2021 holiday retail: New trends, new opportunities

Recapping the 2021 holiday shopping season

While COVID-19 and the accelerated shift to digital platforms strongly shaped consumer shopping behaviors during the 2021 holiday retail season, sales grew. This report examines the trends that dominated the most recent holiday season.

Published January 2022

Optimistic predictions, strong sales results

The most recent holiday season was again shaped by the COVID-19 pandemic, but 2021 holiday retail trends looked markedly different than 2020 in several key ways. Based in-part on the availability of COVID-19 tests, vaccines, and treatments, coupled with stabilized financial situations, we forecasted strong holiday retail growth for the 2021 season. Our projections included an increase of 7-9% year over year (YoY) increase for overall sales and a 11-15% YoY increase for e-commerce sales.

Ultimately, total holiday retail sales in 2021 increased 8.5%, the largest annual increase in 17 years. E-commerce sales increased 11% compared with 2020 and 64.1% compared with 2019. We believe this reflects the continued effects of COVID-19 and the accelerated shift to digital platforms based on consumer retail shopping behaviors.

This quick take examines several trends that affected how consumers, retailers, and infrastructure providers performed during the 2021 holiday retail season.

Price bumps, confidence dips, and supply chain concerns

Amid rising inflation, anticipated supply chain shortages, and increased consumer demand this holiday retail season, retailers hiked prices and consumer confidence dropped to its lowest level in over a decade. Overall, prices in 2021 increased 6.8% YoY and online prices increased 3.5% YoY—a record high. Online prices for apparel were particularly high, increasing 17.3% compared with 2020. The 2021 holiday retail season also saw a 5-year low in the number of markdowns and clearance items, while discounts among retailers remained relatively flat YoY.

Inflation alone cost shoppers $6.2 billion and was the greatest cause of concern among all generations of holiday retail shoppers in 2021, topping COVID-19 health and safety concerns and a widespread lack of product availability. However, despite relatively low consumer sentiment and significant price increases in everyday items and gifts, consumers did not pull back on purchases. Instead, they prioritized purchases, secured the best prices, and changed shopping habits. Consumers’ use of price comparison tools in 2021 increased 9% compared with 2020 and 49% of consumers considered alternatives like thrifting or secondhand gifting to combat inflation. Additionally, many consumers were willing to switch from their preferred retailer to secure lower prices.

Supply chain disruptions and product shortages challenged both retailers and consumers in 2021. While retailers tried their best to mitigate stockouts, out-of-stock messages skyrocketed 258% from 2019. Consequently, many consumers adjusted their purchasing preferences by switching brands and retailers or patiently waiting months for items to be restocked.

Consumers embraced loyalty programs

Loyalty programs that offered discounts were a huge draw for consumers this holiday retail season. 81% of consumers shopped specific brands during the 2021 holiday season because they were a member, and 61% of consumers joined a loyalty program to receive discounts. Consumers also prioritized guaranteed delivery and access to hard-to-find products, with 43% of consumers indicating they would join a loyalty program to gain special access to scarce products. And retailers responded. Some enticed shoppers by offering loyalty members early access to sale events and top-selling items like PlayStation5.

Importance of traditional holiday retail days continued to diminish

Online spending during Black Friday and Cyber Monday in 2021 decreased for the first time in history after 2020’s record high. Consumers spent $33.9 billion between Thanksgiving and Cyber Monday in 2021, down 1.4% YoY. However, the year’s holiday retail spending was still higher than pre-pandemic levels, up 17% from 2019.

This season, almost half of consumers began their holiday retail shopping before Thanksgiving. Historically, traditional key shopping days including Thanksgiving Day, Black Friday, and Cyber Monday held more prominence, but consumer spending was pulled forward this year. Spending decreased from November to December, falling 1.9%. As e-commerce became more ubiquitous, consumers were not confined to shop on specific days. Instead, they could spread out their online shopping over the holiday retail season.

Top retailers took a slightly smaller share

In a reversal of a 2020 trend, top mass merchants and other leading retailers took slightly less share of total 2021 holiday sales. The largest mass merchant captured 13% of total holiday sales1, down one percentage point from 2020. Despite starting the holidays strong and capturing 18% of all Black Friday dollars, the top mass merchant’s total holiday revenue only increased 0.5% over 2020, compared to 35.5% YoY growth in 2020. In terms of brick-and-mortar sales, the leading grocery retailer captured the largest share at 9.8%1, along with over 25% of all holiday buy online, pick up in-store (BOPIS) sales. Another leading mass merchant had a solid performance as well, with YoY sales in November growing by 10%, doubling the relative growth seen by its primary competitors over the same period.

In-person opportunities influenced shopping priorities

In 2020, COVID-wary consumers shifted their holiday retail spend to “stay-at-home” purchases. A year later, with vaccines widely available, more physical stores open for business, and travel and dining opportunities increasing, consumers shifted their spend back to in-person experiences and “out-of-home” purchases. In 2021, we saw an increase in spending for categories that required leaving home, such as travel, dining, entertainment, and fitness. Concurrently, there was a retraction in categories that saw growth in 2020, such as food and grocery delivery, home improvement, and office supplies.

Consumers also purchased apparel and equipment to prepare for their in-person experiences. Spending on festive apparel—presumably worn to events or parties—increased 188% and 146% respectively since 2020. Ski merchants saw a large sales jump as well, as consumers spent 10 times more than in 2020. While pandemic-related trends such as grocery delivery and home improvement aren’t disappearing any time soon, many of the categories we saw spike due in the 2020 holiday retail season did not experience similar growth this year.

On-time delivery improved

During 2020’s surge in online spending, shipping carriers struggled to deliver a record-setting number of packages during the peak holiday retail season. In 2021, the primary shipping carriers were better prepared, delivering packages 90% on time. Delivery performance and shipping burdens also may have eased slightly this season due to consumers shopping earlier and returning to physical stores.

Seasonal labor woes continued

Employing seasonal workers was especially challenging this year. Retailers relied strongly on incentives and increased pay to hire and retain employees throughout the holiday retail rush. Notable incentives included competitive sign-on and monthly bonuses, increasing starting pay by $3-$5, and offering more hours to current staff. Given the decrease in overall holiday labor, post-holiday job cuts decreased YoY, with almost 150,000 fewer than in 2020.

That’s a wrap

Despite higher prices, fewer promotions, product shortages, and uncertainty around the COVID-19 omicron variant, consumers opened their wallets this holiday retail season and spent at record-setting levels. Retailers and infrastructure providers did their part provide enough products for consumers to buy, keep store shelves stocked, and deliver online orders on time.

Special thanks to Meghan Cole, Madison Brooke, Audrey Adam, and David Gilbert for their authorship, support, and research throughout the development of this article.


1 Deloitte InSightIQ Analysis

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