The global pandemic has changed virtually every aspect of everyday life, and holiday shopping is not immune to this upheaval. Black Friday has traditionally been the big day for super deals, but like so many other things in 2020, this time it will be different.
The backdrop of the coronavirus doesn’t mean there won’t be any blockbuster deals planned for Friday, just that some promotions could look similar to ones already offered last month. And forget about hordes of shoppers in the wee hours waiting on a line to get into a store to purchase that doorbuster deal. It’s not just because of social distancing. Retailers have been bringing forward promotions as early as last month, including Amazon, which hosted its Amazon Prime Day in October, a change from its usual July timetable. Many retailers have been fretting about how they’ll be able to fulfill the surge in online orders in a timely manner and one way to counter that has been to start the holiday season early.
Last Thursday, when Macy’s Inc. reported third-quarter sales, CEO Jeff Gennette said the retailer brought forward its “friends and family events into the third week of October. And you can see what we’re doing now with the Black Friday specials, kind of drying those off of the Black Friday event and bringing that earlier into the month of November. We did have some volume that pulled forward.”
“The holiday season has historically been starting earlier and earlier, and with the change in the Amazon Prime date this year, it’s kicked off earlier than in years past….In the past couple of years we’ve seen a shift from material things to more experiences [but] with the onset of Covid-19, many people are turning from experiences to buying more tangible goods,” Natalie Kotlyar, BDO partner and retail and consumer products practice leader, said. She expects to see an uptick in purchases during this holiday season.
According to Kotlyar, one other change due to Covid could be that we won’t see the usual lull that occurs after Cyber Monday until mid-December. That’s because retailers will continue to push promotional events “in order to get consumers to buy early,” she said.
With all the ongoing promotions since October and retailers ordering less inventory in general, there’s also a chance that consumers who don’t buy early could end up missing out on items that sell out, Kotlyer said. That could be a problem for electronics, home goods and some athleisure items, but probably not so much for handbags and most non-athleisure apparel.
While some shoppers will take money earmarked for travel and elect to spend it on luxury goods or bigger-ticket items, most consumers said they expect to spend less overall during the holidays.
“The importance of Black Friday has been diminishing for some time. What’s going to be really important is the overall trend, not just Black Friday per se. We’ve seen some strength across the board going into November,” Christina Boni, vice president and senior credit officer at Moody’s Investors Service, said.
She also believes that consumers who see something they want to buy should probably buy it sooner rather than later. “There’s definitely some pullback on the investments retailers are making. They are very conservative given the retail environment,” Boni said.
However, that’s not a bad thing for retailers. “Third-quarter margins are improving for many retailers as average unit retails are rising because there’s less inventory in the systems. Promotions are still there, but more targeted. While the amount of inventory is lower, that also supports price integrity across the board,” Boni said. That’s better than investing in more inventory and then having to deal with a higher margin discount due to markdowns, she concluded.
Some savings from not being able to travel could translate into some luxury spending, whether that’s “jewelry or a handbag as a way for her to feel good. We all need to feel good these days,” she said.
The National Retail Federation, one of the retail industry’s trade groups, delayed its holiday forecast this year due to uncertainties connected to Covid and the U.S. presidential election. It finally provided its annual outlook on Monday, but did so with a wide berth as its projection for Holiday 2020 ranged from a sales gain of 3.6 to 5.2 percent from 2019’s numbers.
Retail analysts at Customer Growth Partners, citing personal savings rates above 14 percent, expect a robust 5.8 percent year-over-year increase for the November and December holiday period, but that’s tempered by concerns for the millions still unemployed and by uncertainty as to a new federal Covid-related aid package before 2021. CGP’s president Craig Johnson said there’s concern over how sustainable the growth this year will be going forward, given the “uncertain pace of Covid, particularly on employment growth.”
In a McKinsey study on “2020 Holiday Season: Navigating shopper behaviors in the pandemic,” the consulting firm found that consumers this year are price sensitive and expect value and better shipping costs.
As for years past, “Black Friday dominates as the day that shoppers plan to spend, while the recent Amazon Prime Day came in a close second. In the United Kingdom, Black Friday overtakes Boxing Day as the most popular shopping day,” the study found. Results from the study noted that Black Friday is now also the most popular deal day in France and Germany.
But other concerns stemming from Covid uncertainties could change that, whether its logistics related to the back end at fulfillment centers or on the front end as consumers, cognizant of social distancing rules, elect to bypass going into stores to shop.
“In the situation that most retailers are in, where they are now having to move so much of their sales through the online channel, they’re worried about the capacity to deliver products to homes—whether the third parties are going to be able to get them there and whether their own warehouses can keep up with the online demand. So one of the interesting things we’ve seen about Black Friday is retailers now starting to spread out these blockbuster events, so they’re able to ‘level load’ their supply chains and ship products in a way that doesn’t create a massive spike that they can’t fulfill,” Brian Ruwadi, a co-author of the McKinsey study, said during a company podcast event.
According to co-author Tamara Charm, who also spoke at the event, “We fielded our research before a lot of the recent shutdowns in Europe, and there was already a lessening of folks wanting to go in stores—people wanted to go online. I think we’ll see more of that. Consumers are wanting to participate in these events in a modified way: either completely online or buy online and pickup in store or pickup outside the store. We’ll see a lot more physical distancing and a different way of delivering so that retailers can not only meet the demand safely but also manage delivery, inventory and their profitability.”
Other changes include some retailers creating “dark stores,” converting a door to a warehouse to use for fulfilling online orders. Moreover, another finding in the study has U.S. consumers with under $50,000 in income planning to reduce holiday spending more than higher-income consumers. The shift, likely due to high unemployment, translates to an “economic reality that people are in reduced circumstances, and what’ve seen throughout the Covid-19 crisis is that even those whose incomes haven’t been affected are more conscious of what they’re spending and care more about the value of what they’re spending on, given the uncertainty of the times.”
In a holiday consumer survey from the equity research team at Jefferies, disclosed on Monday, 82 percent said they intend to spend the same (at 55 percent) or less (at 27 percent.) And 74 percent of those who said they will spend less cited financial distress (at 40 percent) or having less due to a job loss (at 34 percent) as the reason. As for where they will shop, 51 percent said they expect to spend more online. The Jefferies team surveyed 1,400 consumers regarding their holiday intentions.