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Holiday 2021 Predictions: The Costs of Labor Shortages and Logistical Headaches

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The holiday season is rapidly approaching, and many of the challenges retailers have been grappling with from late 2020 through today will be felt in full force — including an expected $223 billion in added costs due to freight, manufacturing and labor.

However, there will still be plenty of opportunity as well, particularly for retailers with strong last mile offerings, solid social media presences and a knack for bringing people together, according to Salesforce’s 2021 holiday projections. The key takeaways include:

  • Rising costs will lead to price hikes: The added costs faced by retailers stem from manufacturers and will trickle down to shoppers in the form of higher prices, affecting the entire supply chain and shaping the season’s logistics;
  • Associates are in, cookies are out: The role played by associates will grow larger than ever, encompassing fulfillment and loyalty building, while retailers will turn to social media and loyalty to prepare for the cookie-less future; and
  • Shoppers will shop digitally for live experiences: Shoppers will continue expanded use of ecommerce, further reducing the importance of specific shopping holidays like Black Friday, but their purchases will focus on items that help them get outside, see friends and experience life.

Salesforce will dig into more shopper insights and predictions for the 2021 holiday season during an upcoming Retail TouchPoints webinar.

Rising Costs Will Reverberate from Suppliers to Retailers to Consumers

The first Salesforce prediction is a continuation of current trends: rising costs, as supply chain woes from the port to the warehouse raise the price of goods. Salesforce expects logistics complications alone to result in $163 billion of added costs compared to peak season 2020. The three major components of this total are:

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  • Continued COVID restrictions: The pandemic may feel like it’s over, but it’s still affecting how close-quarters work like unloading shipments is handled, and these slowdowns will be felt once the holidays take off. Manufacturing in countries that are still being hit hard by COVID-19 also will be impacted, which could echo further down the supply chain.
  • The labor crunch: The worker shortage isn’t showing any signs of relenting before the peak season, which means players all along the supply chain will be low on manpower. Retailers need to brace themselves and create contingency plans in case this impacts product availability.
  • Increased container costs: Containers are subject to significant inflation, to the point where retailers like Walmart and Amazon have pre-bought hundreds of thousands in advance of the peak season. 

“Probably one of the most common questions I’ve gotten over the last six to eight weeks as I’ve been previewing these predictions and what we anticipate for the holiday is, ‘Who’s going to absorb those cost increases?’” said Rob Garf, VP and GM, Retail at Salesforce during a presentation of Salesforce’s projections. “It’s pretty uniform: we all are, all the way from consumers to retailers back to suppliers.”

Shoppers already are seeing the result of these challenges in the form of an 11% year-over-year increase in average product prices during Q2 2021, according to Salesforce data. Rising costs have already generated increased interest in buy now, pay later services, up 86%, and that trend may hold steady through the end of the year.

Associates Will Take on New Roles — Including Building Loyalty in a Cookie-less World

Heightened digital demand already has significantly altered the role of the associate. They’re not just salespeople and cashiers but pickers for online orders, assistants who can place online orders, support staff who make sure a range of operations run smoothly and social media representatives who bring the brand to life. Salesforce’s second holiday prediction is that all these roles will be emphasized during the hectic holidays, making frontline employees more important than ever.

Associates-as-influencers will be a particularly important role at the tail end of the year. Shoppers crave genuine interactions more than ever, and associates are perfectly suited to offer that experience both in-store and online. Garf has even seen luxury retailers with very strict branding guidelines encourage their associates to express themselves online, on the theory that building familiarity and friendliness trumps maintaining a disciplined brand message.

“When luxury brands are willing to give up some of their control of their brand and allow their associates to represent the brand in the digital world through social, you know the industry is going to follow fast,” said Garf. “Some of these [brands], particularly in China, have hundreds if not thousands of followers, and it’s so genuine and unique whether that engagement is happening with the store associate in the physical store or anywhere else.”

Using associates to build loyalty via social media ties into the next prediction as well: retailers will begin to wind down cookie usage as restrictions grow. The GDPR has been in place for years, Apple’s iOS 14 is boasting anti-tracking features and Google is planning to remove cookies from Chrome (though that timeline remains uncertain).

Garf expects social media interactions to become one of the major new ways retailers build a brand connection, since less access to shopper data makes genuine associate-to-customer interactions much more valuable. They also will gather data through the launch of new loyalty programs, which will ensure they’re only collecting information from willing participants while also providing benefits above and beyond personalization.

“We’re anticipating over the holiday that 1,000 new programs will emerge in the U.S.,” said Garf. “That puts a lot of pressure to try to get into their wallet and have the consumers become part of your loyalty program. It’s a great way, it’s a genuine way and it’s a natural way for that value exchange to happen between the consumer and the retailer.”

Digital Shopping Still Reigns, but Experiential Categories Will Drive Sales

Salesforce’s fourth prediction is the continuation of a trend that has been building for several years — Black Friday and Cyber Monday will become less important as shoppers spread out their purchases and retailers expand their promotional windows. This was particularly apparent in 2020 due to deliveries running into capacity limits, and the current logistics challenges combined with stretched associates will make good last mile practices a smart bet once again.

“For the last five years we’ve been tracking a smoothing of demand across all of Cyber Week on the Wednesday before Thanksgiving in the U.S., all the way through Cyber Monday,” said Garf. “Particularly with Black Friday, where more and more stores were closed last year because of the pandemic, but we [also have seen] a trend in closings to try to create this balance of work and personal time with the family.”

Garf noted that retailers shouldn’t discount late December either: retailers that had BOPIS capabilities were able to cater to last-minute shoppers and saw 60% higher growth than those that didn’t during the 2020 holiday season.

Retailers looking to succeed during the holidays also can put an emphasis on experiential categories, particularly adventure (outdoors brands like TUMI), social (items that bring people together for events) and luxury (pieces that can be shown off as an investment). Salesforce’s final prediction was that these categories would see significant growth as shoppers continue working to rebuild a sense of normalcy post-COVID.

Those categories that really enable us to get together, feel human again and be social are going to thrive,” said Garf. “Luxury as well. There are going to be pieces that people are going to look for to make the shift from needs to wants.”

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