‘Tis the season of making up lost sales.
With many retailers still seeking a return to normalcy following months of store closures and continued Covid-compromised foot traffic, fingers are crossed that the gift-giving season could provide a much-needed boost. For many, this is leading to a quicker than normal shift in focus from back-to-school straight to an early holiday.
Many retail executives have said they are already prepared and will start promotions earlier in the season to spread out consumer purchases and ensure they can meet demand. It’s certainly one way to ease some of the stress in the hunt for gifts over a condensed six-week selling season. But it’s also a safeguard to avoid the risk of being unable to get goods to customers on time. Retailers are expecting a spike in shipments as consumers continue to primarily shop online to avoid heading out to stores. Carriers such as UPS and FedEx are already planning for the avalanche via a rate hike.
There’s also the question of what exactly consumers will be shopping for.
Probably whatever can help them feel a bit of normalcy—and less anxiety—against the backdrop of a stagnant economy and a possible second-wave of coronavirus infections. And with lowered foot traffic in stores, many retailers this year have decided to close on Thanksgiving Day. That move will allow everyone, including store associates, to spend some me time at home with their families, according to retailers.
A Deloitte study on Holiday 2020 predicts a flat to 1 percent year-over-year sales increase, presuming a lack of an effective vaccine, continued school closures and the expiration of the unemployment benefit supplement. It pegs sales up 2.5 to 3.5 percent in a second scenario where there’s the creation of an effective vaccine and a federal pandemic relief bill with an unemployment insurance benefit supplement. Regardless, Deloitte’s retail and distribution teams are projecting overall holiday spending between November and January to be in the range of $1.147 trillion and $1.152 trillion. Strikingly, e-commerce sales are projected to grow by 25 percent to 35 percent, versus 14.7 percent in 2019. That would see e-commerce holiday sales generating between $182 billion to $196 billion this season.
But retailers also will have to hope they have the right goods in stock, and that consumers will be in the mood to shop, particularly if there’s another spike in the the rate of Covid-19 infections that has them shifting their focus back to essentials, such as food and other necessities.
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For now, retailers are hoping for the best and planning to focus on home and family gatherings over the holidays—and as far as strategies go, they could very well be onto something.
Making holidays special
Sometimes what people want most during times of upheaval is a return to the familiar.
“One of the learnings we’ve had over the years from storm situations [was that] if a storm hit in a particular area that we would go in and [pull out] holiday decor from those markets,” said Craig Menear, chairman and CEO of The Home Depot Inc., who was a keynote speaker at the Goldman Sachs 27th Global Retailing Conference last week. Though the home-improvement chain thought “that’s not where their mindset was going to be and what we learned over the years is, actually, it’s exactly where their head is, they want some form of normalcy in their life,” he added. “And so they actually fully focus in that area.”
Menear said The Home Depot has reconsidered its approach, especially for the fourth quarter, “because we suspected that the customer would react in the same way that they do in a storm situation and that they want that kind of normalcy overall.”
Menear is not the only one who thinks consumers will choose to hunker down at home and celebrate the festivities with their families.
“The only thing we’ve announced so far is we’ll be closed on Thanksgiving Day, which is something new for us,” Walmart chief financial officer Brett Biggs said at the Barclays Global Consumer Staples Brokers Conference last week.
Thanksgiving, he added, “is still two-and-a-half months away, which in today’s world seems like a long time,” though Walmart’s merchant team is working overtime to invest in where the signals show the holiday season will shake out.
“Holiday is going to look a lot different than prior years,” Biggs mused.
Walmart, according to Biggs, is well positioned for the holiday. “I think people will want to make this special, so I would expect things [such as] Trim-a-Tree and other things like that [where] people want to decorate their homes will probably be pretty big this year,” he said. “We’ve seen that and other times when there has been a downturn in the economy that people really want to go out for the holidays, and there’ll be some places where they’ll be more conservative.”
Home, luxury and more shopping options
For retailers, Black Friday and the week before Christmas are typically when people throng stores and malls hunting for deals. With Covid-19 still hanging around, it’ll be up to retailers to figure out how to reduce crowding while accommodating shoppers.
Jumpstarting Black Friday earlier in the season to pull demand sooner is one option. And in fact, the industry is forging a new venture called 10.10 Shopping Festival to rival Alibaba’s Singles’ Day, dubbed 11.11 because it is held on Nov. 11, and Amazon’s Prime Day, which this year has been moved to October from its usual mark on the summer calendar. Deborah Weinswig of Coresight Research cam up with the idea for 10.10, bringing in shopping app Shopkick and contemporary fashion discovery platform Fashwire as partners. During a webinar Wednesday, Weinswig cited the need for an earlier start to the holiday season, pointing to anticipated Covid-19 supply-chain constraints.
According to Weinswig, the idea for 10.10 is to focus on a day and a weekend, and then incentivize consumers to purchase during this time. In addition to attractive discounts by unnamed participating retailers and brands, Shopkick’s Kicks rewards enable consumers to use Kicks to buy things for themselves or donate to the charity of their choice. Fashwire’s participation helps consumers discover its network of 250 emerging global designers.
What happens after the event and how 10.10 evolves is still anyone’s guess. “We all have big aspirations,” Weinswig said, adding that there’s an opportunity to revisit having another shopping day in January as a way to “elongate the season.”
