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  • Cathaleen Chen

Retailers Are Preparing for a Happy Holidays

Analysts are predicting another big jump in holiday spending. Retailers are shaking up how they make the sale — online and in stores — to attract consumers who demand both low prices and a convenient shopping experience.

NEW YORK, United States — Last holiday season, retailers subverted the narrative of a “retail apocalypse,” racking up $692 billion in US sales and posting a year-over-year increase of 5.5 percent — the biggest jump in nearly a decade.

Now, as department stores are starting to put up Christmas decorations, retailers and analysts are predicting another stellar performance. The National Retail Federation forecasts holiday sales growth this year to be between 4.3 percent and 4.8 percent, while Bain has a similar range of 4.8 percent to 5.2 percent. In the US, a strong labour market and sky-high consumer confidence are expected to boost spending during the all-important two-month stretch, where retailers do about a fifth of their annual sales.

A Deloitte survey found consumers expect to spend 20 percent more on presents this year. Clothes are likely to be a popular gift, as women update their wardrobes to reflect a wide-legged, more conservative silhouette.

“Our forecast accommodates the fact that we have to lapse a high hurdle from last year,” said Jack Kleinhenz, chief economist at NRF. “But rarely do we see as many gauges so strong, whether it’s in consumer confidence, business spending and a somewhat volatile but still elevated stock market, that give us a sense of optimism.”

But competition for those dollars is stiffer than ever, with retailers fighting to offer the most convenient shipping for online orders and enhancing their in-store pickup options. Costs are also rising, from tariffs on Chinese-made leather goods to soaring wages for warehouse and store workers.

Here’s how retailers are preparing to make the most of what’s expected to be a strong holiday season.

Rising Costs, But Not Rising Prices

Chinese-made handbags, belts and other leather goods were among the items hit with a 10 percent tariff in the US last month. Retailers from Walmart to Gap Inc. have indicated that price increases are possible down the road, though most companies are likely to wait until after the holidays.

'If a competitor is offering 20 percent off, you can easily compete by hosting an in-store event or offering free shipping as long as you market it online.'

Growing labour costs is another headwind. The US unemployment rate stood at 3.7 percent in September, the lowest in 49 years. Big retailers like Walmart and Amazon raised their minimum hourly wage this year, pressuring the rest of the industry to follow suit. Labour costs tend to spike around the holidays when retailers need hundreds of thousands of temporary workers in warehouses and stores. Those costs will eventually be passed along to consumers.

Retailers are trying to offset costs, nonetheless, by investing in automation and tightening control over inventories because doing so would allow for reduced discounting, which hurts margin, just like heightened labour costs and tariffs.

Some stores are designing in-store attractions to draw customers, rather than relying on promotions, said Evan Bakker, a senior associate at Gartner L2. Net-a-Porter and its sister retailer Yoox are using exclusive capsule collections with brands such as Montblanc and Fornasetti to entice consumers to their websites.

“If a competitor is offering 20 percent off, you can easily compete by hosting an in-store event or offering free shipping as long as you market it online,” he said. “Retailers can often take for granted the holiday traffic and get stuck in the old-school mindset of ‘if you build it they will come to you,’ but that’s not always the case.”

Raising the Bar With E-Commerce

With the majority of shoppers already planning to shop online for the holidays, amenities like free shipping are table stakes. Target, for instance, is starting in November offering free two-day shipping on any order without a minimum purchase, and Walmart is expanding free shipping to third-party merchants on its website, with a minimum order of $35.

But with shipping costs on the rise, retailers are encouraging customers to pick up online orders in store. This will be Old Navy’s first holiday season offering in-store pickup, which launched in July for the brand. It has also deployed mobile checkout and price checkers in stores, said Blair Dunn, SVP and general manager of Old Navy online.

Only a little over half of brands that Gartner L2 tracked last year offered in-store pickup for online orders, with beauty and activewear lagging behind big-box retailers, said Bakker.

In-store pickup was popular with Bloomingdale’s shoppers after it was introduced last year, and this season will feature faster turnaround times, said Erica Russo, the department store’s VP of fashion direction. Some items are available for same-day pickup.

“It speaks to a new way people shop,” she said.

'Stores are making a comeback ... if you think about the overall share of holiday sales, it’ll still be predominantly in stores.'

Brick-and-Mortar Makes a Comeback

The focus in past holiday seasons was on boosting online sales. But after store traffic unexpectedly rose in 2017, many retailers are redoubling efforts to draw customers to stores. Last year, digital sales grew 14.6 percent, about the same pace as in 2016, according to Gartner L2 data. Sales in stores rose 4 percent, double the rate from the previous year, the report shows.

“Stores are making a comeback ... if you think about the overall share of holiday sales, it’ll still be predominantly in stores,” said Bakker.

For Bloomingdale’s, season programming is as important as ever. This year, events include designer appearances, cooking demos, book signings and a personalisation event that would allow shoppers to add monograms onto denim or leather garments, as well as home goods.

Setting up “instagrammable” tableaus is a new push, Russo said, and holiday themes make for the perfect fodder. At its 59th Street location in Manhattan, for instance, the store will feature a life-sized gingerbread house, ideal for social media.

Many online brands are opening temporary physical outposts to take advantage of a season when customers are more willing to shop in stores. The Outnet, owned by the Yoox Net-a-Porter Group, will host exclusive customer cocktail events in London and New York.

Fashion in the Spotlight

This year’s fashion boom will extend into the holidays and beyond. Part of why retail sales have been so strong is that the fashion cycle is renewing itself, prompting mass consumers to update their wardrobes to fit a brand new silhouette. While labels on the luxury end have been enjoying the tides for a while now, mid-tier retailers are finally catching up.

'We’re feeling optimism come back with fashion in general.'

“Women’s apparel will be huge this year, especially for women in their 30s and 40s. This is the first time they’ve had new clothes in years because looser proportions are now in favour — instead of the plunging v-necks and crop tops of the past five years,” said Rebecca Duval, a retail analyst at BlueFin Research Partners.

Streetwear will be popular category headed into the holidays. Virgil Abloh’s Off-White was the “hottest brand” in the third quarter, according to Lyst, and Nike’s 2018 England Football Shirt and M2k Tekno Sneakers were among the top 10 most popular product in menswear.

“We’re feeling optimism come back with fashion in general,” said Jonny Ng, director marketing strategy and campaigns at Zalando, “[especially] with a little bit of nostalgia,” a big trend that’s driving the new fashion cycle.

Bloomingdale’s store-in-a-store concept, Carousel, will have a new theme next season: “Past Made Present,” in partnership with Kodak. ASOS design director for menswear and womenswear Vanessa Spence anticipates that 70s-inspired garb will be a “huge trend.”

“It’ll be this kind of glam, over-the-top, embellished look… with flared silhouettes. We were very inspired by the Freddie Mercury film that’s coming out,” she said.

Courtesy : Business of Fashion


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