It’s been a chaotic year for retail, and the madness may not yet be over. COVID-19 transformed the industry in a matter of months. Thousands of physical stores are now struggling while eCommerce has jumped five years ahead.
Consumer spending is equally divided. Millions of families have been hit hard by the pandemic, but many others have been able to set aside significant sums during lockdown.
What does it all mean when it comes to the holiday shopping season? We collected the opinions and forecasts of industry experts to find out.
Retail Sales Will Probably Grow, But Not By Much
Let’s start with the good news. Many analysts expect holiday shopping sales to grow year-on-year. Don’t expect anything close to double digits, though.
Deloitte forecasts a 1% to 1.5% increase in sales in their annual holiday retail forecast. Between November and January, they expect a total of around $1,150 billion to be spent. This forecast is actually a fusion of two different scenarios that Deloitte analysts think will occur.
There will either be a tiny year-on-year increase of between 0% to 1% or a significant rise of between 2.5% to 3.5%. Both are smaller increases than the previous years and will be the result of a K-shaped recovery.
“This year, one of two holiday scenarios will play out. Regardless of the scenario, however, the consumer’s focus on health, financial concerns and safety will result in a shift in the way they spend their holiday budget,” said Deloitte’s Rod Sides. “For retailers, this holiday season will continue to push the boundaries on the importance of online, convenience, the role of the store, and the criticalness of safe and speedy fulfillment.”
AlixPartners also forecast a small rise in holiday sales of between 1% to 2.6%. Analysts say the increase is in part due to a significantly longer holiday shopping period that will begin permanently a month early from now on.
“The traditional November-December holiday-season definition is meaningless this year—and, I would argue, for the future as well. For years now, holiday sales have been pulled forward earlier and earlier, thanks mostly to the explosion in online shopping,” says Joel Bines, Managing Director at AlixPartners.
Similarly, the International Council of Shopping Centers is forecasting a 1.9% rise in holiday sales, reports Ben Unglesbee at Retail Dive. The major shopping center trade group estimates sales to total $862.2 billion. Further, they expect the average adult consumer to spend $655 on items, with 73% expecting to spend the same or more than in 2019.
More Sales Will Definitely Be Made Online
Regardless of whether holiday sales increase, one thing is abundantly clear: There will be huge growth in online holiday shopping.
Digital transformation has accelerated by five years during the pandemic, says Salesforce’s Caila Schwartz, and that’s going to have a big impact on the 2020 holiday season. In particular, Salesforce predicts up to 30% of global retail sales will happen through digital channels. Continuing uncertainty around brick and mortar stores will help push this figure higher, adds Schwartz.
“We believe many retailers will transform their stores to be more optimized for fulfillment rather than shopping this Holiday season (more on that prediction later), pushing up the share of digital shopping, regardless of fulfillment choice, to an unprecedented high,” she writes.
It looks certain shopper preferences will change as a result of the transformation. A BlackFriday.com survey finds more consumers will shop on Cyber Monday rather than on Black Friday this year (30% vs. 24%). This is in contrast to 2019, where consumers preferred Black Friday.
Mobile shopping is looking equally popular. App Annie’s Senior Market Insights Manager Lexi Sydow says the firm expects Q4 of 2020 to be the biggest on record, with consumers spending over one billion hours shopping on Android devices. That would be an increase of 50% from Q4 2019.
The importance of an omnichannel solution can’t be understated. The team at Redpoint Global recommend brands “bridge the gap between physical and digital channels.” While a survey conducted via Dynata research found almost two-thirds (62%) of consumers would shop exclusively online this year, half plan to pick-up items in-store and curbside.
Online Spending May Lead to Back-End Problems
An increase in online holiday shopping is great news for DTC and other eCommerce brands, but the season won’t be free of challenges.
Brands will be used to a surge in visitors during the holidays, says Alissa Lydon on CMSWire, but they will not be used to the levels of traffic promised this holiday season. She recommends forgetting about previous benchmarks and testing web and mobile sites to ensure they can handle significantly increased traffic levels.
“That means performance testing on the front-end and load/stress testing on the backend,” she says. “You simply can’t afford to have your app or website crash when you have nothing but digital buyers.”
Stores will need a robust, flexible and responsive supply chain to ensure they have the best possible holiday season, says Mark Williams, Co-Founder and Managing Partner at On Tap Consulting. How fast brands can respond to changes in demand will be the difference between a profitable year end and “leaving sales on the table due to limited supply.”
A store’s digital channel is more adaptable than its physical location, Williams adds. “As inventory levels for online channels typically can be ramped or throttled more quickly vs. traditional brick and mortar channels, having a robust online strategy and the means to deliver incremental inventory late in the season is one key to capturing upside sales when they materialize.”
