Holiday retail is going to look different this year. Here’s how your pricing strategy will be impacted.
Retailers have approached holidays in a consistent manner over the past several years. The assortments might change slightly due to fads and new launches, but the methods and consumer behaviors follow a similar pattern. This allowed a lot of retailers to adopt a ‘copy-and-paste’ attitude from year to year, with just a few tweaks.
This same approach is simply not feasible in 2020. The impact of COVID-19, and the numerous other evolving trends which it has created or accelerated, has completely changed consumer demand for the upcoming holiday season and retailers need to be ready to react and adjust accordingly.
The following are some demand trends that retailers can expect to see this holiday season.
Demand changes this 2020 holiday season
Demand Impacted by Economy
One thing is certain this year – it is going to occur during a very challenging macro-economic time with a lot of uncertainty and consumer anxiety. There is so much unpredictability in the market that Deloitte recently published not one but two holiday retail forecasts:
- A less optimistic projection with growth between 0% and 1%
- A more optimistic projection with growth between 2.5% and 3.5%
Regardless of where the holiday season ends up, it remains a fact that more people are unemployed or face job uncertainty, and consumer confidence has dropped significantly from 2019 levels.
Despite this, there are also signs that demand may stay fairly similar to last year. A recent consumer survey by Revionics denotes that spending behavior may align with previous years.
Retailers have been finding creative ways to try and pull ahead holiday sales for decades. The most notorious examples have been earlier Black Friday opening hours which have increasingly crept into Thanksgiving Day in the past several years. These efforts have resulted in mixed results for retailers in the past, but this year appears to be different.
Consumers are planning to start shopping earlier this year, so it is very likely that a larger percentage of holiday purchases will occur earlier than in previous years. This lines up with both retail initiatives and with what consumers are saying about their holiday plans.
One such retail initiative is 10.10, an event that mirrors China’s Singles Day and offers blockbuster deals on traditional holiday type items on October 10th. Retailers leveraging 10.10 promotions hope to pull holiday sales forward to better balance conservative inventory strategies caused by the pandemic. Moving sales forward also helps curtail the anticipated delivery challenges resulting from large expected growth in online business.
10.10 is not the only initiative aimed at bringing sales forward. Amazon has aggressively signaled that it will be aiming to move sales earlier this year and numerous other top retailers like Target, Kohl’s, Best Buy, Macy’s and Nordstrom have also all indicated moving promotional activities earlier this year. Home Depot has pledged to “reinvent Black Friday” with promotions spread over two months. These initiatives make sense in a post-COVID reality where stores cannot be crowded and it makes sense to spread demand out over a longer period of time.
Not only are retailers indicating the desire and the strategies to pull sales forward – customers themselves are indicating that they will shop sooner than last year. 29% of shoppers will begin their holiday shopping earlier this year than last year with a whopping 67% stating that they would begin their shopping prior to Thanksgiving.
Not only is demand going to be earlier and possibly impacted by macro-economic factors – it is also going to shift into different products, channels and categories altogether.
The most obvious shift of demand that has occurred this year is the shift to ecommerce. The same Deloitte forecast mentioned above predicts that online sales will grow 25% to 35% this holiday season versus last year. The reality is that the growth will be much more pronounced for some retail verticals than others. It also means a large percentage of retailers will see this continued trend of 2020 impact their channel mix this holiday season.
The same Revionics survey indicates that twice as many consumers plan to shop online more this year than those who envision shopping online less. The shift to ecommerce did not begin with COVID-19, but it certainly has accelerated this year. The holidays will not be any different.
Outside of channel demand shifts, retailers need to prepare for other shifts which are likely to happen this holiday season due to COVID-19. Some things to consider include:
- Will reduction of experiential presents (i.e. tickets to concerts, games), shift additional spending demand into retail sales?
- Will a larger number of smaller Thanksgiving/Chanukah/Christmas gatherings result in different demand patterns for grocers and other retailers? Some impacts may be item specific (i.e. smaller Turkeys) while others may have category level impacts (i.e. less spent on Holiday décor if the extended family is not coming over this year)
- With more social distancing and less projected holiday travel, will more people spend money on gift cards for extended family?
- Will existing COVID category and item trends extend into the holidays?
Shifting Shopper Loyalties
All of the above are examples of how demand will transfer in the upcoming holiday season. The transfer that many retailers care about the most, however, is the shift in loyalty. One study conducted earlier this year by Signifyd explored how much COVID has impacted shopper loyalty and share of wallet:
- 39% purchased from some online stores for the first time during the peak of COVID-19
- 37% discovered brands selling their products directly to consumers
- 33% discovered small merchants that they didn’t previously know about
- 83% said they’re likely to keep purchasing from the new stores they discovered
There is no doubt that holiday demand will look a lot different in 2020 than in previous years. The best retailers have already put strategic plans in place to address these shifting trends and will hopefully reap the rewards by gaining share and strengthening loyalty in these critical months to come.
For more insights into consumer behavior and demand changes this holiday season, download our 2020 Holiday Pricing and Shopping Report.