By most accounts, we are already a month into this year’s holiday shopping season thanks to the coronavirus pandemic. Retail journalist Daphne Howland (@daphnehowland) observes, “To buy more time, the industry is embarking on the holiday season earlier than ever this year, but, despite the respite evident in September, retailers can’t escape the prevailing challenge of the moment — an unprecedented level of uncertainty.”[1] The September respite to which Howland refers was an uptick in retail sales. Craig Johnson, President of Consumer Growth Products (CPG), explains, “After the COVID store closures crushed sales by 12% in April, traffic and sales have rebounded ever since, culminating in the blow-out September retail sales data, up 8.8% from 2019.”[2] As a result of this upward retail trend, CPG “predicts a strong 5.8% year-over-year increase in retail sales for the November-December holiday season.” Not all predictions are so rosy. Ben Unglesbee (@Ben_Unglesbee) reports that Deloitte analysts aren’t quite so sanguine about holiday sales. According to Deloitte, “This year’s retail holiday sales are likely to be muted, with growth of 1% to 1.5% from last year.”[3] The only thing one can reliably say is that questions remain about holiday sales.
Consumers are looking for a return to normal
Howland surmises the pandemic lockdown may hold unexpected surprises for retailers this holiday season. She explains, “The pandemic has prevented many U.S. consumers from enjoying their summer the way they like to, with sports, entertainment, travel and dining out (at least indoors) not an option. That has left their bank accounts with more money just as they’re contemplating what to do at the holidays.” Dan Berthiaume (@DBerthiaumeCSA), Senior Editor Technology at Chain Store Age, reports a recent survey concludes consumers may, in fact, spend liberally this year to maintain a sense of normalcy. He writes, “A survey demonstrates most consumers will maintain traditional holiday spending habits, with a couple of modern twists. According to a recent consumer survey from online discount platform RetailMeNot, 66% of respondents say they plan to spend the same amount of money or more during the upcoming holiday season, in order to create a sense of normalcy and keep traditions alive.”[4] He added, “Nearly two in five (39%) respondents say they will shop earlier than they typically do to avoid shipping delays or items being out of stock, while 41% will start shopping in October or earlier. More than 88% say they will not shop the traditional in-store door buster deals on Thanksgiving.”
Since so many consumers are hesitant about returning to in-store buying, retailers are generally upbeat about the extended holiday shopping period. As a result, reports Jinjoo Lee (@JinjLee), “Wreaths and reindeer will make early appearances at retailers this year, and no wonder: Holiday sales — usually spanning November and December — represent roughly 20% of annual U.S. retail sales each year. … Their collective shift toward a prolonged holiday period reflects pandemic constraints: Retailers want to limit crowding at stores, as do customers. And because delivery will take an especially important role this time around, spacing out shipping will help alleviate bottlenecks and surcharges.”[5] Lee notes the focal point of holiday sales used to be Black Friday, then it became Black November, and this year holiday sales begin in Black October. Lee points out, however, the extended sales period isn’t all roses for retailers. She explains, “While [the extended sales period] could help retailers tackle logistical challenges, it also has the potential to create some pain. Lower-margin e-commerce has come to dominate holidays in recent years and will play an even bigger role this time around as shoppers avoid crowded stores. Promotions will be another drag.” The longer retailers have to offer promotions to attract consumer dollars the lower their margins will be.
Prepare for shippageddon
As several people pointed out above, one of the big concerns this holiday season is shipping. Konstantin Bohmeyer, Vice President of Consumer Products at Arvato Supply Chain Solutions North America, explains, “The usual carrier networks are already full, and e-commerce volumes will only increase throughout this peak season. Carriers will be highly selective about whom they work with, as they prepare for capacity restraints and more volume than they can handle.”[6] Caila Schwartz (@CailaSchwartz) , a senior industry strategist at Salesforce Commerce Cloud, adds, “All the traditional last-mile delivery carriers [like FedEx, UPS and DHL] will run out of capacity at some point in the season. So we anticipate that 700 million packages are actually at risk of being delayed this year.”[7] Journalist Paul Ziobro (@pziobro) reports, “The outlook has sent retailers on the hunt for alternatives with little luck.”[8] He adds, “Smaller carriers in the U.S. like LaserShip Inc. and DHL eCommerce Solutions said they booked up their capacity for the holidays months earlier than usual and aren’t taking new customers until next year. The final safety valve is the U.S. Postal Service, whose finances and network have been stretched during the coronavirus pandemic and could come under more pressure if shippers dump their overflow orders into the agency’s network.”
