What can be done to save Christmas 2020 from the COVID-19 Grinch?
- Posted on November 4, 2020
- Estimated reading time 3 minutes
This article was originally written by Avanade alum Elizabeth Ebert.
Most of us are looking forward to 2020 being done and over, but before that can happen, we need to navigate Christmas 2020. Nagging questions include:
- What should shoppers and retailers expect this holiday season?
- How big will the shift to eCommerce be and can retailers handle the increased volume?
- How are consumers going to adjust their buying behaviors this year?
Six+ months of new COVID-19 realities have required retailers to rethink their business models, products and customer engagement. New expectations for the holiday season are taking hold just in time for both retailers and consumers to make some changes.
While we’re seeing cancellations of Christmas markets, parades and mall Santas, Holidays 2020 should still be a solid season for many retailers, though below the 4.5% growth that we saw in 2019. We expect a “Let’s Be Merry/Not So Merry” tale, a shopping season with those affected by COVID-19 layoffs and economic anxiety driving contraction in spending. Those with higher incomes (and fewer ways to spend because of the broad shutdowns in travel and entertainment) are likely to have money (and desire) to spend. We anticipate lifestyle-centric retailers to do well, including those selling consumer electronics, toys/games/books, self-care and hobby supplies. Apparel and experience-oriented retailers are likely to come up short as quarantine reduces consumers’ interest and ability to leave their homes.
We expect continuation of changes we’ve seen through the 2nd and 3rd quarters of 2020. The shift to eCommerce will accelerate and far exceed last years’ share of spend (16.7%). In-store traffic will also accelerate its decline (from 7.5% in 2019), as the eCommerce shift further takes its toll. While the ability for retailers to retain overall sales via e-commerce has been a lifeline, the transition from in-person, in-store transactions has been imperfect. Retailers’ omni-channel execution has been difficult to scale as demand patterns have been disrupted, supplies delayed and employees stressed by the risks of simply coming to work. To thrive during Holidays 2020, retailers must build fulfillment capacity, whether that is through 3rd party logistics capability or mobilizing their existing store locations to be “ship from store” or “buy online/pickup at store” sites.
Promotion planning needs to be repositioned this year to drive the consumer behaviors that will optimize consumer spend. “Final mile” capacity is already taxed and will likely result in orders requiring longer delivery timeframes as we get closer to Christmas. Retailers’ traditional demand planning models have been upended so the merchandise planning cycle is likely to be best informed by the top sellers from the first 9 months of 2020. Customer loyalties are likely to be tested as well as availability of popular items may not be available from their preferred retailers. Shoppers will follow the inventory to new retail relationships (over established preferences and behaviors) unless near term loyalty program incentives are introduced. Procrastinators are likely to find the products they want are out of stock and unavailable in time for the holidays, so a bump in gift card purchases is likely, with the associated delay in gift card revenue recognition.
For consumers, this season will be a roller coaster. Retailers will work to create the familiar holiday traditions, while keeping employees and shoppers safe. New operational processes such as shopper maximums and other flow management techniques like special shopping hours will be commonplace. High-income shoppers will be less price-sensitive and be more focused on hunting for the products that they want to buy, likely causing a sales spike earlier in the shopping season. Continued high unemployment numbers will perpetuate the economic anxiety many shoppers have been experiencing through the pandemic.
Lastly, Christmas 2020 will be one where local retailers may actually see a benefit from the quarantine experience through an increased sense of community. The positive aspects of COVID-19, where we have a greater sense of responsibility towards our neighbors will provide a new level of commitment in local economies as shoppers create new holiday traditions closer to home.