The Only Holiday Gift Retailers Want This Year: Impecunious Shoppers To Spend
Retailers have managed to overcome the struggles of the pandemic, including store closures and supply chain disruptions This year, however, they face a greater challenge: demand.
As the pandemic slowly becomes a distant worry, U.S. retailers are once again preparing for the expected influx of holiday shoppers eager to return to in-person shopping.
The holidays are often the busiest months for retail and shopping, with November and December accounting for around a quarter of annual sales of department shops and niche businesses. Logistics and supply chains weren’t something Black Friday shoppers worried about. Yet, during the pandemic, customers did not expect rows of empty shelves that were once filled with vegetables, hand sanitizer, and…toilet paper.
This year will prove to be a difficult time for companies that sell products. But not due to limited merchandise, in fact, it’s quite the opposite. To prepare for the holidays, companies order seasonal products months in advance to ensure enough stock availability. But what if consumers don’t buy them?
Although shoppers are looking forward to returning to stores post-pandemic, many are still skeptical about inflation. According to a survey released by the NPD group, a marketing research group found that 1 in 5 holiday shoppers will spend less this season due to the current economy. Among the two-thirds of respondents of a debt informational resource poll created by the President of Debt.com, Don Silvestri, one-third said they started shopping earlier in October and 15% started over the summer when it became clear that inflation was not going anywhere.
It’s evident that retailers must be creative and think outside of the box in order to win consumers over this season, rather than focusing solely on purchase profit margins. With reduced demand, businesses must go out of their way in order to promote their products and target customers who might not necessarily be looking to purchase new items this year.
Since discounts eat into retailers’ profit margins, they were only able to use them very sparsely in recent years. Particularly during the 2021 holiday season, retailers recorded higher profits due to supply chain impediments. Since inventory was limited, shoppers were desperate to get their hands on products, thus, fewer discounts.
David Silverman, a senior director at Fitch Ratings, said that “consumers are less compelled to buy, and they’re going to need the call to action.” In response to the lack of purchases, many companies are reconsidering business strategies, resulting in company reconstruction and layoffs in the upcoming year. For example, Amazon and The Gap are freezing corporate hiring or cutting a certain number of positions for its retail business for the rest of the year. Walmart is planning to hire fewer seasonal workers and Peloton is laying off about 12% of its workforce.
“They’re trying to reset, just like the entire world is,” said Liza Amlani, the founder of the consulting firm Retail Strategy Group.
To address the lack of shopping appeal, retailers have begun to utilize technology to provide consumers with a seamless shopping experience, offering them a multitude of ways to get what they want.
“A unified commerce approach can help retailers meet shoppers how they shop-online, in-store, social, mobile, or any combination- and improve their overall experience,” said Mathew Guiste, retain industry lead for Zebra Technologies.
Customers who choose to shop at physical stores want access to technology that would allow them to get in and out as quickly as possible. Self-checkouts, for example, have grown in popularity, as well as cashless payments which help individuals bypass long sale queues. People also tend to use their smartphones to compare prices in-store as well as hunt for coupons in order to decrease spending.
When it comes to retail, “the winners of Covid are going to be those who learned from Covid,” Simeon Siegal, a retail analyst at BMO Capital Markets claimed.
In addition to convenience, executives from companies hope to increase consumer shopping through discount, a strategy many anticipate to use more frequently this year. Levi Strauss Chief Financial Officer, Harmit Singh, stated that he “expects the broader marketplace to be more promotional through the end of the holiday season.”
Retailers are testing out ways to sell their items earlier and faster than they ever have before. This is partially due to the abundant inventory that has both executives and investors concerned. However, shoppers have indicated that seeing a significant discount on an item they like is critical when deciding whether or not to make the purchase.
Many well known corporations are already taking the initiative to put forward more frequent sales. Earlier in October, Amazon held a second Prime Day, the first time it has offered the site-wide sale twice in a single year. Target had extended its price match guarantee for a longer period of time than usual. Best Buy also launched its holiday deals a month before Black Friday.
Although early holiday sales are nothing new, the intentions behind its use has shifted. In 2020, social distancing was prioritized, and early sales prevented crowd surges. In 2021, the setbacks due to supply chains caused retailers to urge the public to take advantage of early shopping to avoid gift delays for the holidays. This year, early sales can help retailers reduce their excess inventory and provide them with insight as to what sells during the season.
Brands need to use critical strategies to sell inventory in order to meet sales targets. If unable to meet those numbers, they may have to resort to drastic measures to make it happen.
