Holiday Retail Prep & What to Expect for 2021?
Will Christmas come early this year? Early holiday retail forecasts seem to think so. Given the returning lockdowns in most of Europe, a spike in cases throughout the US and some parts of Asia, this year’s holiday season might be entirely different than what retailers had initially anticipated.
While no one is certain how this season will conclude, we do know that we will see some interesting twists and turns, particularly online with key retail events that have and will take place. The quarter began with Amazon’s Prime Day on 13 October, the event was said to generate USD $3.5 billion from third-party sellers alone.
Alibaba’s flagship Single’s Day event was also a major success. The Chinese e-commerce titan that popularised the 11.11 date internationally, gained 498.2 billion yuan (USD $75.3 billion) in gross merchandise volume during the recent campaign. The stage is set for the next hallmark retail event, Black Friday. Although newly tightened restrictions are likely to mute overall sales, Deloitte consulting firm predicts e-commerce to balloon by 25% to 30% YoY.
For regions still battling the pandemic, a K-shape recovery in retail is the most realistic outcome of this season. The K analogy defines that certain retail sectors, particularly ones supported online, will grow while those reliant on foot traffic will fall. The trend is likely to continue on next year until conditions improve or vaccine production speeds up.
This is rather unfortunate for the fashion industry that is mostly buoyed by brick-and-mortar. But do not fret, omnichannel and Online-To-Offline (O2O) strategies will outline some solutions for retailers to overcome the covid-related hurdles this season and in the foreseeable future.
Kicking Off the Holidays Early
One thing for certain is sales are starting earlier. Most retailers opted to bring forward holiday sales and extend promotion cycles. Forecasting sales this season has been especially difficult, as past holiday sales are now redundant. Start dates are no longer as clear cut as they used to be.
Prime Day, which usually takes place in mid-July, was pushed to October to coincide with the start of the holidays. Single’s Day promotion in Asia began in early November, gradually building to the big price slashes on 11 November. This year marks a new milestone for the holiday’s significance on the global scale. Dior released its first ever Single’s Day limited collection on China’s Tmall. Nike also announced that it will be launching a special women’s Air Jordan inspired by the event.
In the US, a similar pattern was observed. Black Friday historically began on 27 November followed by Cyber Monday on the 30th. Holiday sales planning typically never included October but since Prime Day was brought forward, most major western retailers launched discounts during that period.
Omnilytics data showed over 30,000 SKUs were newly discounted on the week of 7-13 October at ASOS, Nordstrom and Zalando in the US, UK, France and Germany. The analysis further clarified that the majority of products were marked down between 10% to 39% off, implying deeper discounts will take place closer to the actual Black Friday date.
Online Marketplaces Reign Supreme
With lockdowns once again disrupting non-essential shopping, offline foot traffic is at an all-time low. Physical retail in the UK recorded the worst numbers in shop closure history, a total of 11,120 chain store outlets collapsed between January and June. These numbers could soon grow as restrictions extend until 2 December.
However, as chaos ensues offline, digitally-native companies are thriving. Amazon, Zalando and ASOS have all upgraded their full year guidance on the back of strong growth and profitability this year. In fact, the latter two online marketplaces are waiving commission fees until next year to support sellers through the second lockdown and peak trading period.
Generally, marketplaces are the best entry point for brands to start building an omnichannel presence. In the past, some brands had been apprehensive about joining online platforms due to their consignment terms and lack of control in pricing and discounting mechanics. In reality, this is a small price to pay for the online traffic and exposure it can bring. On top of that, marketplaces also provide efficiencies in fulfilment and logistics which can be helpful for brands that have no online experience.
The key here is to determine the right channel. Each marketplace answers to a specific audience. While there is certainly some overlap, every marketplace has a way of operating that is unique to them and the cost involved on the seller’s part would also differ. The introduction of dynamic pricing also diversifies the online landscape greatly.
The chart above indicates the distinct variance between the two mega online retailers despite selling similar products and brands. ASOS focuses the bulk of its assortment under the 40 USD range while Zalando equally distributes approximately 10% of its products across the pricing ladder, from 10 to 60 USD.
Scaling Capabilities and Avoiding “Shipocalypse”
The first and second quarters of the year saw a significant boost for e-commerce and many fashion brands are seeing this as a sign to scale up their online efforts. H&M announced it will close 250 stores worldwide to shift focus on e-commerce. Zara is also pulling a similar move while building more app and online integrations to optimise its O2O operation, which aims to simplify online shopping and reduce return rates.
As online adoption accelerates across various markets and age groups, many traditional retailers are finding fewer reasons to invest in physical stores. But do not be fooled into thinking brick-and-mortar is over, it simply means the gap between offline and online entities are closing. More often than not, consumers search and even possibly buy products online but only complete the purchases in-store.
This year, one of the major concerns for online shoppers is the “shipocalypse”. As peak trading period moves online, shipping and logistics will be pushed to its limits, especially in the countdown to Christmas. Retailers will need to buck up online capabilities with a real emphasis on warehouse and fulfilment management to avoid unwanted delays and backed deliveries.
Among the factors to pull holiday discounts earlier and prolong the season is to reduce stress on the postal systems. Retailers that do have an extensive offline presence can benefit from using all touch points to maximise O2O capabilities with services like third-party pick-up, in-store collection and curbside pick up.
Key Takeaways from Holiday Retail 2020 and 2021 Plans
Servicing customers at a safe distance is the top priority across retail. The pandemic has upended nearly everything we used to know about our industry and these effects will last well after the pandemic is over. The consensus is in, omnichannel is here to stay.
- Seasonal discounts and promotions have to be reconsidered. Rather than waiting for a start date for the entire retail landscape, it is now an individual race. Retailers should determine when and what discount mechanics to apply according to their own P&Ls. Not every retailer needs to discount at the same time.
- Online marketplaces offer all the benefits department stores used to offer with less baggage. Since shopping cannot take place on the highstreet, these platforms are the fastest way to expand your online presence.
- As online adoption equalises across markets and consumer groups, e-commerce is the forefront of retail. Scaling capabilities must extend to the after-purchase processes like fulfilment and logistics.
Read more about pandemic-centric retail strategies in our report, How to Prepare for a Pandemic Holiday Season.
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