This year’s holiday retail will be unlike any the industry has ever experienced. As the biggest annual shopping period, the holiday season accounts for 20% of retail sales each year. But for this year, after a tumultuous period of economic downturn, a boost in consumer spending is highly anticipated.
That said, retailers have to exercise caution in approaching this season as consumer demand remains volatile.
We recently hosted a webinar in collaboration with The Parker Avery Group, a leading retail and consumer goods consulting firm in the US.
Retail expert Joe Skorupa was joined by The Parker Avery Group president and managing partner Clay Parnell, as well as Chief Analytics Officer and managing partner Sam Iosevich. Rounding off the panel was Kendrick Wong, CEO of Omnilytics.
Uniquely qualified to discuss holiday retail and make recommendations, the panellists covered:
- What to expect for holiday retail
- Key omnichannel capabilities and investments
- Demand-driven strategies
- The role of data in understanding consumer behaviour
Here are the key highlights from the webinar to help brands and retailers weather this challenging period:
Predictions for Holiday Retail
While the equity market is showing signs of recovery, most are still in recession. Unemployment, depleting savings and discretionary incomes will see consumers spending conservatively, especially for non-essential categories.
Consumers are prioritising safety, and the doorbuster sales of Black Friday are unconducive to social distancing. Retailers will be amplifying safe shopping measures for the consumers’ convenience and safety.
However, expect to see the highest volume of online shopping in history over the next few months as consumers are still hesitant to leave their homes.
Shipping services FedEx and UPS have been vocal of the struggles to keep up with the rise of e-commerce during this pandemic. Delivery networks are bracing for impact in anticipation of the holiday season.
To not overwhelm e-commerce management and fulfilment operations, the holiday promotional period will likely kick off much sooner than usual. Retailers are looking at managing inventory and promotions for an extended period of time this year.
The painful lessons of spring will be fresh in the minds of retailers, who will want to avoid another inventory crisis. Therefore, the general consensus is a reduction in inventory levels to minimise overstocking risk. With smaller intakes, flexibility and demand fulfilment is top of mind for brands and retailers.
Historical sales data is not going to help here. The situation this year is too different from last year for historical data to be useful. - Sam Iosevich
Brand and retailers have no control over economic pressure and social safety disruptions but a lot can be done in inventory management with greater market visibility and a strong grasp on demand.
Key Omnichannel Capabilities
Omnichannel capabilities face the ultimate test in the final quarter. On a positive note, retailers are not diving into the deep end as the role of the store has evolved beyond traditional shopping in Covid-19.
Curbside shopping, click and collect, parking lot returns management and other scrappy omnichannel solutions will be scaled to ensure safety and swift operations.
Consumers want experience, but that experience has to include safety and convenience along with engagement. - Clay Parnell
Omnichannel requires a strong collaboration of key functional areas – storage, supply chain, fulfilment, buying and more that retailers must fine-tune to meet consumer expectations.
Brands and retailers can utilise omnichannel to adjust in-store options and depth with e-commerce insights.
At a time when margins are critical, every product should be viewed on its own merits to increase profit. With e-commerce insights, dynamic pricing and smart discounting can be applied to bestsellers in-store, fully maximising their potential.
Going omnichannel also allows brands and retailers to test new trends and different prices online before scaling offline to minimise risk.
Understand the bestsellers to stock products at the right store at the right time and with the right prices. - Kendrick Wong
As more brands and retailers take an omnichannel approach, there is greater visibility on competitor positioning. For instance, the store locator option on most omnichannel retailers’ websites allows competitors to analyse what products are selling well in different regions.
We can spot opportunities easily with a 360-degree view of the market, which brings us to another crucial area of holiday retail – meeting consumer demand.
Strategies to Meet Consumer Demand
Volatility in consumer demand is a constant threat. The best way to safeguard against unexpected shifts is with a robust demand-driven assortment and quick response strategies.
Evaluate the sell-out performance of different price bands to spot opportunities and risks in pricing. With soft demand, consumers tend to look for more affordable options. Brands and retailers can sell high quality products at a marginally reduced price to boost perceived value. At the same time, dynamic pricing can be applied to bestsellers to maximise margins.
Review stock and sales at both category and product level to create more targeted, smart promotions. A common mistake by brands and retailers is to set blanket promotions for categories, which fails to boost margins.
The above chart demonstrates the difference between a targeted discounting strategy by Everlane and a homogenous promotional tactic by Gap. Everlane’s strategy is more effective at driving sell-outs for its discounted dresses.
Pinpoint where your competitors are falling short in terms of inventory to gain an edge in demand fulfilment. Alternatively, if your competitor is selling similar products to yours with superior sell-outs, identify the factors that contribute to their performance and use the learnings to improve your own strategies.
The Role of External Data
Volatility requires a quicker response to demand, and this is where external data sources come in to supplement internal data and fundamental business practices.
Historical data only provides important insights into past performance for brands to learn from previous experiences. But competitor or external data allows for accurate forecasting of the future.
Analysing your competitors’ performance is an avenue to understanding consumer behaviour and the key to replicating successes and avoiding mistakes.
Trend validation is another major component of competitive data to validate emerging trends from other sources such as social media. That said, competitive insights remains a largely untapped resource in retail.
Data doesn’t take precedence over fundamental business practices. They operate in parallel, with data sources fine-tuning your fundamental principles. - Joe Skorupa
The best game plan is to combine multiple data sources to gain more accuracy, speed and efficiency.
The panellists agreed that inventory issues and other challenges that await holiday retail will drive change moving into 2021, particularly around bringing data and analytics together to identify demand signals.
This coming season is a stress-test for the industry to trial omnichannel capabilities and speed in adapting to consumer shifts. Brands and retailers must tread carefully as the volatility of the market could backfire and set them back tremendously.