Preparing for the Retail Holiday Season during the Pandemic

Stephen DeAngelis

May 20, 2020

Normally, by this time of year, retailers are well into their planning for the end-of-year holiday season. This year is an obvious exception. Jim Shea, chief commercial officer for First Insight, observes, “The novel coronavirus and the precautions governments and individuals are taking to protect themselves from infection have already had a powerful impact on the global economy. Those impacts are likely to extend well into this year, possibly even into the fourth-quarter holiday shopping period.”[1] Affecting everyone’s plans are considerations like: When and how will the economy get restarted? As consumers dig out from under debt created by the shutdown, will they have money to spend this holiday season? Will suppliers produce sufficient products? Will the business even be in business? As Shea notes, “Between disruptions to manufacturing and supply chains and shifts in consumer behavior and purchase decisions, the retail industry will continue to be hit on both the supply and demand sides.”

The outlook isn’t bright

Although the economy should be recovering by the holiday season, it won’t be fully recovered. The reason is simple. Until a vaccine is created and the vast majority of the population has been innoculated, social distancing recommendations will remain in place and holiday shopping crowds will be sparse. The two most likely results will be increased online holiday shopping and decreased in-store holiday shopping. Lauren Thomas (@laurenthomas) reports, “America’s department stores are on a sinking ship, racing for a lifeboat that might not be big enough for all of them.”[2] She continues, “Prior to Covid-19 hitting the U.S., department stores were in trouble because they had failed to keep up with shoppers’ changing tastes. These retailers had been investing in ways to win back customers. But now their stores are closed to halt the spread of the virus. And no one knows exactly how long this will be the case. The situation is dire.” Fashion retailers are also suffering. They’ve already canceled millions of dollars worth of orders and many are struggling to remain afloat. The big question: Once physical stores re-open, will consumers return?

Dave Bruno, director of retail market insights at Aptos, explains, “Not only will retailers be forced to try to recoup as much of the losses from closures caused by COVID-19 as they possibly can, but they also will be faced with new pressures to adapt to shopping habits that will have changed significantly as a result of the pandemic. Making things more difficult, the full impact of COVID-19 on consumer behavior may not be fully understood for quite some time. Will shifts in shopping and fulfillment preferences persist once the crisis subsides, or will entirely new behaviors emerge? We can’t know just yet how retail will be changed. What we do know, however, is that retailers — across all verticals, tiers and geographies — must focus on building trust and loyalty with their customers as storefronts start to reopen. They must deliver experiences that align to customer preferences and demands.”[3] First, however, they must survive — and survival isn’t guaranteed.

Matthew Townsend (@matt_townsend) reports, “Even with the U.S. economy expected to reopen in coming months, investors should be prepared for this holiday shopping season to be filled with lumps of coal. In a best-case scenario, retailers who shuttered their locations to slow the spread of the coronavirus would start operating them again in May and June. But many chains in hard-hit discretionary categories, like apparel, would still see sales fall 5% to 10% during the holiday shopping season from a year ago, according to Fitch, the ratings company.”[4] You know things look bleak if the “best-case scenario” involves fallen sales. As Townsend explains, “The reasons are many. Unemployment will remain high because lots of furloughed workers won’t be brought back as companies cut costs or don’t reopen. A downturn in consumer psychology will boost an already-high savings rate. And the risk of a second outbreak of the virus in the fall will hang over everything.”

What, if anything, can be done?

Shea writes, “Retail has always been an industry that thrives off proactive thinking, and this is a time that absolutely requires it.” By the time the holiday season rolls around, we’ll have a better idea of how close we are to a vaccine. We’ll know how many COVID-19 flareups have occurred and how they have impacted the economy. All of the bad news has us hungering for good news and good cheer and the holiday season might be the right time to provide some. Retailers need to promote holiday cheer in order to get consumers back in the store; but, they’ll also need to ensure returning consumers can shop safely. It’s going to be a balancing act requiring great skill to pull off. And, as Shea suggests, “Retailers and brands will need to significantly speed up their holiday product development, sourcing and shipping operations to ensure that October and November holiday deliveries don’t arrive in January.” In order to prepare for the holiday season, Bruno suggests retailers concentrate on five “P’s”: Price; presentation, promotions, promptness, and personalization.

Price: Bruno writes, “Price has always been a deciding factor for many consumers, and that’s not expected to change in an economy that has been impacted by this global pandemic. Our data revealed that nearly two-thirds of shoppers will abandon their purchase if they can find the item cheaper elsewhere.”

Presentation: According to Bruno, “Retailers should expect customers to have a heightened awareness of store cleanliness moving forward. This is a trend we saw during the holiday season, with 44 percent of U.S. consumers indicating that they would leave a messy store to shop elsewhere. It’s a safe assumption that an even larger percentage of consumers will prioritize store cleanliness once the lockdown has lifted and we return to stores.”

Promotions: “In-store offers are incredibly popular,” Bruno writes, “with approximately 82 percent of the consumers we polled saying promotions encourage them to enter a physical store. Retailers should be prepared to utilize in-store promotions to their full advantage once stores reopen, taking into account the nuances of each customer segment, market, channel and location.”

Promptness: According to Bruno, “Prompt and flexible fulfillment was separating the retail leaders from the laggards before the global pandemic. Enter COVID-19, and flexible fulfillment became imperative, drawing a line in the sand between those retailers that could continue to transact and move merchandise and those that could not. … While BOPIS gave way to BOPAC (buy online, pick up at curb) during the lockdown period, we expect a multitude of omnichannel acronyms to gain ground in 2020.”

Personalization: Bruno writes, “Approximately half of shoppers say they would visit another retailer if they felt a sales associate was unhelpful or unavailable. During the COVID-19 pandemic, the world — rightfully so — began to see the value of front-line retail workers, recognizing that our society is dependent on these everyday heroes. As retail recovery begins, the associate role will continue to be an important one.”

It is unlikely any major retailer will survive without a strong omnichannel strategy going forward. During lockdown consumers are becoming ever more comfortable shopping online and that behavior is expected to be permanent.

Concluding thoughts

There are number of wild cards planning for this year’s holiday season, foremost among them will be consumer behavior. Shea concludes, “Retailers that take advantage of digital product creation and data insights that take into account the preferences and opinions of consumers will be better able to mitigate the effects the novel coronavirus will have on their businesses throughout the rest of the year. Although it’s not clear yet exactly what aspects of retail will be most impacted, long-term planning that incorporates the voice of the customer will help retailers and brands have a more successful 2020 holiday season.” Townsend is fairly optimistic shoppers will return to stores. He notes, “The American consumer has continually showed the ability to bounce back. … Despite the boom in e-commerce, U.S. brick-and-mortar locations still generate about 80% of the retail industry’s sales during Christmas shopping, according to researcher Customer Growth Partners.” Brainstorming about how to entice consumers back into stores this holiday season is one of the most important activities retailers can participate in during the coming weeks.

Footnotes
[1] Jim Shea, “Smart Retailers Are Looking at Holiday 2020 Through a Viral Lens,” Total Retail, 17 April 2020.
[2] Lauren Thomas, “The coronavirus pandemic will likely leave a lasting legacy on retail: Fewer department stores,” CNBC, 19 April 2020.
[3] Dave Bruno, “Can Consumer Insights From 2019 Holiday Season Help Retailers Prepare for COVID-19 Recovery?Total Retail, 16 April 2020.
[4] Matthew Townsend, “It’s Only May, But Christmas Is Already in Doubt,” Bloomberg, 8 May 2020.