Winning Over the Holiday Consumer

The pandemic has upended the retail industry. To see how the consumer path to purchase is evolving, Google and BCG have launched a series of surveys. The first survey looks at key changes in consumer buying patterns to help retailers get ready for the holiday season. We plan to conduct follow-up surveys to understand how consumers’ decision making evolves as the crisis unfolds, holiday shopping begins, and the US elections conclude.

The recent surge in online shopping has been unprecedented, according to Google and BCG’s first Retail Path to Purchase survey. Since the pandemic’s onset, half of consumers we surveyed have placed e-commerce orders. And one-third of consumers said that the pandemic has permanently changed the way they shop. (See the sidebar, “About the Survey.”) At the same time, many consumers are apprehensive heading into the holiday season, with 42% expressing concern about their personal finances, according to the October edition of BCG’s COVID-19 Consumer Sentiment Survey.

The magnitude of the shift to online purchasing has created a unique opportunity for retailers to win the holiday season in a way that deepens their relationship with consumers for years to come.

Colder weather may reinforce this shift to e-commerce as consumers avoid crowded stores and outdoor queues. And because many consumers will stay home for the holidays, gifts will substitute for, rather than complement, personal connections at extended-family gatherings. As a result, retailers will be under greater pressure to ensure online availability and on-time delivery. Above all, retailers will need to fulfill holiday demand profitably while appealing to consumers whose confidence has been badly shaken.

Now is the time for retailers to initiate their outreach to holiday consumers—our survey finds that consumers can take, on average across categories, two to three weeks to make purchasing decisions. To capture this opportunity during the holiday season and beyond, retailers should address five imperatives.

1. Be prepared to fulfill e-commerce demand. On average across categories, half of consumers we surveyed placed e-commerce orders during the post-COVID-19 period, whether for home delivery or in-store pickup. The holiday season typically places the greatest stress on e-commerce fulfillment, but this year’s historically high online demand promises to dramatically increase the challenges. To fulfill this demand, retailers will need high-frequency data to enable accurate forecasts (for example, real-time demand forecasts via a Lighthouse capability), as well as flexible logistics infrastructure (including using stores as nodes), in order to handle the surge in deliveries and returns.

2. Feed your brand funnel to stay top of mind and relevant. Our survey finds that consumers narrow their retailer options early, and the vast majority purchase from a retailer that was part of their initial consideration set. To build your brand and feed your funnel during the pandemic, emphasize top- and middle-funnel marketing spending (for example, through lookalike targeting via video). When done effectively in combination with relevant messages, this makes you present and active where new consumers are likely to come to you.

3. Intercept first-time digital consumers. On average across categories, one in three online shoppers bought online from the category for the first time. This gives retailers a rare chance to attract fresh consumer demand and develop new relationships. First-time consumers may be present in media channels where you are not currently active (such as video, social media, and podcasts). So, now more than ever, you need to leave “powder in the keg” when managing your marketing budget. That way you can be responsive and flexible when effectively allocating media spending.

4. Instill confidence in the purchase. Consumers who are concerned about personal finances (42% in BCG’s sentiment survey) will likely think harder about their purchase decisions. To help consumers feel confident in their choices, retailers need to clearly communicate their value proposition via pricing and product information. They need to have a credible online presence—even many consumers who ultimately buy in store conduct research on the web. Clearly communicating and validating your value proposition will be critical to give consumers confidence when making a purchase.

5. Deepen consumer relationships amid adversity. Our survey finds that retailers with strong loyalty programs have a significantly larger market share among loyalty members than among nonmembers—the difference can be up to nine times higher. Retailers also have a unique opportunity to form digital relationships with consumers, particularly first-time online shoppers, whether through email signups or app downloads. To capture the opportunities, you need to establish a compelling value proposition for members, optimize acquisition and onboarding, and then personalize the experience. This engagement is essential to strengthen connections with new consumers and retain old ones.

The survey findings provide insights that demonstrate the importance of each of these imperatives. You can explore a snapshot of the detailed findings in the slideshow below.