As we look to round off what has been an incredibly disrupting year with the all-important holiday season, how is the retail industry likely to fair?

How are retailers reinventing the holiday season in 2020?

As we look to round off what has been an incredibly disrupting year with the all-important holiday season, how is the retail industry likely to fair? Will the usually busy holiday season provide some much-needed relief to retailers feeling the pinch of a tough year, or will sales and profits continue to struggle? We analyse the figures and identify the key trends that will rule this year’s holiday season.

Overview

In terms of general outlook, the majority of experts are predicting the coming season to be positive in general, but with less growth compared to previous years. ICSC and CBRE both predict less than 2% growth in sales for the period, compared to the average of 4.1% we typically see in the holiday season. Considering the economic and social disruption of the past year this lower than normal increase is to be expected, but ultimately will cap off what has been several months of steady growth in both the UK and the US. If we look at consumer polls, the outlook is similar, with a survey from Maybe* finding that its ‘Christmas as usual’ for 71% meaning they plan on spending the same as in ‘normal’ years.  But the way customers, and indeed retailers, go about this holiday season looks to be very different from previous years.

Let’s take a look at some of the key trends for the upcoming holiday season:

An extended season

Black Friday is the event that kicks off the holiday season, typically meaning high discounts, crammed shop floors and long ques outside of stores. Due to the realities of the pandemic many retailers have extended their Black Friday offerings to cover several days or even weeks, in an attempt to prevent overcrowding in stores. COVID may have moved the starting line of the season altogether however with prime day, typically taking place in July, pushed back to earlier in October. If ever there was a retailer big enough to move the needle by themselves, it was Amazon – and several retailers in the US including Target and Walmart launched their own deals at the same time to compete with the online giant. Customers will be keen to take advantage of these deals this year more than ever, and according to AlixPartners, 49% of consumers plan to start their holiday shopping by Halloween or earlier in the US, and in the UK Maybe*’s survey found that 65% of respondents have already started their Christmas shopping this year.

ECommerce will continue to run the show

It’s a statement everyone in the industry is very familiar with this year, but the defining feature of this holiday season will be a major preference for online shopping and eCommerce. While this trend has been steadily increasing over the years, the coronavirus pandemic has caused a huge spike in eCommerce as many consumers avoid stores and practise social distancing. As a result, Deloitte’s Annual Holiday Retail Forecast predicts eCommerce sales will grow between 25-35% year-on-year, compared to 14.7% in 2019. Similarly, the Maybe* consumer survey found a whopping 58% of customers plan to do their Christmas shopping online this year. This will be a test for many retailers, both pure-play and multichannel models, as the increased demand will test the capacity and strength of both their online channels and their fulfilment capabilities.

How will Brick and Mortar stores fare?

But what of the brick-and-mortar store? It’s no secret that physical retail has taken the brunt of the impact on sales and revenue this year, but will the holiday season offer some respite? Retailers hoping to make the most of the period will need to focus on ensuring safety and customer confidence in their stores, with 55% of consumers saying that COVID-19 safety tops their list of holiday shopping concerns according to a survey by PwC. Even with these measures in place, in-store holiday traffic is expected to drop by up to 25% this year in the US. For the UK, it may be even worse, with only 30% of shoppers heading to their local high street for Christmas, according to Maybe*. Black Friday specifically is where store traffic is likely to fall more than ever, with more than a third of US shoppers planning to avoid stores for Black Friday in the US, and a massive 91% said the same for the UK.

Bigger discounts for Black Friday?

So how are retailers planning to approach this year’s Black Friday to account for this? Alongside the extension of the event and the repositioning online, it seems many retailers are planning on discounting deeper and earlier this year. According to data analytics experts Edited, the most common advertised discount this year is 40-50% for apparel products compared to an average of 20-30% the previous year. For fashion retailers, in particular, this makes sense as the goal is to not only try and drive sales but is, perhaps, more importantly, an opportunity to sell older and slow-moving seasonal stock collected throughout this challenging year.

Store fulfilment will be vital for many

With the continued dominance of eCommerce, non-pure-play retailers are being challenged to keep up with the pace as their online channels have been, at least temporarily, promoted from supporting operations to the heart of the business. Two of the biggest retailers in the US have invested heavily in their ship-from-store capabilities this year,  with Walmart expanded theirs to 2,500 locations, whilst target reported fulfilling 90% of their online orders from store cutting the cost of fulfilment by 30%. Adopting such a strategy not only allows for such operational benefits but it makes the existing eCommerce arm much more durable – which is exactly what they’ll need to be this season.

Click-and-collect / Curbside continue to be popular purchase options 

Similarly, click-and-collect and Curbside services will be more important than ever for many retailers this season. Macy’s CEO called the use of Curbside a ‘big secret weapon’ for the upcoming holiday season. Just how secret it is may be up for some debate, according to customer surveys, 80% of shoppers expect to increase their use of these services over the next six months, and 85% have already significantly increased their use of curbside since the year began. The reason for this is clear as such services tick all the boxes of being convenient, safe and online-first.

‘The season will ultimately cap off what has been several months of steady growth in both the UK and the US.’

‘COVID may have moved the starting line of the season altogether however…’

‘eCommerce sales (are predicted to) grow between 25-35% year-on-year, compared to 14.7% in 2019.’

‘Retailers hoping to make the most of the period will need to focus on ensuring safety and customer confidence in their stores’

‘it seems many retailers are planning on discounting deeper and earlier this year’

‘online channels have been, at least temporarily, promoted from supporting operations to the heart of the business.’

‘80% of shoppers expect to increase their use of these services over the next six months’

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