2021 Holiday Forecast: Part One - With Adobe's Taylor Schreiner

Welcome to the Retail Rundown, your go-to weekly podcast where RETHINK Retail teams up with industry experts to discuss the news, trends, and big ideas that are redefining commerce.

This episode is part one of our deep dive into the 2021 holiday shopping season and features insights from Adobe’s annual holiday shopping forecast.

Joining the show today is Taylor Schreiner, director of Adobe Digital Insights, where he leads a team of data scientists and researchers, who dig into Adobe’s vast data set to provide consumers, businesses and policymakers a real time pulse on the evolving digital economy.

If you enjoyed this episode, please let us know by subscribing to our channel and giving us a 5 star rating us on Apple Podcasts.

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Hosted by Paul Lewis
Written and produced by Gabriella Bock
Edited by Trenton Waller

TRANSCRIPTION

Paul Lewis:
Hello, and welcome to another episode of the Retail Rundown podcast. I can’t believe it’s already November. Where did this year go? I hope everyone had a great Halloween. I’m your host, Paul Lewis. And today we’re bringing you insights straight from Adobe’s annual holiday shopping forecast. Joining the show today is Taylor Schreiner. Taylor is the Director of Adobe Digital Insights, where he leads the team of data, scientists and researchers who dig into Adobe’s vast data set to provide consumers, businesses, and policymakers a real-time pulse of the evolving digital economy. Thanks for joining the show, Taylor.

Taylor Schreiner:
Thanks, Paul. I’m happy to be here.

Paul Lewis:
So let’s dive into this. What are some of the defining trends that Adobe has seen for this holiday season?

Taylor Schreiner:
So it’s going to be a unique year. So what we’re seeing right now is e-commerce demand being extremely high. Consumers want to shop online, consumers have changed their habits of shopping online. They are expecting deals online. There’s a huge amount of demand in the system for e-commerce. But we’re also seeing a holiday season that is going to be defined by shortages. It’s going to be defined by either the inability to get certain goods, or inability to get them at the time that consumers want them, or inability to get them to the place they need to go on time. Or even if all those factors aren’t at play, there are going to be items that are more expensive than they were even a year ago. And that is dramatically different than anything we’ve seen, honestly, in the decade that we’ve been looking at these data. So it’s going to be like last year in that we are going to see massive growth in online spending, but it’s going to be even more of a story of supply shortages and inflation than we even saw last year.

Paul Lewis:
Yeah. Let’s double-click click down on both of those points. So the first thing is I’m really interested in this growth. I think it’s obvious that online e-commerce is continuing to grow and we would expect that, but I’d love to understand a little bit about the growth rate itself. So if we look at past years, ’17, 2017, ’18, ’19, what was the relative growth rate of each year, year over year, of the holiday season or e-commerce in general?

Taylor Schreiner:
Yeah, so we started looking at these data maybe in 2014, 2013 in aggregate for the whole holiday season. And basically, every year would be somewhere between 12% and 15%. Good, strong year would be 15% growth, and not as great year might be 12%. Last year, we saw 33% year-over-year growth. So it was a rocket boost.

Paul Lewis:
Wow.

Taylor Schreiner:
COVID was a rocket boost to e-commerce. It made an enormous difference. And this year, we’re expecting 10ish percent, give or take, going to the holiday season. So if you back of the envelope that math, you’re still looking at a world in which are basically seeing consumers spending 2022 levels of money in 2021 because of COVID. So if you’d sort of drawn a line from 2013 through 2019 and projected into 2022 or 2021, you’d expect us to be lower than we are now. In fact, you wouldn’t expect us to spend this much until 2022. So COVID gave us a year of e-commerce boost and we’re we still have it.

Taylor Schreiner:
Now, you might look at the 10% growth that we’re going to see over last year and say, “Hmm, is that slower growth?” My take on this is marginally slower growth. I mean, maybe a couple of percentage points slower than you had expect in a off year, in the before times. But really, it’s a tiny correction on top of what we’re really seeing, which is a continuation of growth of e-commerce. People have come through coping. Through is the wrong word. We are wherever we are in the pandemic. And consumers are not going back to the old ways of shopping. They have seen curbside pickup, they have seen moving more of their convenience shopping and staples shopping, like grocery, online and they’re sticking with it.

