The holiday shopping season, the busiest and most lucrative time for retailers, has become a giant question mark as a second COVID-19 wave pushes more consumers to the web.
Much is on the line as local shops and big-box chains prepare for the unknown.
Holiday retail sales totaled $730.2 billion last year, according to the National Retail Federation, and the pandemic-scarred retailers need every penny they can get. But 40 percent of consumers expect to spend less this year than last, according to data from consulting firm PwC. Competition for their business will be high, and experts say retailers must be careful not to blow it.
At Timeless Toys in the Lincoln Square neighborhood, the question of how to staff for the holidays has been driving shopkeeper Scott Friedland nuts. The decisions he makes at the 27-year-old shop, from staffing to inventory, are based on historical data. But there's no historical data for a year like 2020.
Sales are down more than 30 percent year-over-year. Friedland says he hopes to close the gap between Thanksgiving and Christmas, when Timeless Toys typically brings in one-third of its revenue. He expects online purchases to surge to 50 percent of sales during that time, up from just 1.5 percent last year.
"Generally, in retail you operate at a loss for most of the year anyway," he says. "What really makes a difference is what we can do this holiday season, because that determines whether or not we can keep our doors open for the next year."
The toyshop is not alone. Sixty-one percent of people plan to do the majority of their holiday shopping online this year, up from 54 percent last year, according to PwC. Additionally, 54 percent of shoppers plan to ship gifts directly to recipients, according to data from consulting firm Accenture.
If retailers fumble on order fulfillment, they risk losing customers, says Lee Moore, Accenture's Midwest market unit lead.
Consumers expect retailers to have supply chains and delivery capabilities figured out, he says. They will not accept the kinds of shipping delays faced in March and April.
"People were much more tolerant then," Moore says. With the holidays, "now I've got a deadline. . . .I'm not really prepared to wait a long time. Or if the product comes and it's not as described, then I'm going to be much less tolerant and I just won't go back to this store."
Big-box retailers including Walmart, Macy's and Target say they are shifting hiring toward online order fulfillment.
Target hired about 130,000 seasonal workers last year. The retailer expects this year's numbers will be similar, but teams supporting contactless pickup options will double in size. Target plans to train workers throughout its stores on how to do those roles, as well, should the need arise, and it's hiring more people in its warehouses.
Retailers are playing a guessing game with the hiring shifts, says Steve Horwitz, an economics professor at Ball State University's Miller College of Business. They must be ready to shift workers back to the registers if more people show up in stores than expected. "We really are in uncharted territory here," he says. "The key is being flexible."
Clothing retailer Gap is also focused on hiring seasonal workers to prepare orders for shipment and run its curbside and in-store pickup options, according to a news release.
Its situation could sum up this year's holiday season in a nutshell: Gap acquired 3.5 million new customers via online channels in the second quarter. Simultaneously, it is working to shutter 220 U.S. stores by the end of 2023. It has closed two Illinois locations since June.
U.S. retailers have announced more than 8,000 store closures this year, according to New York-based Coresight Research. That's fewer than last year at this time, when almost 9,000 closures had been announced. Experts say the holiday season will determine how quickly that number rises.
"It's like the Alamo. It's the last stand," says Andrew Challenger, senior vice president of Chicago-based outplacement firm Challenger Gray & Christmas, which has been tracking seasonal retail hiring. "If they don't see a decent number of consumers in their stores, they might not be around for another Christmas holiday."
Retailers that didn't make a big enough investment in e-commerce might have missed their chance, Challenger says.
Women's boutique Jayne launched its website last year, and it came just in time, says buyer Katie Cummings.
Jayne has four locations in the suburbs and one in Lake Geneva, all of which closed for about 10 weeks during the state-mandated shutdown this spring.
"We have a lot of ground to make up," Cummings says. "Those 10 weeks were a good 10 weeks. It was all of April and May. That's your spring. So for sure, it's very important that we perform this season."
She expects the website to be a crutch. E-commerce makes up about 20 percent of Jayne's business, Cummings says. Sourcing has been challenging during the pandemic—certain brands have slowed production, there haven't been trade shows to find new product lines and demand is unpredictable.
Still, customers find them. Searching for, say, a Sorel boot that Nordstrom sold out of, they find Jayne.
"We're acquiring people strictly based on the products we have," Cummings says. "If that person likes the product that they get, likes the service that they receive from us, even if it is virtually, they will come back."
But it's not just online ordering that retailers have to get right. Half of U.S. consumers are facing pandemic-altered income levels, says Dawn Eber, a partner at PwC. They will be choosy about where they shop; retailers must think carefully about how to capture their attention.
Customers want stores that have not only put measures in place to protect them from COVID-19, but have shown they will protect workers as well. They want contactless pickup and enforced mask policies, plus loyalty programs, Eber says. They want to shop local and will only choose a few winners. According to PwC's survey, 60 percent of consumers said they were going to visit fewer stores.
"The browsing is gone," Eber says. "We're going to go into the store that we know has a product we want."
October 31, 2020 at 03:47AM
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Holiday shopping is a giant question mark this year - Crain's Chicago Business
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