Digital Path to Purchase Decreases Retailers’ Reliance on Holiday Shopping

Stephen DeAngelis

December 04, 2019

Traditionally the holiday shopping season has been a make-or-break time for retailers. It’s still important, but Lauren Thomas (@laurenthomas) reports, “Coresight Research … says the holiday season is becoming ‘less important’ for retailers, with more shopping taking place online throughout the year. … It said the holiday season accounted for almost 24% of all retailers’ sales in the late 1990s, but is closer to 21% today. And Coresight is expecting that percentage to continue to shrink.”[1] The question is: Is this good or bad news for retailers? For online retailers and retailers with an omnichannel strategy, it’s probably good news. Thomas continues, “The ease of online shopping throughout the year, with constant deal days, has accelerated this trend. Amazon’s Prime Day in July, for example, has led to more retailers like Target, Walmart and Kohl’s offering steep discounts on toys, apparel and electronics during the summer, in a bid to stay competitive. That pulls shoppers’ dollars forward and away from November and December. … The one issue retailers should we wary of — if this trend tracked by Coresight holds true — is ending up with too much inventory on their hands after the holiday season, if they’re planning to sell more than what ends up being the case. That could force companies to use heavy markdowns in January to clear the shelves. This would weigh on profit margins at the start of the new year.”

The importance of a “digital first” strategy

The odds are pretty good that the trend noted by Coresight is going to continue, with the percentage of annual sales made during the holidays eventually leveling off somewhere in the high teens. Dan Clark, Founder and President of Kuebix, observes, “The digital age has altered consumer shopping habits forever. Instead of shopping solely in retail stores, consumers shop online as well. More e-commerce orders mean a big increase in transportation requirements. Everything from inbound shipments coming into a distribution center to last-mile parcel delivery are changing. Consumers are demanding faster shipping, better visibility and excellent customer experience from the places they shop. This means retail stores and e-commerce companies alike must focus on rapid replenishment to their customers.”[2] A survey conducted ahead of last year’s holiday season by Citi Retail Services, found over half of consumers (57%) planned to do at least some of their shopping online.[3] Forty-two percent of respondents also indicated they would use their mobile smartphones or tablets.

Smart retailers are adopting a digital-first or mobile-first strategy to take advantage of the growing number of consumers taking the digital path to purchase. However, Tim Hinckley, Chief Commercial Officer with Radial, notes such strategies don’t guarantee success. He writes, “Digital-first retailers … experience greater demand variability.”[4] As a result, he asks, “How can retailers foresee what the must-have holiday gifts will be — and, most importantly, manage increased activity accordingly?” His answer, “Investing in dynamic omnichannel technology that can support quick changes in inventory management. This includes prioritizing distributed order management, so orders are fulfilled from the best and most profitable locations, using an enterprise-wide view of inventory.” Cognitive computing is an important part of the “dynamic omnichannel technology” to which Hinckley refers.

Leveraging artificial intelligence during the holidays

As Thomas pointed out, inventory management is especially critical during the holiday season. Alex Achour, a Sales Engineer with ToolsGroup, insists various forms of AI, like machine learning, can help brands and retailers better cope with the volatility of the holiday shopping season. He explains, “Demand forecasting augmented by machine learning helps you better meet customer expectations with reduced inventory investment.”[6] He continues, “Machine learning is one of the most powerful technologies being applied to achieve market-driven forecasting. Seasonality is one of the most popular use cases we’ve seen, as well as promotion forecasting, new product introduction forecasting, and others. Planning systems that apply machine learning do indeed ‘learn,’ which makes them grow better at predicting demand over time. Not only do these systems learn from a wide range of demand and historical data, but they also assimilate the knowledge and experience of demand planners and others involved in the planning process. These smart systems elevate planners, allowing them to focus on the most productive and the highest value-added activities.” He notes, “One difficulty of using a demand pattern from year to year is that the demand is a sum of variables occurring daily.” Cognitive computing platforms, like the Enterra Enterprise Cognitive System™ (AILA®) — a platform that Sense, Think, Act, and Learn® — can handle an extremely large number of variables in order to provide the best possible insights.

R. J. Talyor (@rjtalyor), founder and CEO of Pattern89, insists AI can do more than simply monitor demand — it can drive demand. He explains, “Nearly half of holiday purchases in 2018 were either completely or partially unplanned, according to Deloitte, and 20% of those shoppers are open to being influenced by retailers, both in-store and online. With the entire retail industry at a crossroads — with store closures, CMO reshuffles, and competition from Amazon — retailers have a lucrative opportunity to differentiate themselves and win over undecided shoppers through marketing. Unfortunately, this is not an easy task. In fact, one of the biggest challenges facing nearly half of retailers for the 2019 holiday season is figuring out to reach their target audience. The solution? Artificial intelligence (AI).”[5] Solutions, like the Enterra Shopper Marketing and Consumer Insights Intelligence System™ can utilize a large number of variables to help brands and retailers understand and influence consumers. Talyor adds, “AI analyzes billions of consumer data points every day to find what ad elements drive consumer behavior and determine how marketers can more effectively interact with their target audiences. It also combs through an organization’s past and current campaigns to discover the biggest ways to save costs while still increasing results.”

Concluding thoughts

Hinckley concludes, “In the digital and mobile commerce age we live in, many retailers can churn out compelling content highlighting products to grab a consumer’s attention. But if they can’t deliver when it comes to having inventory in stock and getting products to consumers’ doors quickly, consumers will turn to the competition. … Preparing for peak season is no easy task, but with the right tools and groundwork, retailers can provide an exceptional experience that leaves their customers feeling assured ahead of the holidays.” Talyor adds, “Every retailer is gearing up for the holiday season, and adopting new tech is the solution many are replying on. … From managing marketing costs, building excitement and driving conversations, AI will allow your brand to not only survive the holiday season but also thrive.” Just as importantly, cognitive technologies can help drive sales throughout the year improving the bottom line and relieving reliance on end-of-year holiday sales.

Footnotes
[1] Lauren Thomas, “This chart shows why the holidays are becoming less important to retailers,” CNBC, 1 October 2019.
[2] Dan Clark, “Preparing Your Supply Chain For The Holidays,” Logistics Viewpoints, 31 October 2018.
[3] Dan O’Shea, “42% of holiday shoppers turning to mobile this year,” Retail Dive, 12 November 2018.
[4] Tim Hinckley, “How Digital-First Retailers Will Succeed This Holiday Season,” Supply Chain Brain, 8 October 2019.
[5] Alex Achour, “‘Tis the Season to Make Sense of Seasonal Demand with Machine Learning,” ToolsGroup Blog, 17 September 2019.
[6] R. J. Talyor, “Marketers and Retailers, Want to Survive the Holiday Season? Implement AI.,” MarketingProfs, 24 October 2019.