Taylor Schreiner:
So I guess the direct answer to your question is we don’t see any return to… Or sorry. We don’t see any decline in growth rates for a while yet. And we expect e-commerce to bank that boost that we got out of COVID and just keep going.

Paul Lewis:
Yeah, no, that makes perfect sense. And if you do some time normalization and just take these two years an aggregate, if we say we had a 33% and a 10% growth rate, we’re still at a 20 plus percent growth rate compared to the 12% to 15%. So it’s almost double what it’s been, and I totally agree with you. I don’t think consumers are going back. Once I saw my mother begin to shop online, I knew that the world had profoundly changed.

Paul Lewis:
And I think I read an article one time in psychology that talked about how long does it take for some new behavior to become a habit? And it was anywhere from 12 days to 200 days on the outset. And we’ve definitely passed the 200 day mark. So I feel like the new habits, whether that’s your grocery shopping or your holiday shopping, are here to stay. Once people get used to the convenience of those things, there’s no going back. I agree.

Taylor Schreiner:
Yeah. And in fact, I expect to see this continue to shift. One thing we saw last year, we saw curbside pickup, for instance. So, people shopping online, but just getting their fulfillment at a store. So functionally, an online transaction with just delivery being, “I’m going to go drive over and pick it up.” And last year, we saw a record level of that around Christmas. And honestly, after that, we took our eyes off the ball. We said, “Okay let’s go back and look at these numbers again, middle of the year.” When we look back in the middle of this year, the percentage of transactions, online transactions, that were being build as curbside pickup, was as high as that record was in December and that’s in August. So we’re going to see not only a transformation of e-commerce in terms of people just getting things drop shipped, but also a transformation in the way that they even do their brick and mortar retailing, retail shopping. And that’s going to continue to move that in that direction.

Paul Lewis:
Yeah, it’s true for me. Again, I always like when I can bring things home. I know that grocery… I think I was just at a grocery shop a month and a half ago. And talking about what’s happened in grocery and then as well as my own grocery experience. And I think groceries have been slow to move into an e-commerce model. They see it primarily in-store and then e-commerce was sort of an afterthought. And now, it’s obviously front and center. And I know personally, my grocery shopping is now primarily online. Every once in a while, there’s the, “Oh, I forgot something. Let me run to the store.” But the bulk of it is curbside pickup or direct delivery all the way.

Taylor Schreiner:
And, well, you’re not the only one, Paul. We’re seeing that across the board. And frankly, one of the things that we’re sort of directionally seeing here as we got through October, is that grew groceries got one of the strongest uplifts of any category in, among the categories that we look at. And what’s happening there is a transformation of Halloween. People are not just buying their regular groceries online, but they’re thinking, “Oh, do I really have to make a run to the store and buy a bag of candy? Or can I just add that in all of my holiday purchases?” When it comes to groceries, they’re also going into that, either buy online, pick up in-store or even home delivery options. And it’s really transforming the way that consumers shop for groceries. And as you say, groceries are, year two now into the pandemic, really adapting to that set of preferences that consumers are showing.

Paul Lewis:
Yeah, no. Agreed. And I wanted to also come back, circle back to the point you started talking about supply chain. And one of the things I love when we have Adobe on the show is you guys have so much great data and insights. And obviously, we’re hearing a lot about supply chain issues, but it’s hard to bring that from qualitative information into quantitative information. I wonder if you have some insights on that as well.

Taylor Schreiner:
Oh yeah. This has been something that we’ve paid a lot of attention to. This year, obviously, and we get to see the consumer end of, as you say, all these shipping challenges across the Pacific and all of the trucking challenges and the delivery challenges that we get to see what it really means for the consumer. And so far, what we see are two things. One is that you’re going to be seeing about five times, four to five times as many out-of-stock pages as you saw maybe two years ago. So you’re used to shopping and seeing occasionally, “Oh, maybe this thing isn’t around,” you’re going to see that about five times as often. Now, that doesn’t mean that as a consumer, you’re not going to be able to get access to all those goods.

