What's in store for holiday shopping?
Q: What’s your outlook for holiday spending?
There’s good reason to expect robust spending given low unemployment, a strong stock market and fairly healthy consumer confidence. You also have to factor in some economic uncertainty in the mix and a shorter timeframe between Thanksgiving and Christmas. But overall, holiday sales are likely to outpace last year’s levels.
Q: Do you expect the U.S.-China trade conflict to affect spending?
The big questions on tariffs continue to be at what level over what percentage of merchandise and when will they take effect? For most companies so far, the biggest issue is the uncertainty because the framework around trade has shifted so often.
With that said, most companies have endeavored to diversify their sourcing to reduce their dependence on China-manufactured merchandise and to avoid being overburdened with tariffs. There also has been a good deal of forward inventory buying to avoid tariff-impacted merchandise.
From a consumer perspective, we may start to see some higher pricing related to certain tariffs, but manufacturers and retailers are fully aware that consumers are price sensitive. So they will pass along increases in a way that minimizes the impact—at least the visible impact. That could mean raising a price on one item to cover the tariff on another or pushing back on vendors to share cost increases. We don’t expect aggressive pricing action that would significantly hamper consumer spending.
If the trade conflict continues well into next year, we believe the impacts would be more noticeable. Given the politics and priorities in both countries, we don’t expect a one-and-done resolution to trade-related issues. There may be some agreements, but most likely this will involve long-term negotiations.
Q: What retail trends are having the greatest impact?
While we don’t see a must-have item or category, consumers have become as interested in spending on experiences such as travel, dining and entertainment as they are on traditional gift items. Not surprisingly a continuing trend is the outsized growth in online purchasing at digitally native companies like Amazon, but even more so at traditional retailers that have invested in online capabilities to promote a more convenient experience for their customers. There continues to be 20% to 30% or more online growth at some of the traditional big box retailers who enable customers to purchase online, pick up at the store or curb-side and/or provide same-day delivery of merchandise. Considering the shorter window between Thanksgiving and Christmas, convenience and speed of delivery will be even more important this year.
Increasingly the retail winners are companies that continue to invest in the resources, technology, people and processes that deliver more convenience beyond their traditional brick & mortar locations. Those without the foresight or cash flow to make these necessary investments are continuing to struggle. Adding to the challenges for many of the big, traditional “mall” retailers is their category, which largely focuses on apparel. Target and Walmart, for example, also sell food, toiletries and other consumables that keep customers returning and shopping throughout the store—along with the other key benefits of value pricing and convenience. Retailers that don’t specialize in products with perceived high-quality and design or that don’t offer value pricing are rapidly losing market share.
Q: Has the concept of “Black Friday” changed? Are we now talking about a season versus a weekend?
Specific to this year—given a shorter traditional holiday shopping season—many retailers started their quasi-Black Friday sales earlier. The fact that e-commerce and mobile technology enable shopping 24/7 from just about anywhere has driven earlier and more constant promotional activity. But Black Friday continues to grab headlines and there will always be a contingent of shoppers who view the day as a sport or its own tradition and are willing to wait for hours outside a store for a chance to get that doorbuster item.