By Cheryl Sullivan, President, DemandTec
With Memorial Day fading in the rearview mirror, it’s interesting to note how different from past years this holiday weekend has been for retailers. It’s typically a huge weekend for retailers as shoppers shift into summer mode and stock up on picnic and cookout groceries and supplies, outdoor furniture, and the perennial furniture, large appliance and mattress binging. This year, of course, traditional patterns were disrupted as many stores remained shuttered, many wary consumers still shunned in-store shopping, and economic malaise tightened shoppers’ purse strings.
In these unprecedented times, it’s difficult to know with any certainty what the all-important post-Thanksgiving shopping season will look like in 2020. But I’ve been giving it a lot of thought since this is the time of year when retailers go into holiday planning high gear. With the holiday season serving as the ‘insurance policy’ for retailers’ entire fiscal year, here are some critical lines of thought to consider:
Urge to Splurge v. Economic Paralysis
We’ll see a strange mix of pent-up demand from some shoppers and extreme frugality from others. If, as we all hope, we are on a path to economic recovery by late 2020, shoppers who have been conservative with spending since mid-March and many who are fortunate enough to be still employed – or re-employed – might be in the mood to splurge. Those budgets set aside for summer camps or spring break family trips may now become the lifeline for their holiday shopping, particularly for games and activities to keep families interactive and amused at home as social outings continue to be carefully rationed. Many, especially those who continue to face financial strain or uncertainty, will be looking to home-based activities in place of consumerism this holiday season. Instead of mass-manufactured gifts for the more distant relatives, gifts may be about home-baked cookies and savories this year. Even many shoppers still fortunate enough to have jobs are full of uncertainty as to what the future may hold. The rise in COVID-19 cases over the past few weeks and seeing friends and family losing employment may lead them to choose a more scaled-down holiday experience, opting for cozy over glitzy and showing appreciation for every dollar they have.
For those who do shop, what they will buy is also hard to predict. We’ve all seen long-held stable category roles upended as the whiplash of COVID-19 continues to reverberate, and unprecedented supply chain disruptions collide with unpredictable demand surges and ebbs to produce chaos, stockouts, and delivery delays. A social and economic shockwave of this magnitude will continue to have repercussions well into and beyond the holiday season for non-essential items, and the only thing we know is that we don’t know what assumptions we can make about the roles in November and December for specific categories or items.
New Ways of Thinking about Brand and Price Perception
Traditionally, the holiday season is a time to flock to the stores and relish the energy of gift-hunting among festive crowds. But this season, it’s a good bet that a significant number of shoppers will want to avoid crowds. And shoppers who spent the lockdown months embracing more and more online shopping for all their shopping needs will be more comfortable than ever ticking off their gift list with a click rather than a drive to the mall.
The in-store experience itself may remain changed for the long term as foot traffic is rationed, sneeze guards and shopper basket antiseptic wipedowns are the new baseline, and masked shoppers tsk-tsk the unmasked, and vice versa. Already many of the traditional holiday stalwarts who specialize in spectacular in-store experiences are in deep trouble – think of Nordstrom’s and Macy’s, for example. But it’s not just at the luxury end of the market that we see department stores swooning. More budget-minded chains like TJ Maxx, Kohl’s, and Sears are struggling mightily as well, and whether they can muster enough appeal to attract shoppers either online or in-store remains to be seen.
So now is the time to be demonstrating to suspicious and stressed shoppers the long-term attributes of your brand and price promise. Maybe rogue sellers are jacking up prices on sidewalk chalk, eggs, yeast, and hand sanitizer. Other retailers leveraging machine learning-based price optimization can get real-time insights into which of those products represent the new KVIs, with shoppers watching prices very closely, and absorb margin on those while making up the hit on less price-sensitive areas of the assortment. Many retailers have used this period to donate generously to healthcare workers, nursing homes, or food-insecure families, and the depth and integrity of those retailers’ community commitment will loom large in the minds of shoppers far into the future. Loyalty is being redefined. Shoppers will remember which retailers treated them fairly during the COVID-19 siege and which fell down on the job or seemed to take advantage – and those who earn trust over time will be rewarded with shoppers who return to them when their holiday purchase lists are fleshed out.
Invest in the Online Experience – Now
Now is also the time to work out any remaining kinks in your online shopping site, apps, fulfillment, and delivery logistics – so you keep shoppers engaged and on your site as volumes surge going into the holidays. All the goodwill in the world from shoppers can evaporate in an instant if they hit a glitch in their online experience. Ensure that you understand how price sensitivities have shifted (and will continue to shift) for each item in the online channel v. in-store – research shows shoppers have different expectations and tolerances by channel. Know what promotions and offers resonate with shoppers when they are online. Promotional science exists to provide insight into how they differ by channel and help you plan which promotional types today’s shoppers will respond to. For example, do BOGOs really work today outside of essential categories? What is the right depth of discount? Are you reaching them in the right digital channels? Are your ads being delivered via the postal system really giving you the edge you need?
Patience, Learning, and Agility are the New Watchwords
tailers need to stay in continuous learning mode as we move through the phases of reopenings and setbacks in the COVID era. Stay on top of emerging demand signals, which will continue to be fluid as economics, outbreaks and supply chains progress and relapse, ebb and flow, in multiple cycles. At a time when wallets have shrunk and there is a shopper focus on value and less spending, getting prices and promotions right is more important than ever.
As KVIs continue to shift unpredictably and shopper, market and competitive behaviors keep entering uncharted territory, items will move fluidly between what were once clearly defined lifecycle phases: base price, promotion, and finally markdown. Shake up your traditional thinking with a more holistic approach to all of these as items may move back and forth between phases more than once.
Patience and agility may sound contradictory, but what I mean here is that change is continuous and you can never again go back to an era of long lead times, recurring seasonal promotion patterns, and preset markdown clearance plans. Leverage automation tools that continually assess emerging data, apply science to separate the signal from the noise, and evolve your organizational culture and processes from measured, manual cadences to automated, continually evolving processes. The reward for the evolution of continuous learning and business agility is increased shopper engagement and a clear path to delivering that elusive win-win: prices that resonate with shoppers and margins that sustain long-term business health.