Taylor Schreiner:
It might mean that you just have to shop around a little bit more in a number of cases, but it’s going to be harder. It’s going to take more time. And then the other… And that’s going to mean that consumers are going to have to think about their shopping differently. They’re going to have to make a list. That’s what I’ve done. I made a list of things that I absolutely need to get, and I don’t care if I get the deepest discount on them. And now, at the beginning of November, is the time to do that. And then another list that is unflexible either on timing or particular product. And I’ll wait until the big sales hit later. And the other thing speaking of big sales-

Paul Lewis:
I was going to ask you quick question on that too. You mentioned that you are doing some things now, and that’s another thing that’s been in the news a lot. Are you starting your holiday shopping now? And maybe not so much are you. Are you seeing that other people are starting their holiday shopping at the beginning of November, that they’re not waiting Black Friday inches a little bit forward every year. Are we seeing it now really being right now, the 1st of November, this starting?

Taylor Schreiner:
Oh, that’s a good question. And it’s important. I’m terrible at this. I don’t do my shopping early. I talk about this all year long and I tell people to do their shopping early. And I hang up the phone or I stop talking about it and I don’t do my shopping. So I’m the worst example here, but broadly speaking, yeah. We’ve seen an acceleration in sales toward the end of October. The big question that is hard to tease apart right now is, is that part of a trend that’s always been there? So Halloween has always been accelerating in terms of online shopping, or is that pulling forward November sales? So far, largely, it seems that this is a really good Halloween season for retail, but it’s a good Halloween season because of Halloween. And that we haven’t seen a massive pulling forward of sales from Thanksgiving. That said, as you say, discounts and offers have all started to come earlier and earlier in the year. And I wouldn’t be surprised if now that we’re past the trick or treating season, we see a lot more deals coming and a lot more early November sales happening.

Paul Lewis:
Yes, I agree. And it sounds like an example of the shoemaker’s kids have no shoes.

Taylor Schreiner:
Necessarily, yeah. Practice what you’re preaching.

Paul Lewis:
But again, I think that’s another interesting takeaway from what you said is that Halloween was strong, because that’s another possibility. People are like, “Hey, there’s going to be less Halloween activities this year, less parties, costume parties, kids candy.” All those elements could be reduced given the current situation. So the fact that we’re still seeing pretty strong sales is a good indication that people are coming back in a real way.

Taylor Schreiner:
Yeah. Halloween is definitely here. And as a parent of kids who are able to be vaccinated now, I think it’ll only get the kids’ portion of shopping, and the kids’ party portion of shopping, and the social interactions that you have to go buy groceries for and apparel for, those are only going to accelerate now, I think, going into the next year.

Paul Lewis:
And let’s talk about that, or product categories more, more generically.

Taylor Schreiner:
Mm-hmm (affirmative). Sure.

Paul Lewis:
What are the product categories that you’ve really seen in an increase for? And if you have any reasons or thoughts behind what’s driving that.

Taylor Schreiner:
So there’s an interesting… Let me start that again. It’s an interesting question, and every category has a slightly different answer. So we certainly see things like toys, groceries, video games, those things, electronics even, are all seeing very strong growth here in October. And for good reason. I mean, toys come off of Halloween as… Your toys are part of the Halloween shopping season and people know that buying toys early is going to be important because there are a fair number of potential shortages looming out there. Electronics are always going to be a big portion of any holiday shopping season. Video games, we expect to see a lot of traffic in video games this season, especially as other material goods see shortages. So it’s very easy to say, “Look, I can’t get exactly what I want in terms of a material product, but I can definitely get somebody a piece of software that’s easily replicable.”

Taylor Schreiner:
So those are expected and they are strong. And groceries, I mentioned before, is also very strong as people are buying their party goods and their Halloween candy. Everything is growing. Let me just put it, put that out there, but the places where we’re not seeing as much strength right now, apparel and baby products are two of the ones that strike me. And they strike me because they are the top two, and sporting goods. Those are the top three categories for which we see out-of-stock pages. So they’re the categories that give me pause and make me think, “Hmm. Maybe some of these challenges may hold back certain categories going into the holiday season.” I don’t think we can be definitive about that yet, but it’s something that we’re definitely keeping an eye on.

Paul Lewis:
Yeah. And I wonder, as we look at grocery being strong, I think we also have to look at if restaurants are coming back up? Is it a shift of more people cooking at home due to, again, new habits that are formed, not necessarily current concerns, but more about the habits of like, “Hey, I started cooking for myself or my family and it was actually great.” So I think there could be some elements there. And then when I think about apparel, again, I always think of my personal situation and it feels I have to dress for different, whether it’s social or business, I have to worry a little bit less about what I dress like. So I’m probably a bit more out of fashion than in years past. And I wonder if that’s causing additional drag on top of supply challenges.

