important to choose products that bring in the When it comes to discovering brands and deals,
right customers; people who are great for your consumers are inclined to listen to a personal
business long-term, people who are likely to buy recommendation from family and friends and, to
more from you in the future, people who match a lesser extent, social media influencers. Klarna
your brand. Pick your offers with them in mind. recommends that retailers take advantage of referral
Another aspect to consider is your margin on specific programs, shareable offers and social shopping in
products. Cutting 50 percent off the price of an item order to maximise this.
with just a 20 percent profit margin will be more
To date, Klarna consumers have added more than
painful, at least short-term, than an item with a
2 million items to wish lists globally through the Klarna
70 percent profit margin.
app. These shoppable wish lists allow app users to
gain followers and share inspiration. These lists can
Check your expenses. also give brands insights into top trending items.
It’s clear that shoppers want to share what’s on their
What can you afford to lose short-term to win
‘must-have’ list or show off their recent purchases
long-term? Make a budget for the Christmas season,
in order to build social and community engagement.
taking into account key factors like advertising costs,
It’s a trend that retailers can’t afford to ignore, and
profits and losses for discounted products, the lifetime
they should look to invest in tech and tools that help
value of customers, payroll, cash flow and so on.
facilitate community creation.
Keep the full price. The social aspect of shopping also extends to
how ‘social’ as a brand you want to get with your
Do you want to keep specific items at full price at all customer. How far should you take personalisation?
times? For example, you might have one product that Everyone wants to feel like an important and
brings you a significant profit, and diminishing its value valued customer. Personalisation is a powerful was
would hurt your bottom line too much. for brands and retailers to make their customers
feel special and keep them coming back again
The power in numbers. and again. But get it wrong at your peril, as it can
turn off shoppers permanently.
Is it better to focus on having ONE unbelievable offer,
or would a dozen bargains work better? Here’s where
your knowledge about your customers comes in.How to get personalisation right:
1. Categorise your customers.
Leverage the segmenting capabilities available
within your ecommerce platform to help break
“However, today, the majority of
your customers into specified groups, and retrospective messaging which purports
personalise their marketing and shopping to be personalisation is far from that. And
experience to their needs. poor personalisation is worse than no
2. Make personalisation personal.
personalisation. But as technology gets
Algorithms are powerful, but they’re not always smarter, we’ll begin to appreciate the
accurate – and that’s where creating an open extent to which our lives can be enhanced
dialogue comes in. The more you get to know the through personalisation. By offering
preferences, wishes and expectations of your an experience that feels truly personal,
customers through building a community and brands will earn the right to engage and
rapport, the better you’ll be able to personalise continue the conversation.”
their experience.
3. Fewer steps at checkout mean fewer
– Andrew Busby, retail expert
abandoned baskets.
Klarna only collects need-to-know customer
information at the checkout, meaning the
transaction can be completed quickly. For example with Klarna, not only can you provide
For returning customers who are already part your customers with flexible payment options that
of the Klarna community, fields are pre-filled differentiate from your competitors, you can also
to allow purchases in just one click. shift the customer conversation from price to
convenience and empowerment.
Retailers can benefit from Klarna’s own customer
“Everyone appreciates being recognised base, marketing investment and insights to gain
but it has to be done in the right way. We access to 90 million potential global customers,
who already love using Klarna. Additionally, Klarna’s
all know that buzz we get when we’re
broad appeal can help retailers gain a foothold into
welcomed back to our favourite restaurant new customer segments and demographics, which
or hotel, or we get a seat upgrade on a flight. are currently an untapped opportunity for growth.
It’s all part of the unwritten contract we
Finally, with Klarna to help drive consumer traffic
have with brands and retailers. We’re happy
and acquisition, retailers can reduce their own
to share more information about ourselves, spend on tactical marketing efforts and re-distribute
provided that we see value in return." it to drive even higher engagement and a closer
emotional connection with their existing customers.
– Andrew Busby, retail expert
What Klarna can do for you.
If you want to see how Klarna can help make your
4. Keep good company. holiday season a success with our buy now pay
When considering tech and payments partners, later options – which are proven to increase AOV,
look for those that have a strong value-add that conversion and repeat purchase for some of the
can contribute to a consumers' propensity to biggest retail brands in the business – or you simply
spend. Now is the time to think long-term and want to talk commerce in general, don’t hesitate
look for relationships that can help deliver to reach out. We’d love to hear from you. (And yes,
acquisition, improve customer lifetime value, our quick and simple integration means you haven’t
and accelerate growth. missed the holiday deadline yet.)
“ It’s all part of the unwritten contract we
have with brands and retailers.”Learn more at klarna.com/uk
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