Nov 16 2020

Q&A: Prepare for an Unprecedented Holiday Shopping Season

The retail industry has been turned upside down during the pandemic, and now it’s heading into its most crucial time of the year.

Few industries have been affected by the pandemic like retail has. Whether it has forced businesses to adjust their products or services, their selling methods, or even forced them to close their doors, much of retail’s daily operations have been at the mercy of fluctuating infection numbers and seemingly ever-changing social distancing guidelines.

Now, businesses are heading into their most critical time of year: the holiday shopping season. A recent survey found that 20 percent of all retailers are depending on this time of year to survive. Deloitte recently released its holiday shopping forecast, and BizTech spoke to Vice Chairman and U.S. Retail and Distribution Leader Rodney Sides about what to expect from this unprecedented season.

BIZTECH: What’s your assessment of the retail industry right now?

Sides: I would call it really a tale of two halves in the industry. Those who were deemed to be essential businesses, I think they have adapted the best. They had to, right? The mask players, the food players, the club channels have all done pretty well. I think the consumer has learned to feel safe in those environments, out of necessity. We all move down a path where maybe we're doing a little more contactless type of interaction, curbside delivery, etc. So, I think they did pretty well. 

Then, I think the ones who were shut down, maybe apparel guys especially, have struggled, largely because roles change. Folks didn't deem apparel necessarily to be essential items. So, it really is a tough time. 

BIZTECH: How has the pandemic affected our shopping habits? Are people buying more technology?

Sides: This year, about 60 percent of respondents said they were going to shop in the electronics category. That was about 47 percent last year. I think as we all hunkered down at home, perhaps we need a new laptop, a bigger TV if that’s possible. We've seen some of that shift. We’ve seen apparel, even though apparel’s usually No. 1 year to year, we actually saw that declined slightly in terms of how much they were planning to spend. So, we’ve seen, again, a shift to the durables.

BIZTECH: Deloitte has come out with its holiday shopping forecast. What are the predictions?

Sides: We think the holiday’s going to be up 1 to 1.5 percent, in total. We anticipate a K-shaped recovery. That means the upper-income households, those at $100,000 and above, are likely to continue to do OK. We think that spending in that cohort is probably going to grow 2 to 3 percent. Folks that are in the low-income category, at a $0 to $50,000 household income, spending is likely to be flat, if not declining slightly, simply because of unemployment. If we can get a relief deal, then I think we'll see even the lower-income group step in and participate a little more actively throughout the holidays.

What we found through the summer was that savings rates continue to rise. Savings rates, in our forecast, are a big determinant of what happens during the holidays. There are usually two key factors that we look at: One is the unemployment rate and the other one is the savings rate. 

MORE FROM BIZTECH: Digital transformation surges in retail during the pandemic. 

BIZTECH: Black Friday is a tradition for many families. What can we expect it to look like during the pandemic?

Sides: I think the crowds will be muted, if I had to guess. I think most of the retailers are looking to move some of their activities online around those days. I found in the report this year that Cyber Monday, across every age category we look at, is more important now than Black Friday as a promotional day.

About 29 percent of our respondents said they would plan to shop on Cyber Monday. Only 24 percent were planning to shop on Black Friday. When you look at that, you see that the cyber piece has really taken off, especially being that 68 percent of the total spending is expected to be online. It just shows you how digital and online and this whole notion of safe practices has taken hold.

BIZTECH: How is technology helping retailers prepare for this unprecedented season?

Sides: They are moving a lot of their promotions to digital platforms, and a lot of this is going to be online. They have the ability to more quickly modify the promotion and the offers. If you think about it, 10 years ago, when we decided to do a “buy one, get one free” offer or give 30 or 40 percent off, we had to order the signs, ship the signs, change all the signing and the pricing source. Online, you basically can do that with a click of a button, from a pricing perspective and a promotion perspective. Having the flexibility to be able to do that is helpful.

A lot of them also have added new capabilities. There’s curbside pickup; last year we only found about 11 percent of our respondents who were interested in leveraging that. That number has grown to 27 percent. So, there's new capability that retailers need to have and be able to service.

If I'm offering it, I have to make sure that within a reasonable period of time, I can run those products out. If I’m at peak staffing for the holidays, I have to have dedicated teams that I can run back and forth to a parking lot. So, logistically, it’s just a different challenge. 

I think that puts a lot of pressure on the operations team to allocate labor in a way that enhances the customer experience.

BIZTECH: Smaller retailers have been having a tough time during the pandemic. What is their role in this holiday season, especially as they’ve been pushed to grow digital platforms?

Sides: The big players obviously have the volume and they’ve got a lot of things to choose from, but I think there’s been a movement of folks looking for gifts that are unique and authentic. Small players have tapped into being online more and having some of that uniqueness. I do think that the consumer is looking for those kinds of items, and they want to give smaller teams a try.

The one statistic that I thought was pretty interesting in the report was that on average, folks were looking to shop within about a 9.6-mile radius from their homes, which is a little bit closer than we've seen in the past. If you’re like me and you live 12 miles out of town, what that tells me is the local shops in a little town and in the suburbs have a chance to win, because folks want to be closer to home.

BIZTECH: Will these changes just be adjustments for this year, or do you think the trend toward digital will last?

Sides: I think it will become the new norm. We may find next year it moderates a little bit, in terms of people going back in-store. But we opened up a whole new generation of folks to the convenience of home delivery and subscription-type services through the pandemic. We had a number of folks that were in the senior category that were probably late adopters to that. 

What we normally find in a downturn is that trends that were ongoing tend to accelerate. I think in this instance, we will see this divergence between shopping in-store and online, especially in the holiday season.

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