Taylor Schreiner:
Well, I got to tell you my favorite. The favorite thing I get to dress for is a podcast.

Paul Lewis:
Amen to that.

Taylor Schreiner:
Yeah. I think that, as you say, consumers are really changing the way that they shop and what they’re shopping for. And things are going to keep changing at a pace. Vaccines are going to change the world that we live in. Office openings are going to change the world that we live in. The return to travel’s going to change the world that we live in. We currently see Thanksgiving bookings not that far off of what we would’ve expected. So people are coming back to that… Or in previous years, sorry, not far off of what we would’ve expected in previous years. And so that’ll transform what people need to shop for and how they think about buying both goods and experiences as gifts for people in the holiday season.

Paul Lewis:
And Taylor, I’d love to ask you, as we’re talking about this shift in people getting comfortable and vaccines coming back, I’d love to ask about what do you think about physical retail? Do you have any thoughts or insights there? Is that coming back in a big way too? Or is there, now again, the habits have moved to e-commerce that that is impacted still or continuing?

Taylor Schreiner:
So yeah, one thing I can say definitively is that if you are a retailer who can use your retail space as a distribution hub, then you have an advantage. So we see consumers, as you mentioned earlier, we see consumers wanting to do curbside pickup, wanting to get things same day. And if you’ve got a particularly a big box store, but any operation where you can have consumers come by and pick up the goods, that really works for their preferences. And then other retailers where there are showrooming op opportunities. I think that makes a big difference. There are definitely products that you want to see and engage in person. I have a particular stationary store that I like that those kinds of niche elements will be hard to lose. But it’s hard to imagine a world in which retail broadly grows faster than e-commerce. E-commerce is going to take share from overall retail over the course of this season. And that means that while there’s room for brick and mortar retail to grow in that space, but not nearly as fast as we expect e-commerce to grow.

Paul Lewis:
Right. And I love some of the points you brought up about becoming a bit of the warehouse, the distribution hub on a few levels. One of the companies they just have so much respect for is Best Buy. I think that they went through… There was a number of competitors who actually went out of business and Best Buy certainly went through their struggles, but they came out of it stronger with new models, where they’re partnering with a lot of the suppliers, and making it that show warehouse distribution. I watched them pivot on a dime for buy online pick up in-store and curbside pickup to support the pandemic. I think they’ve just done a really great job. Obviously, the future is always indeterminate, but I think it’s an example that you can transform.

Paul Lewis:
And that brings me, I think, to the larger point, which is, I know that transformation is the overused buzzword and that we hear it just way too much. But I honestly believe for retail, across the board, this is the time of the biggest transformation. The pandemic set the perfect storm, if you will, of all the right elements where you really have to now look at your business and rethink, like, “What does it mean? Is it the fact that I’m close enough to consumers to get that delivery in under an hour? Does that start to be an edge? Is it the experience of coming in the store? How integrated is my physical stores to digital, so that when people are looking for a product that’s hard to find, they can see that it’s actually in stock at my store?” Stores have notoriously had problems of not having the inventory that they think is on their shelves. So getting that finally right, all those are just huge opportunities to transform the business.

Paul Lewis:
And I think that the retailers who do are going to reap incredible rewards, and the ones that stick their head in the sand are going to find themselves in dire circumstances if they’re not careful.

Taylor Schreiner:
I’d agree with that, Paul. I think the way that I’ve thought about it is like Mr. Miyagi from Karate Kid.

Paul Lewis:
Yes.

Taylor Schreiner:
Not dating myself. You can commit to convenience and fulfillment, and you commit to that and you’ve got a winning operation. You can commit to the experience of being in the store and you can have a winning operation. If you try and do too many things. Or if you try to be too many things to too many people, as he said, “Squish like grape.” It’s not going to work. And that’s the people who don’t have really defined business models that meet very specific consumer needs for an audience that is devoted to them are going to have a hard time.

Paul Lewis:
Very well said. I can’t top a Mr. Miyagi quote. So I think that’s a good one to go out on. Taylor, it has been great. Having you on the show has always, Adobe brings so much insights and data and perspective on this rapidly changing industry. So we do just really appreciate you sharing that with us today.

Taylor Schreiner:
Thank you, Paul. It’s always a privilege to talk to you.00

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