Viewpoint: 2012 Holiday Spending: Leveraging Lessons Learned for 2013 Payments Success (February 2013)

By Krish Mantripragada, First Data

The busy holiday season may be over, but the work is just beginning for many merchants. The first few months of the year are a critical time for retailers to reflect on lessons learned and plan for 2013—and beyond.

According to First Data’s SpendTrend holiday reports, consumer spending was down from 2011, with Black Friday spending increasing only 8.3 versus 9.7 percent in 2011, and dollar volume growth only 4 percent in December. Yet, trends in holiday purchasing this year reveal not only what consumers spent—but how—offering valuable insights for retailers as they develop their plans for the remainder of the year. Looking at consumer spending during the 2012 holiday season points us to three key trends retailers should watch in 2013: The power of mobile technology, the influence of enhanced gift card offerings, and the continued importance of e-commerce.

Lesson 1: The Power of Mobile Technology

As the technology landscape continues to evolve, so do consumer shopping preferences and behaviors. Technological advancements continue to make mobile purchasing easier and more streamlined. Proof of this was evident in the rise in use of mobile devices like smartphones and tablets for holiday spending. In fact, 24 percent of consumers used a mobile device to visit a retailer’s site over Thanksgiving and Black Friday in 2012, up from 14.3 percent in 2011, according to data from IBM. The data also found that Black Friday mobile sales increased to 16 percent of total online sales in 2012, up from 9.8 percent in 2011. By offering convenient mobile payment options to customers, merchants can extend their reach and ultimately drive sales.

Trends in technology go beyond influencing mobile purchases but may also impact in-store decisions. Retailers can embrace mobile technology by developing a multichannel marketing strategy. This can include sending location-based messages directly to customers’ mobile devices or email accounts, or offering unique in-store incentives for consumers that “check-in” or download merchants’ mobile applications.

In the coming year, merchants should prepare for change as the lines continue to blur between in-store, online and mobile commerce. As consumers demand greater access to information, offers and payment functionality—anytime, anywhere—retailers should embrace not just mobile commerce, but what we call “universal commerce.” Universal commerce is the new reality where increased information and technology sophistication and access are transforming today’s commerce. By enabling consumers with seamless, personalized solutions across the full buying process, merchants can avoid falling behind the technology curve.

Lesson 2: The Influence of Enhanced Gift Card Offerings

The volume of gift cards purchased and received in 2012 remained consistent with 2011 levels, with birthdays and Christmas remaining at the top of the list of occasions to give gift cards, according to the First Data 2012 Consumer Insights Study (CIS).

The CIS found that the practice of giving gift cards as holiday gifts is on the rise, with more than half of gift card givers buying at least one closed-loop gift card last holiday season. With an average of 67 percent of consumers spending more than the value of their gift card in 2012, offering holiday gift cards is an opportunity to increase revenue for retailers. Gift cards also can provide the benefits of allowing merchants to access significant information on customer spending behaviors, and reaching customers through card-linked incentives, such as bonus reloads, loyalty points, and linking gift cards with credit and debit cards for convenient redemptions.

In 2012, 21 percent of consumers bought at least one e-gift card, up from 19 percent in 2011 and continuing a multiyear upward trend. Additionally, the average number of e-gift cards purchased by these consumers rose from 1.8 to 2.5 year over year. Consumers that like e-gift cards cite a number of benefits, such as immediate delivery, convenience for recipients and purchasers, and their environmentally friendly nature. Retailers shouldn’t overlook the growth of the e-gift card segment, particularly among younger and more tech-savvy consumers. The CIS found that the average value consumers say they would spend on e-gift cards across retail categories rose from $33 in 2011 to $37 in 2012, while the maximum rose from $51 to $60, proving that this growing category is also an opportunity for merchants to increase profits.

Lesson 3: The Continued Importance of E-Commerce

For today’s retailer, e-commerce should mean more than just added convenience for consumers, as it proved to be one of the most influential drivers of holiday sales. In fact, 2012 holiday online retail sales for Thanksgiving Thursday and Black Friday combined increased 29.3 percent over 2011, and online spending on Black Friday alone topped $1 billion for the first time, according to comScore Inc.  

One reason for the increase could be attributed to “showrooming”—examining merchandise in-store then seeking out the best deal online. According to new research by Aprimo/Teradata and Forrester Research, 1 in 5 consumers is now showrooming, presenting a unique challenge to merchants without an online presence.

Holiday spending in 2012 also showed that Black Friday isn’t the only time online shopping peaks. Merchants should note that online holiday shoppers spent 30 percent more this Cyber Monday than they did in 2011, according to IBM data, resulting not only from computer purchases, but mobile shopping on phones, tablets and other smart devices. In addition to offering online product sales, e-commerce enables retailers to leverage online technology by providing e-coupons, online daily deals, electronic loyalty programs and more.

2013: Looking Forward

While the 2012 holiday season already may seem like a distant memory, the season of change continues for customers looking for a streamlined experience across all channels to meet their unique, individual needs. Smart retailers will take advantage of the lessons learned from 2012 spending trends to leverage new and existing technologies and offer smart purchase options and incentives to consumers.

By taking a close look at 2012 consumer holiday purchase behavior, retailers can gain valuable insights on how to improve payments strategies, and ultimately, their bottom lines.

Krish Mantripragada is senior vice president of information and analytics solutions at First Data. In this role, he is responsible for providing data-driven solutions to power universal commerce. Prior to joining First Data, Mantripragada was group vice president at SAP, responsible for next-generation business analytics applications in sales, supply chain, consumer marketing and areas leveraging the power of real-time, social and cloud technologies. He holds a doctorate in supply chain management, dynamic systems and product design from Massachusetts Institute of Technology (MIT) and is a graduate of Indian Institute of Technology, Delhi. He can be reached at [email protected].