Rob Garf, Vice President of Industry Strategy and Insights at Salesforce, believes last-mile delivery will be the secret to success this holiday season. Around 700 million packages risk being delayed this year according to Salesforce data due to stores exceeding their shopping capacity. Earlier shopping cutoffs to ensure packages arrive in time is another factor that will be thrown into the mix.
Garf recommends that eCommerce companies partner with smaller last-mile delivery companies and use their physical stores as fulfillment centers, in addition to relying on large players like FedEx and UPS.
Brick and Mortars Face a Tough Black Friday But Longer Shopping Periods
It looks like it will be a particularly challenging season for brick and mortar stores. Sensormatic Solutions is forecasting foot traffic to decrease by as much as 25% this year. The one silver lining for retailers is that weekday visits are expected to increase, says Sensormatic’s President Bjoern Petersen, as consumers continue to avoid crowded weekend shopping.
Many stores are playing it safe when it comes to COVID-19. Major retailers like Best Buy and Walmart are letting employees spend time with their families by staying closed on Thanksgiving Day, report CBRE’s Meghann Martindale, Andres Rodriguez and Richard Barkham. “Additionally, they will modify Black Friday promotions and hours of operation to avoid early-morning lines and overcrowding amid ongoing social-distancing measures and reduced store capacities.”
It’s a good thing, then, that consumers will have a longer shopping season than before. According to a National Retail Federation survey, 74% of retailers believe consumers will spread their holiday shopping over several months. Nearly half believe shopping will start as early as October.
It’s in retailers’ interest to spread out demand as much as possible across the entire holiday season, Tory Gundelach, SVP of Retail Insights at Kantar Consulting writes. In doing so they can minimize crowds, alleviate supply chain stress and avoid surcharges imposed by the big shipping companies.
Gundelach also expects the big two shopping days, Black Friday and Cyber Monday, to “bleed together” more than ever. Consumers are expected to want to start shopping earlier this year, to avoid a repeat of the empty shelves and out-of-stock notifications that were prevalent at the start of the pandemic.
All these changes reflect a trend that has been going on for the last five or six years, says Dave Marcotte, SVP of Operations Strategic Advisory Services Americas at Kantar Consulting. Black Friday used to be simple, a case of heavily discounting that year’s must-have product. Now online retailers like Amazon have made Black Friday a much more virtual event.
“You honestly can’t say Macy’s or Nordstrom have as much to do with Black Friday other than they participate; they don’t drive anything, they don’t drive thinking. That wasn’t true 20 years ago, 20 years ago they set the pace, the tone, and what is going to be sold,” he said. If brick-and-mortar brands want to continue doing so, they need to innovate now more than ever.
Mashable’s Miller Kern offers one potential innovation. “A lottery system could be put into place where you could win (or even purchase) a time slot to get to do your shopping without a crowd of other shoppers,” she says. “It could be set up so that 10 or so people get to come inside to shop within a designated half hour or hour timeframe.”
Not only would this keep Black Friday shopping safe in a time of social distancing, but it would also be a change to previous years when consumers would wait in line for hours just to enter a store.
Buy Online Pick Up In-Store
NPD Group Vice President of Industry Analysis Stephen Baker predicts lineups won’t disappear this Black Friday, but they’ll take a different form. Rather than a line of people waiting for stores to open, there will be a line of cars waiting to collect their products outside.
Buy Online, Pick Up In-Store and other ship-to-store fulfillment methods could be the saving grace for many brick and mortar businesses this holiday season. Major stores have already adopted curbside pickup en masse, reports April Berthene at Digital Commerce 360. Of the 2020 Digital Commerce 360 Top 500 retailers, 121 offered curbside pickup as of August — up 536.8% from 2019. When you exclude brands that don’t have stores (and, therefore, can’t offer curbside pickup), nearly half (43.7%) offer the service.
Other brands would be sensible to follow suit. According to a Google and Ipsos survey, over half (53%) of consumers will choose to shop at stores that offer contactless shopping; 47% will buy online, and pick up in store or curbside.
Practical eCommerce’s Armando Roggio predicts click-and-collect orders to increase by more than 50% over the holiday period. “Omnichannel retailers — from Walmart and Target to single-location shops — will be able to offer the speed and convenience of online ordering coupled with the certainty of local pick-up,” he says. “This will be particularly important if the eCommerce supply chain or small package delivery services experience trouble during the holiday season.”
Whatever happens this holiday season, make sure you’re prepared. Read our analysis of last year’s holiday shopping season, prepare your store for the holiday rush and discover how your DTC eCommerce company can make the most of Black Friday without slashing prices.