Just as coaches dissect every play after the Super Bowl to build a winning strategy for the next season, retailers, following a record-breaking 2024 holiday shopping season, find themselves with a comprehensive playbook of successes and areas needing improvement. Each transaction, website click and customer interaction during the holidays serves as a crucial data point.
By understanding what drove wins and where the plays fell short, retailers can develop comprehensive plans to improve every facet of the customer journey—from sparking initial interest right through to post-purchase support.
The Checkout Bottleneck: A hidden revenue killer
As retailers sift through the vast amounts of data collected during the holiday season, the checkout process emerges as a critical area demanding close scrutiny due to its direct impact on sales conversion rates. This stage is pivotal in the customer journey, where the presence or absence of efficiency can greatly influence the overall shopping experience.
Even minor delays during checkout can lead to a dramatic increase in cart abandonment rates. Additionally, studies have shown that 48% of shopping carts are abandoned due to excess shipping fees and taxes added during the final stages of checkout—underscoring the need for transparent, optimized checkout processes.
Often, these bottlenecks arise from inadequate integration and processing capabilities within backend systems. Tax engines, pricing tools and eCommerce platforms must be robustly integrated to handle real-time, complex calculations such as sales tax, VAT and GST. These taxes not only vary widely across different jurisdictions but also frequently change, adding another layer of complexity to the challenge.
To tackle these issues, businesses must optimize their systems for both speed and accuracy. This involves leveraging advanced technology capable of efficiently managing dynamic tax rates and rules, thus minimizing delays and errors that can frustrate customers and result in lost sales. Additionally, simplifying the checkout process by eliminating unnecessary steps and clearly communicating all costs—including taxes and additional fees—upfront is essential for maintaining customer transparency and trust.
For instance, during Black Friday and Cyber Monday 2024, users of Sovos’ Tax Determination software successfully processed nearly 300 million real-time tax calculations, demonstrating the effectiveness of advanced technological systems in managing large volumes. In contrast, retailers relying on outdated systems experienced operational breakdowns under high demand, leading to missed sales opportunities and customer dissatisfaction. This stark difference underscores the critical importance of modernizing checkout processes to enhance customer experiences and secure sales.
Returns and refunds: the untold post-holiday challenge
The challenges for retailers, however, do not end with managing the rush of Black Friday and Cyber Monday. According to Salesforce, the 2024 holiday return rate escalated by 28% from the previous year, leading to a staggering $128 billion in returned merchandise. This shift from generating sales to processing returns underscores the necessity for robust systems that can adeptly handle the complexities of post-transaction adjustments.
Tax reconciliation for refunds can be a logistical nightmare for organizations that do not have the proper systems in place. Every return potentially alters the total taxable sales amount, necessitating adjustments in sales tax filings that were calculated based on the original sale. The challenge intensifies with the volume of returns post-holiday, as each transaction needs to be revisited and revised to reflect accurate tax liabilities.
Systems must be designed to handle these adjustments efficiently, which requires sophisticated software solutions that integrate with existing financial systems to allow for automatic recalculations of taxes owed. This ensures that all financial records are up-to-date and compliant with state and federal tax laws.
The bottom line: compliance is retail’s best investment
In retail, compliance—particularly in areas like tax, data security and consumer protection laws—is often viewed as a necessary burden, a line item on risk management spreadsheets. However, forward-thinking retailers are beginning to understand that robust compliance strategies can serve as a significant competitive advantage.
With the dust fully settled on last year’s holiday rush, the most crucial question isn’t just “How did we do?” but rather “How can we turn obstacles into opportunities?” Looking ahead to the 2025 peak season, retailers who take these lessons to heart and proactively invest in refining their systems will be best positioned to meet customer expectations and navigate the complexities of a dynamic retail environment.
