Retailers are looking forward to the gift of an early and lucrative holiday shopping season this year. Credit unions should gear up now to help their members enjoy a pleasant and stress-free payment experience, whether in-store or online.
Last year, in the midst of the pandemic, overall holiday season shopping sales actually grew over 2019 by 8.3%. Despite the lingering effects of the pandemic and serious supply-chain concerns, we anticipate another strong holiday shopping season this year, with Mastercard projecting U.S. retail sales to grow by 7.4% compared with 2020, and 11.1% over 2019.
Following are our payment trends predictions for the upcoming holiday shopping season, along with some recommendations for how credit unions can meet their members’ payment needs and enhance the member experience:
3 Spending Predictions for the Holiday Shopping Season
- Expect An Early Start to the Shopping Season: Worries about the Delta variant will drive many consumers to get their shopping done sooner this year. Expect a repeat of 2020, when businesses started the traditional post-Thanksgiving “Black Friday” sales as early as mid-October.
Adding to the uncertainty, supply chain issues, including short-staffed factories, shipping container shortages, and record-high plastic prices are continuing into the fall. In fact, shipping times for goods manufactured in Asia to arrive in the U.S. by both air and sea have doubled during the pandemic. This is causing inventory shortages at many retailers, a fact that is concerning to 82% of retail executives surveyed by KPMG. According to the same survey, 55% of these executives are planning to source goods through alternate suppliers.
And with inflation up by 5.4% over last year, holiday shoppers will see low inventory, higher prices and fewer discounts. Expect high demand for the most desired toys and gifts – even more than in a typical year.
- e-Commerce is Here to Stay: Although we do anticipate that brick and mortar shopping should increase compared with last year, continued worries about the Delta variant will keep some away from physical stores. Newer online shopping trends like buy online/pickup in store (BOPIS) and curbside pickup have proven to be very popular. The National Retail Federation found that the convenience of BOPIS improved the customer experience for 70% of surveyed consumers.
Mastercard projects online retail sales to grow by 7.6% this holiday season over last year, and a whopping 57.4% versus 2019.
Bottom line, eCommerce, which showed tremendous growth during the 2020 pandemic lockdowns, remains very popular and will continue to grow.
- Non-retail Categories Will Likely Stagnate: Aside from gift-related purchases, we do expect certain spending categories to slow down between now and the end of the year, as leisure travel tapers off following the summer peak and business travel remains subdued. Likely candidates include merchant category codes like travel, educational, clothing, fuel and ride-sharing services.
As always during these volatile and uncertain times, it’s important to be mindful of a few factors that may throw the above predictions in doubt. One is the ongoing threat of the Delta variant which saw a rise in coronavirus cases in many regions of the country during the late summer. Any widespread return of lockdowns and social distancing mandates would dampen the economic recovery and hence consumer spending trends. However, positive news about the availability of vaccines for school-age children (ages 5-11) and boosters for older adults can help elevate consumer confidence this season.
What Credit Unions Should Do Now
Here are a few areas to focus on as your members gear up for an early, and busy holiday shopping season.
- Activate Your Spend & Get Campaigns: Make sure you’re incenting your members to use your cards when they do their shopping this holiday season, by boosting rewards for select merchant category codes through a Spend & Get campaign. This can be done in a variety of ways, such as offering double or triple rewards points, or even by crediting dollars directly to members’ checking or savings accounts for purchases in certain category codes. And don’t forget about your local merchants!
- Offer Special Low APRs: To keep your cards top of wallet, why not offer a special low rate for any purchases made in November or December? Like Spend & Get campaigns, this is a great way to incent certain member segments to increase their spend and reach for your debit or credit card first.
- Focus on Digital: If you offer contactless cards or digital wallet provisioning in your product toolset, now is the time to promote these methods, as shoppers get ready to do their gift shopping online and through touchless payment methods in store.
- Promote Card on File: With subscriptions growing in popularity for everything from monthly lifestyle boxes to streaming services, ensuring your members use your credit and debit cards as their primary payment method is more important than ever. Look for ways to educate and promote the benefits and convenience of provisioning your card on file with such services, as well as in popular shopping sites like Amazon, Target and Best Buy.
- Start Thinking About Balance Transfer Campaigns: Lastly, begin planning a balance transfer campaign for the first quarter of 2022, when consumers are saddled with bloated, post-holiday credit balances and seeking relief through low rate offers. It takes time to implement such campaigns, so get started today!
CO-OP is the Gift that Keeps Giving!
Get the most out of this year’s holiday shopping season by ensuring your credit and debit portfolio is gift-wrapped for the holidays. Activate your data to optimize your portfolio with CO-OP Insights Center. Then put a bow on it with help from CO-OP SmartGrowth Consultant Services.