Are you ready for the most unusual holiday retail season yet? Whether selling or shopping in 2020, the only thing that can be expected is the unexpected.
By now retailers both big and small most certainly have their holiday strategies laid out. But with the health crisis at hand, even the best laid plans are subject to unpredictability and the ability to “pivot” will be paramount this November and December (last time we say pivot this year, promise!).
To help retailers craft their last minute strategies, RIS dove into the data and talked with experts to provide ammo for peak selling season twists and turns. Below we answer your most pressing questions.
What will shoppers spend, when and where?
The holiday shopping season is already upon us. Amazon’s annual Prime Day discount event was held Oct. 13-14 and many retailers have started promotions already, bucking any reliance on Black Friday to drive sales. Drawing crowds into stores is out this year; the CDC named “shopping in crowded stores just before, on, or after Thanksgiving” a high risk activity.
Walmart, for one, is spreading out its Black Friday sales over three events this year, the first of which started online at 7 p.m. on Nov. 4. “By spreading deals out across multiple days and making our hottest deals available online, we expect the Black Friday experience in our stores will be safer and more manageable for both our customers and our associates,” Scott McCall, EVP and CMO for Walmart U.S., said in a press release.
Health, safety and the livelihood of store employees are on consumers’ minds, with 61% saying they plan to minimize in-store shopping to reduce health risks to essential workers, according to the 14th annual Accenture Holiday Shopping Survey. The same number said they’d be inspired to shop with retailers that demonstrate visibly high commitments to health, safety and hygiene practices.
“The pandemic has reinforced, even strengthened, the social consciousness and call for transparency we’ve been seeing over the past few years,” said Jill Standish, a senior managing director at Accenture and head of its Retail practice globally. “Our survey findings show that this could be shaping up to be a very ‘human’ holiday, with a desire to support the people who have served our communities. Retailers need to respond — there has never been a more important time to be authentic and clearly communicate what they are doing to look after their employees and the wider community.”
Smaller footprints and transparency may be one way small-to-midsize retailers (SMBs) can compete with larger chains that are generally better equipped to handle a longer Black Friday Season, more reliant on e-commerce and curbside fulfillment.
25% of shoppers done?
While one study in early October found 1 in 4 consumers have already completed shopping for everyone on their lists, it also showed 48% had not started at that point.
“I think it’s important to recognize that we are seeing BOTH a stretching out of the season and an increased use of online shopping and related delivery techniques,” Steve Horwitz, Distinguished Professor of Free Enterprise for the Miller College of Business at Ball State University, tells RIS. “That combination still favors the larger firms. Smaller firms, and especially local mom-and-pops, are going to have to do whatever they can to up their game to deal with COVID-related restrictions and consumer desires.”
One of the biggest concerns for all retailers this year should be the expected increase of online shopping. As online sales have skyrocketed during the pandemic, it comes as no surprise that the National Retail Federation found the majority (60%) of consumers say they plan to purchase holiday items online this year. Retailers are already starting to manage customer expectations and push for earlier sales to ease delivery strain.
To combat shipping concerns, Horwitz recommends retailers emphasize more strongly curbside delivery.
“Another option retailers might consider,” he says, “is to engage in what economists call ‘congestion pricing:’ Offer free shipping or other discounts for people who are willing to order and ship gifts earlier in the extended season when demand is lower, perhaps including holiday wrapping. Then as we get closer to the December holidays, eliminate those discounts or raise shipping prices to help discourage large demand in the last week or two.”
- Total U.S. retail sales will increase by around 5% year over year during the holiday period, taking total October–December sales to $1.1 trillion. -Coresight Research
- In total consumers plan to spend $997.79 on gifts, holiday items such as decorations and food, and additional "non-gift" purchases for themselves and their families. -NRF and Prosper Insights & Analytics
- Consumers are expected to spend on average $1,387 per household, down 7% from 2019. - Deloitte
- Although 44% of consumers plan to spend the same amount on holiday shopping this year as they did last year, 41% said they expect to spend less — nearly triple the number from last year — and only 15% said they plan to spend more. On average, respondents said they expect to spend approximately $540 on holiday shopping this year, a 15% drop from last year. -Accenture
What will Consumers buy?
As COVID-19 causes consumers cut back on travel and other holiday experiences this season, one could predict those that have money to spend may be putting their dollars elsewhere.
Consumers are expected to spend $435 per household on non-gift purchases this holiday season, accounting for nearly a third of household holiday spending and representing a 12% increase from last year, according to Deloitte’s 35th annual holiday retail survey, as travel and socializing away from home is expected to decline 34% year over year, to $260 per household.
And shoppers appear to be trading up to more premium products, advisory and research firm Coresight Research finds, noting we could see a potential multibillion-dollar switch from services to products as consumers face reduced options for spending. In the holiday quarter of 2019, US consumers spent over $400 billion dollars on air travel, food service, accommodation and recreational and cultural services.
"Covid changed everything," Marie Driscoll, managing director Luxury & Fashion, Coresight Research, tells RIS. "The pendulum which swung increasingly away from product and toward services and experiences in the past decade is reversing and consumers are once again interested in product. Covid reduced consumers options for experiences: fine dining, performing arts, international travel and more, and products have captured their attention. Many consumers are working from home, which has reduced spending on work apparel, lunches out, the daily coffees as well as commuting costs.