Journalist Shira Ovide (@ShiraOvide) calls the perfect storm of increased e-commerce and full capacity carriers “shipageddon.” She explains, “The combination of our reliance on online shopping during a pandemic and our eagerness for online shopping during the holidays has made some e-commerce experts predict a ‘shipageddon’ in the United States — delays and chaos as parcel companies already stretched thin also tackle a surge in holiday packages. … The capacity shortfall could average as much as seven million packages a day between Thanksgiving and Christmas, estimates ShipMatrix Inc., a software provider that crunches parcel shipping data.”[9] And those numbers mostly take into account orders being shipped, not products being returned — and e-commerce returns can be as high as 30%. The bottom line is: Shoppers and shippers involved in the digital path to purchase could be on a rough road this holiday season.
Concluding thoughts
Jennifer A. Kingson (@jenniferkingson), managing editor for business news at Axios, writes, “The 2020 holiday buying season is expected to be like no other: An avalanche of ecommerce deliveries, merchants running promotions earlier than ever, and tight crowd controls on Black Friday.”[10] To help encourage consumer spending, Cara Salpini (@CaraSalpini) asserts retailers, especially brick-and-mortar stores, will have to get creative. She writes, “With the potential for a tempered holiday season, creating that holiday magic may be more important for retailers than in the past. ‘That magic is going to be created from innovation,’ [says Dana Telsey, CEO of Telsey Advisory Group]. ‘It’s going to be created from personalization, localization, and retailers reaching out to consumers and consumers willing to embrace it.’ … In addition to beefing up the online experience to make it more enjoyable for customers, retailers can also lean into other channels, like catalogs. Catalogs are already especially prevalent during the holidays, but they could be particularly useful this year as retailers look for ways to stand out among the thousands of emails that have arrived in consumer inboxes since the pandemic began.”[11] While catalog sales may be reminiscent of holidays past, they will run into the same shipping problems as other shopping channels. The best advice this holiday season is shop early and pick-up in person, if that option is open to you. The good news is that some retailers are offering discounts if consumers use in-store or curbside pick-up. Happy shopping!
Footnotes
[1] Daphne Howland, “What September’s retail sales rebound means for the holidays,” Retail Dive, 19 October 2020.
[2] Marianne Wilson, “CPG: Strong September sales bode well for holiday; forecasts 5.8% growth,” Chain Store Age, 16 October 2020.
[3] Ben Unglesbee, “Deloitte predicts tepid-to-modest holiday sales growth,” Retail Dive, 16 September 2020.
[4] Dan Berthiaume, “Survey: Holiday Shoppers Will Start Early, Online This Year,” Chain Store Age, 28 September 2020.
[5] Jinjoo Lee, “Extended Holiday Season Is No Gift for Retailers,” The Wall Street Journal, 12 September 2020.
[6] Konstantin Bohmeyer, “Preparing for an Unpredictable Holiday Shopping Season,” SupplyChainBrain, 20 October 2020.
[7] Jennifer A. Kingson, “The pandemic is reshaping the holiday shopping season,” Axios, 8 September 2020.
[8] Paul Ziobro, “Holiday Crunch Starts Early With More Packages Than Means to Deliver Them,” The Wall Street Journal, 19 October 2020.
[9] Shira Ovide, “Brace for Holiday ‘Shipageddon’,” The New York Times, 16 October 2020.
[10] Kingson, op. cit.
[11] Cara Salpini, “Can retailers reinvent holiday cheer in a pandemic?” Retail Dive, 26 October 2020.
