What challenges face ecommerce in the 2023 holiday season?

Every year, retailers look forward to and plan for the holiday season. It’s the biggest opportunity of the year, after all. It isn’t just customers shopping for themselves - you have lots of customers shopping for all different people all at the same time.

However, as we’ve learned in recent years especially, the holiday season can be unpredictable. Issues arise throughout the year that can impact things like supply chain or consumer spending. New challenges emerge for merchants to deal with. Organizations start making predictions about growth or decline.

2023 is no exception, between inflation fears and consumer confidence in spending, it’s set to be another question mark of a holiday season. Part of being prepared is understanding what challenges are facing the holidays - and that’s exactly what we’re doing today.

Recap: What influenced the holiday season in 2022?

A lot can happen in a year, so let’s first review what happened in 2022 to shake up the holiday shopping season. One of the most major concerns heading into November and December was the state of the supply chain. This had been a concern since 2020, but each year for different reasons. In 2022, many retailers prepared as early as possible to meet inventory demands ahead of Black Friday and the holiday season. This preparation alone put on additional pressure, on top of potential strikes affecting all different parts of the supply chain. 

Another big concern was inflation alongside economic uncertainty. News of both led to a more cautious consumer than previous years, with more looking for deals and discounts to help their holiday spending go further. There were also more consumers heading back to stores compared to 2020 and 2021, which of course impacted ecommerce which had seen whirlwind success in previous years. 

Despite all these challenges, 2022 still saw growth over the holidays in areas like spending, average spend, and more. The overall spend was up 6.5% on the previous year despite taking a slight dip in October. Black Friday weekend was also in growth, which just goes to show that even if there are challenges facing consumers, that doesn’t necessarily mean a downward trend in spending.

The good and the bad for ecommerce this holiday season

Bad: Inflation is still a concern for consumers

It’s likely not surprising that inflation is one of the biggest challenges facing the holiday season this year in 2023. It’s an ongoing issue from previous years, and while inflation rates look to be stabilizing somewhat it’s still something that concerns both businesses and consumers. As they’re starting to shop for the holidays, there may be a bit of sticker shock as they see the result of increased cost of materials affecting their holiday purchases. 

This means they’re more likely to start looking for discounts and deals, rather than shopping at full price which could affect ecommerce sales outside of Black Friday weekend. It may result in a reliance on stronger BFCM sales compared to the rest of the season. But let’s talk about the good news…

Good: Inflation is lower in 2023, and consumers are ready to shop

As we just mentioned, inflation is lower in 2023 and has been steadily declining since this time last year.  And the better news for merchants is that means consumers are ready to shop for the holidays. Consumer sentiment for holiday spending is very positive, and in fact according to a survey by Deloitte, they’re planning to spend 14% more year on year. This would bring their spending habits back to pre-pandemic levels which is a big positive. Not only that but 95% of consumers are planning to participate in the holiday shopping season, compared to a low of 81% just two years ago in 2021. 

So if you’re seeing a lot of doom and gloom in the news about recession and inflation, know that your customers are still ready to spend. Be sensitive to issues they may be facing, but equally prepared to engage with them. That might be through gift guides to give them ideas, through promotional email campaigns, social media content, and more. 

Bad: Student loan forgiveness ending could result in lower discretionary spending

This is certainly a US-only issue, however the end of student loan forgiveness is something which may have certain demographics of US consumers feeling a little more conservative in their spending habits. The true “end” happened back towards the end of September and of course, that leads right into Q4 and the start of the holiday shopping season. Many consumers start shopping in October, but with these kinds of pressures, it’s likely that many will wait till later. That’s because right away, they’ll notice that they have lower disposable income to put towards discretionary spending.

What merchants can do here is ensure that they’re thinking about those budgets this holiday season. Consider how you can appeal to customers at all different spending levels. As we’ve mentioned already, consumers are ready to shop so merchants need to be ready too. Product bundling and gift cards are two options that are easy to implement and effective for customers who are either looking to save a little money or stick to a budget. 

Good: More people than ever are expected to shop over Thanksgiving weekend

With all the challenges each year brings, it can be hard to tell if Black Friday and Cyber Monday will continue to grow or not. After all, with every record breaking year comes uncertainty if it can continue the following year. The good news is that all signs point to a very positive outcome for BFCM in 2023.

According to the National Retail Federation, 182 million Americans are planning to shop in-store and online this BFCM - 15.7 million more than in 2022, and the highest estimate since the NRF began tracking data in 2017. 59% of holiday shoppers have already started browsing, and overall holiday spending is expected to reach record levels.

Bad: Customers are starting to shop more in-person

This isn’t necessarily a bad thing, but if you’re an online-only brand it’s certainly a challenge. During the pandemic and in the years that followed, ecommerce was on the rise. That started to even out in 2022, and now in 2023 more consumers are choosing to shop in person.

What this means is that merchants will need to work harder to capture customers when they are online. Bear in mind that omnichannel is a big trend that’s only growing, meaning that at least part of their journey will be spent online. Even if they intend to shop in-store, they might be researching or comparing products online. 

If you’re an online-only merchant, you can use this as an opportunity to let them know the benefits of ordering online - guaranteed shipping dates, gift options, etc. If you have both an online and offline presence, then you can really use these omnichannel touch points to your advantage. Offer options like buy online, pick up in-store, gift cards that can be used both in-store and online, and other flexible offline to online options. 

Good: Supply chain is in a much better place than recent years

Notice that we haven’t heard a whole lot about supply chain issues so far in the later half of this year? That’s because the issues from previous years are either smoothing out, or merchants are getting smarter about how to manage them. When the supply chain was under pressure due to covid, there wasn’t a lot that could be done. When strikes and slowdowns caused product shortages in 2022, many simply weren’t prepared. This year, merchants know to expect volatility in the supply chain, and so are largely better prepared to deal with potential issues. In fact, now many are looking to the future of the supply chain such as how AI and other technologies may play a part. 

One thing you can’t control is how much pressure there will be due to increased shipments as a result of the holiday season. The supply chain might be a better place than last year, but that doesn’t mean there won’t be any pressure at all. Merchants should prepare for this by setting ordering deadlines earlier than courier cut-offs, and communicating well in advance with customers via their website, social media, and email. 

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