"As we approach the holidays we have a 14.1% savings rate which compares with 7.6% in October 2019 and 33.7% at the pandemic’s onslaught this past April. If they’re working, consumers have money and their “fixed expenses” are down, enabling this trading-up phenomena. Anecdotally, a number of our conversations with shoppers reveal a desire to reward themselves, they’ve earned it after months of social distancing, cancelling foreign and domestic travel, and adjusting to home-schooling. Handbags, jewelry and luxury products have benefitted from this trend."
On the flip side of that coin, the pandemic has also fueled a switch to cautious spending, which may have an impact on what shoppers spend their money on this season. More than half (52%) of Americans report they will focus holiday gift-giving on more essential items such as clothes, food and money, according to a Propeller Insights and Allocadia survey. This find lends credence to the possibility that the apparel industry may finally cut a break. Six in 10 consumers (61%) said they would purchase as many or more clothing gifts than last year, making clothing the second-most-likely purchase this season, behind only gift cards (64%), according to Accenture.
And of course, don’t forget gifts for the children. About 6 in 10 (59%) parents will spend more this holiday season than last year, LendingTree found, and reported 55% of parents are anticipating holiday shopping debt. But retailers will want to target parent shoppers first. The same survey found 44% of parents with kids under 18 are already finished their holiday shopping, and that number rises to nearly half (49%) of parents with household incomes of $100,000 or more.
How can retailers reach holiday shoppers?
While the answer may be different this year, the question of how to reach and appeal to holiday shoppers is posed every peak selling season.
Looking to getting wary consumers back into brick-and-mortar stores for the holidays? Accenture suggests retailers may find success through appointment-based shopping. In fact, nearly two-thirds (62%) of consumers said that booking a time to shop in person could inspire them to physically return to a department store, consumer electronics retailer or homewares retailer.
Target has tapped into this tactic and is offering Pre-Trip Shopping Reservations this holiday season. It’s continuing to monitor and limit the total number of people inside stores at one time to ensure consumers have enough space to shop safely. Target customers can visit Target.com/line to see if there is a line outside their local store, and if so, they are able to reserve a spot in line. Target will then text the shopper to notify them that it is their turn to enter the store.
When it comes connecting with shoppers digitally, Allocadia found 57% of Americans plan to purchase gifts through social media from ads or marketplace. Fourty-one percent of consumers believe that TV ads are amongst the most influential media channels in terms of inspiring their holiday purchase decisions, according to a study conducted by Unruly and Tremor Video.
To shed some insight into how retailers are reaching shoppers this season, RIS talked to Angela Hsu, SVP of Marketing and eCommerce for Lamps Plus. The lighting retailer has always had a strong e-commerce presence, but knew online shopping will be even more important this holiday season. To reach holiday consumers, Hsu says Lamps Plus is focusing on key online marketing channels such as search, display and social, while testing other channels like connected TV (CTV) and podcasts to drive awareness to new shoppers.
“E-commerce competition will be higher so knowing where our customers are and how to engage with them will be even more important,” says Hsu. "We have been testing ads on streaming videos on connected TV and other Internet-connected devices, she notes. “With advanced audience targeting capability, we can target potential customers who are in-market for lighting, who recently moved or are home decor enthusiasts with a higher propensity to engage with our brand or purchase.
“For potential customers who watch our ads on smartphones or desktops, we can subsequently retarget them via display ads. Additionally, we can retarget site visitors or identify lookalike audiences for our CTV campaign. Most importantly, we are able to attribute sales and measure return on ads spent for our CTV campaign."
Lamps Plus is prepared to stay flexible this season and monitor customer sentiment throughout the holidays.
"With a level of uncertainty ahead with COVID-19 and the supply chain status, we only commit to marketing campaigns that allow us to pause or cancel,” says Hsu. “We monitor sales and spend daily and make adjustments accordingly. During the past six months, at times, we’ve held off on certain creative and campaigns to be sensitive about global current events.
“We treat each campaign as a learning opportunity, constantly testing and discovering new opportunities while continuing to leverage past successes."
How can Retailers Manage Shopper expectations?
As the retail industry gets deeper into the holiday season, managing expectations may be needed to keep consumer loyalty. Accenture found consumer patience is waning: more than half (56%) of survey respondents said they won’t shop with a retailer again after an unsatisfactory delivery experience.
“Given the pandemic is still making consumers wary about visiting stores, retailers must ensure that their e-commerce capabilities are up to the task and that they have transparency into demand changes and inventory — with a laser focus on seamless experiences and fulfillment efficiency,” said Brooks Kitchel, head of Accenture Strategy’s retail industry sector. “They will need to build resilience and agility into their networks and those of their partners to address rising delivery costs and avoid supply chain crunches.”
In addition, while consumers move more towards online shopping, free return shipping is expected to be in high demand as 70% of consumers say they prefer a retailer that offers this option for a more convenient shopping experience, according to Deloitte. In light of recent safety precautions, 67% of shoppers say they plan to steer clear of in-store returns, opting instead for mailbox drop-off (67%) or porch pick-up (66%) options, according to ShipStation’s second annual national consumer study.
Whether selling online or in stores, transparency is key this holiday season. Offering convenience to shoppers should be top of mind for every retailer, big or small, but not at the expense of being able to deliver on this offer safely and reliably. While peak selling season is important, shopper loyalty lasts long after the last gift is unwrapped.