Enticing consumers to shop might boil down to delivery and payment options, in addition to having the right goods in stock.
Macy’s CEO Jeff Gennette has hinted at starting promotions as early as right after Halloween. He’s said Macy’s will focus on products for home, and expects trends around items like baking accountrement will continue into holiday as families prepare for small gatherings.
But the CEO has other plans as well.
Gennette said curbside weapon, which Macy’s hadn’t fully deployed for peak season last year, “is going to be a big secret weapon for us this holiday.”
“When you look at the service scores of customers we’re going through, [such as] the speed and the safety of curbside pickup, we think that’s going to be huge for this holiday season, if they’re not comfortable to walk into a store,” he said in July during Macy’s first-quarter earnings call. Store fulfillment through Macy’s At Your Service program also will be big, whether that’s buying online and shipping to store for pickup, or having the items pulled from store inventory.
The focus on omnichannel dovetails with new research showing that retail is investing in cross-channel fulfillment for the November-December time frame. A PayPal study found that 46 percent of retailers will offer curbside pickup for the holiday season. One in three retailers is implementing cashless, contactless payment options in stores, while 43 percent said they are planning to increase their online inventory to prepare for the expected crush. And some options that merchants will be offering include financing and other flexible payment offerings, such as PayPal’s “buy now, pay later” plan that will be available later this year.
Digital sales will continue to grow, with as many as 39 percent of merchants planning to sell products outside of their own websites on third-party digital marketplaces, PayPal said. The digital trend isn’t going away anytime soon.
Online sales were 25 percent of Macy’s business in 2019, and now “it’s over 40 percent, and we expect digital to remain as a higher penetration of sales moving forward,” Gennette said last week at the Goldman Sachs retail conference. “A growing digital business is a good thing and growing digital profitability is within our line of sight.”
The company is going all in on gifting, with options in the under-$15 range but also available at luxury price points at Macy’s and Bloomingdale’s.
“From textiles to shoes to handbags to mattresses to diamonds to luxury beauty and fragrances, luxury has proved to be strong across almost every category of business. For instance, at Bloomingdale’s, luxury represented 30 percent of the [second quarter] 2020 business compared to 20 percent in [second quarter] of 2019 and is trending 23 points better than the total company trend,” Gennette said, adding, “we’ve modeled both upside and downside scenarios depending on the path of Covid-19 and the trends in consumer spending.”
Thanksgiving dinner, home and digital
At Kohl’s second-quarter conference call, CEO Michelle Gass said stores were “instrumental in fulfilling nearly 50 percent of digital sales. Customers picking-up orders in the store accounted for 15 percent of digital demand, with store driving up accounting for half of this.”
“Looking ahead to holiday, it will be a holiday season like no other. Covid is changing all aspects of customer expectations, and we are adapting our plans in response. To start out with, we’ve made the decision to not be open on Thanksgiving Day, allowing more of our associates to be home with their families,” she said. “In addition, we expect many customers to get ahead of their holiday shopping, and increasingly leverage our digital and omnichannel capabilities. We are making adjustments to drive and capture anticipated early holiday demand beginning in October across all of our channels.”
Describing Kohl’s as the destination for the casual lifestyle, whether working from home or dressing more comfortably and casually, Gass said both trends will carry on beyond Covid-19. “We have a compelling holiday assortment that speaks to how our customers are living today. We will emphasize cozy and comfort, our home category and kids’ toys. We feel really good about the content and relevance of our key holiday items, as well as our ability to chase demand. So, based on the continued Covid uncertainty, it remains prudent to plan the business conservatively and chase any upside as it unfolds,” she said.
Gass said the company has been paying “very close attention to what will be the shifts in consumer behavior.” While the department store expects customers to start their shopping earlier, Kohl’s will likely start promoting holiday as early as October. On the product side, Gass pointed to home, toys and active apparel as key for holiday, as well as value and practical gifts.
Trading down, and more on Christmas at home
Dollar General’s digital programs are reaching a new but untapped customer base through analog advertising and promotional marketing strategies, CEO Todd Vasos said last week during a Barclays consumer conference.
“If you look at Covid, now what we’re seeing is acceleration of that little higher income, more digitally savvy consumer, and what we’re seeing there is not only did she come in looking for goods because she really needed it, what we’re finding is that she continues to do repeat business with us,” Vasos said. “We are a [retailer] that does very well in good times and we do well in bad times. In bad times our consumers just need us more, and an even broader selection and cross-section of consumers need us more.”
The dollar store has been gaining market share because of its introduction of DG Fresh grocery items and NCI, its non-consumable initiative, Vasos said, noting that back in March and April, the consumer was trying to find and fill her pantry with everyday items. Over the past two months, she’s no longer doing the full pantry refill, but instead is replenishing the stock that she’s using in her home.
“If you think about the Dollar General consumer and even this [trade-down] consumer that we talked about, you know for us it is more about Christmas in your home—it always has been. So when you think about our seasonal offering, it’s about decorating your home, some small gifts for the kids and relatives,” Vasos said.
Dollar General chief operating officer Jeff Owen, said the company’s merchandising teams have been able to “accelerate some of the holiday merchandise into the stores well ahead of normal, because of the progress we’ve seen in some of the sell-throughs this summer.” Dollar General is testing a contactless pick-up service in select stores.