What Merchants Can Learn from the 2020 Holiday Season
As we discussed in other blog posts earlier this year, eCommerce has been one of the few bright spots in an otherwise pretty dismal 2020.
Brick-and-mortar sales looked anemic heading into the 2020 holiday season, but eCommerce remained a hot spot for retail. In response, we identified some key trends and data that you can leverage to make the new year a success.
With the holidays in full-swing, though, many retailers are worried about the uncertainty in the air surrounding what should be the biggest sales period of the year. Don’t sweat it, though; we’ve got the key data and important takeaways you can use to make this a winning season, even long after the holidays are over.
7 Key Takeaways You NEED to Know
Here’s the bottom line: there is plenty of opportunity out there for you have a successful holiday season in the eCommerce space this year. However, it’s going to take extra consideration even after the new year. So, what are the key takeaways you need to know?
Key Takeaway #1: Opportunity is Out There
Retail sales growth will be anemic overall, with consumer spending up just 2% compared to last year. However, much of what consumers do spend will be spent online. US eCommerce sales between November and December are expected to reach $189 billion in 2020—a 33% year-over-year increase, equal to two years’ growth in one season.
Key Takeaway #2: Consumer Spending Shot up During “Cyber Week
US consumers may have spent up to $37.8 billion online during the six-day period between Thanksgiving Eve and Cyber Monday, for a total average YoY spending increase of 21.46%. This suggests that consumers are simply waiting for the right deal to come along before they spend. Also, eCommerce sales will see 25% to 35% year-over-year growth during the 2020 holiday season. That’s more than double the rate of growth (14.7%) during the same period in 2019.
Key Takeaway #3: Smartphone Shopping is on the Rise, but Buyers Still Prefer Other Devices
39% ($39.6 billion) of total online consumer spent in November 2020 occurred on a smartphone. The remaining 61% ($60.7 billion) came through laptops, desktops, tablets, and other devices.
Key Takeaway #4: Consumers are Much Less Likely to Complete a Purchase on a Smartphone
The average conversion rate for smartphones between Thanksgiving Eve and Cyber Monday (2.68%) was less than half that of other devices (5.82%). This makes sense, as buyers historically tend to do research on smartphone, then move to a desktop or other device to complete a purchase. Interestingly, while conversion rates on other devices fell slightly, the smartphone conversion rate remained largely flat.
Key Takeaway #5: Post-Holiday Returns are Coming, but They May Bring Opportunity
Consumers are expected to return roughly $57 billion worth of merchandise purchased online during the 2020 holiday season. This doesn’t account for additional overhead involved in shipping, processing, and trying to resell returned merchandise. However, more than three-quarters of shoppers who return a purchase around the holidays intend to exchange it for something else. This makes a return a great opportunity to recover your sale.
Key Takeaway #6: 2021 Looks Bright for the eCommerce Space
Retail experts agree that the COVID-19 pandemic will ultimately have a substantial financial benefit for eCommerce merchants. However, it’s unclear whether we’ll see the full scope of that benefit during the 2020 holiday season, or if prospects will really take off in 2021. So, while eCommerce sales are up now, we may see even greater gains in coming months. eCommerce spending in May 2020 alone overshadowed the entire 2019 holiday season, so there’s reason to believe that the real peak is yet to come.
Key Takeaway #7: You Need to Manage Risk to Thrive in the 'New Normal'
Customers are most likely to file chargebacks 45-60 days after a purchase. As a result, we see a regular annual surge in chargeback issuances between January and the end of March. Given that global chargeback volume will reach 615 million issuances by 2021, taking steps to manage risk is more important than ever.
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BONUS: “Chargeback Season” is Right Around the Corner
Those are all important lessons but don’t make the mistake of believing that you can forget about the holidays once January rolls around.
We anticipate a major uptick in chargeback activity during the first quarter of 2021. Every chargeback filed against you means you lose revenue, merchandise, and overhead. You’re also responsible for paying costly fees and can see other long-term threats as your chargeback ratio trends upward.
Even worse, our internal data suggests that 60-80% of all chargebacks are actually cases of friendly fraud. This means merchants are going to lose tens of billions of dollars over the next few months due to completely unjustified disputes.
Friendly fraud works by allowing cardholders to hide their true motivations behind a false chargeback claim. You need to take steps now to ensure that you’re protected, and the first step to defending against chargebacks is to identify disputes by their source.
Advanced analytical tools like our proprietary Intelligent Source Detection™ solution allow you to drill down and uncover the true “reason behind the reason code.” With this knowledge, you can make strategic moves to stop chargebacks and allocate your resources more efficiently.
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When cardholders file chargebacks without a valid reason, the best course of action is to challenge the dispute and recover your cash with tactical representment.
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