Prior to the trials and tribulations of 2020, retail was on track to make some much-needed changes.
Fast fashion was on the decline as shoppers began to prioritize quality and longevity over fleeting trends. The industry’s waste problem, stemming from mass overproduction, was starting to weigh on the minds of conscious consumers—even those firmly tethered to a cycle of constant consumption.
Brands, too, had been beginning to pull back on discounts that devalued the very products they were trying to sell. In 2019, many labels opted out of the biggest shopping weekend of the year, as they attempted to break free from margin busting to pull in profits.
The past six months have changed the industry’s trajectory, though. With many brands and retailers struggling just to stay afloat, price slashing and promotions have become the only means by which many are eking out the sales they need to survive.
This relative pause in normal life activities has helped enlighten shoppers, as well as the brands that serve them, according to retail market intelligence company Edited.
“The uprising continues against the industry’s return to a ‘normal’ where excess consumption and profits is prioritized over people and the planet,” Edited said. “As a result, the relevance of Black Friday in a post-Covid world is being questioned and retailers explore alternatives to mass discounting.”
Market analyst Kayla Marci told Sourcing Journal that brands and retailers have long been feeling the impacts of the near-constant, aggressive discounting structure that had come to define retail. “Discounts are no longer restricted to the traditional retail calendar, and products are on sale more often than not, training consumers to avoid purchasing full price,” she said.
The pandemic and its economic impacts have certainly emphasized shoppers’ impulses to become more price conscious. However, Marci said, that doesn’t mean they’ll be reining in spending completely.
“Lockdown provided an opportunity for consumers to declutter and analyze what is really essential, as well as take an approach to living with less,” she said. “Going forward, there will be more of an evaluation surrounding products that have longevity and provide more value.”
The promise of “constant newness” is still a defining factor for retail, but Marci believes the pandemic has prompted further “fast-fashion fatigue” for many shoppers who have been making do with just a portion of their wardrobes since March. “This is particularly noted in the Gen Z cohort, who are helping shift the consumer mindset to favor a circular economy,” she added.
Social justice has also become a focus for the fashion industry this year, and Marci believes retailers may reposition their strategies and opt “to give back to communities as an antidote to the traditional excessive consumerism associated with Black Friday.”
On a tactical level, deep discounting may not be possible for many brands this year, she added. Edited data revealed that online discounts this spring reached Black Friday levels from 2019. Markdowns throughout the month of May averaged 44 percent, as flailing retailers attempted to sell the inventory that had amassed due to store closures.
Traditional Black Friday sales at malls and shopping centers across the country will almost certainly be scaled back this year, as social distancing measures will likely remain in place, limiting traffic.
Still, Marci said she expects gift-giving to remain “as important as ever” this holiday season, as consumers attempt to retain the traditions that ground them. “Many consumers are benchmarking Christmas as somewhat [of] a return to normalcy, hoping to be reunited with family and friends separated during the pandemic.”
However, Forrester‘s Sucharita Kodali says about one-quarter of shoppers have already said they’ll spend less this year during the holidays than they did in 2019. “Many of those people are saying they’ll spend less on gifts as well,” she said, which doesn’t bode well for Black Friday and Cyber Monday ,which have long served as days for shoppers to check loved ones off their lists.
Still, brands can’t completely opt out of the November shopping holidays. “Not doing something would be unthinkable,” Kodali said. “It’s a tradition as much as anything.”
The bigger issue for brands is what they’ll be able to pull off with the inventory they have, she added. Some canceled orders for fall during the peak of the pandemic, which may leave their warehouses barren this season, while others may be saddled with spring/summer merchandise that didn’t resonate with shoppers’ at-home lifestyles.
Kodali believes many retailers fall into the former camp. “It seems that many are thin on what they even have in inventory, and that will probably extend through the fourth quarter.”
Historical spending doesn’t necessarily paint a negative forward-looking picture, though.
“Consumer spending actually hasn’t been too bad in the aggregate,” Kodali said of the past six months, adding that it’s “no doubt because of the very generous stimulus package” issued by the federal government in April.
“There were some disproportionate winners like grocers and online pure plays,” she added. In the absence of that influx of cash, though, Kodali said retailers can expect to see “softened sales in the months to come because the lowest-income demographics will have less to spend.”
Paula Rosenblum, co-founder and managing partner at RSR Research, said she was surprised to see sales sustain through the summer months, though she also theorizes that government checks allowed shoppers to spend more freely than they might have otherwise.
“Now that Congress has stalled, it’s kind of an open question,” as to whether that spending can continue into the fall, she added. If the House and Senate can come to a deal to “keep consumers whole, the economy will plug along.” If not, she said, “consumers will go into their shells and spend less” during the fall shopping holidays.
The next stimulus package—should it pass—will have massive implications on Black Friday spending, along with the results of the upcoming election. “It’s not a matter of who is elected, but how the losing side reacts,” Rosenblum said. “If there are riots in the streets, consumer spending will indeed contract.”
When it comes to consumer appetites, Rosenblum said shoppers have demonstrated they are still eager to spend on items that serve a practical—and immediate—application. Sporting goods and basic apparel items have done well during lockdown because shoppers are socially distanced and bored.
“But it’s not an accident that Brooks Brothers is in trouble,” she said. Many shoppers aren’t planning to step foot into their old offices for months, and the need for more formal or professional options is virtually non-existent while they continue to work from home.
No matter what, Rosenblum believes Black Friday and Cyber Monday sales are well worth retailers’ time. “I think there will be massive sales of product that never sold from March through June,” she said. “More product will be coming, and it’s better to just get the merchandise out of the store and off the books.”
Rosenblum likened retail merchandise to the opposite of a fine wine. “It doesn’t improve with age,” she said.
She also believes it likely that shoppers will do their part to support local businesses this fall, and that could represent an opportunity for the often overlooked little guys on main streets across the country.
In 2019, Klaviyo found that nearly 190 people shopped online during the five-day period, up 14 percent from the year before. Cyber Weekend accounted for nearly 5 percent of overall online sales last year, generating about $28.4 billion.
Despite its manifold challenges, 2020 could see even greater online spending over the holiday season—to the tune of $51.1 billion in sales, Klaviyo suggested.
Retailers will begin discounting even earlier online, the firm predicted, to head off a season filled with competitive virtual commerce. Physical stores will be encumbered by mandatory social-distancing restrictions, along with shopper anxieties about the virus’ spread. Both factors will limit foot traffic to brick-and-mortars, they said.
Consumers will also be limited when it comes to holiday travel this year, and will need to do most of their gift giving from afar.
The platform’s data from Cyber Weekend in 2019 revealed that the majority (60 percent) of shoppers who made purchases during that period had engaged with a brand via email prior to Q3 that year.
That’s good news for digitally native brands in 2020. New purchasers drove the majority of online sales during the pandemic’s peak in March, and with each order, brands were able to capture a shopper’s email and “begin building a relationship with their subsequent marketing.” Website forms captured 100 percent more consumer emails throughout April and May, Klaviyo said, indicating that shoppers were displaying interest in discovering—and staying in touch with—new brands online.
“Never in the history of e-commerce has there been such a condensed period of relationship-building between brands and consumers” than in 2020, Klaviyo said. Having laid the groundwork for shopper loyalty earlier in the year, shoppers could return in droves to the brands they discovered this spring.