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by Shelley E. Kohan
November 25, 2020
by Shelley E. Kohan
November 25, 2020
The coronavirus pandemic will have a profound impact on holiday shopping due to dramatically changed shopping behaviors. Customers want to feel safe shopping in stores and are spending money in different categories than last year, as we go into the holiday season. Inventories in stores are running significantly lower than last year and the rise in digital shopping has accelerated streamlined commerce. Care for the planet is a stronger purchasing consideration.
The impact of the pandemic has been a wake-up call for consumers, putting them on notice that nature prevails. Purchasing behavior shifted dramatically between March and August. In the first wave (March and April) of the pandemic, customers were focused on stocking up on groceries and household goods such as cleaning supplies, paper towels and toilet paper. Less discretionary spending was evident, especially on apparel and accessories which experienced a sales drop (year over year) of 51% in March and 86% in April for U.S. retailers.
In the second wave (April through May) customer demand shifted toward products that supported a stay-at-home environment including remote learning and working from home. Growth was experienced in electronics, home office, home theater, games, and streamed content.
The third wave of the pandemic exhibited stronger sales in discretionary categories as compared to the first two waves. June through August apparel and accessory sales dropped 22-25% compared to last year, a great improvement from the drop of 62% in May. August brought a slow and extended back-to-school period which lasted through September and included shifts from the traditional categories of clothing and supplies to electronics and remote learning items.
September sales results showed the best performance post-pandemic in apparel and accessories, dropping only 12%. Other segments that performed well in September were Grocery (up 10.5%), Home Improvement (up 23.4%) and Discount/Warehouse CHEF stores (up 6.8%). Traditional department stores, heavily reliant on apparel and accessories, continued their soft performance — down 8.2% but better than season-to-date at minus 19.4%.
The hero segment is an obvious one with online purchasing leading throughout the pandemic. Season-to-date sales through September are up 22.1% over last year, with September itself up 27%. Amazon posted 26% increased revenue in the first quarter, 40% increased revenue in the second quarter, and is expected to post similar results for the third quarter.
While apparel and accessories were soft across all segments of the industry, Millennial and Gen Z favored online brand, ASOS, was able to achieve a 10% increase over the period of March through June, a beacon of light in an otherwise difficult category.
The kick-off for holiday shopping started in mid-October with the onset of Amazon Prime Day and other retailers followed suit including Best Buy (which ran “Black Friday” sales in October), Macy’s Target, Kohls, and Bed, Bath & Beyond. Bonobos CEO, Micky Onvural, said in a Glossy Podcast, “We believed that October 1 was the beginning of holiday; that’s when we started to think about it, as many brands did. Coinciding with Prime Day, we started messaging gifting. We messaged ‘Gift yourself’ and ‘Gift others,’ alongside that promotion.” Walmart announced Black Friday Deals starting November 4th which will include contact-free curbside pick-up as an option. The holiday season will be extended through December with a constant flow of promotions, gifting prompts and initiatives, including gift yourself.
Inventories are down 10.4% going into September as compared to last year’s levels, with deeper declines in apparel/accessories and department stores (down 10.1% and 15.4% respectively). Shoppers who are able to purchase early will have a better opportunity to obtain high demand products. Many retailers will have less inventory going into November and December, so as the season progresses there will be more out-of-stocks and retailers chasing stock to fill the customer demand.
The consumer has shifted priorities with health and well-being at the top of the list. Time has become a higher value factor. The pandemic has given a tremendous boost to convenience shopping. Streamlined commerce and contactless shopping experiences are top of mind for consumers. According to the Deloitte Holiday Survey, contactless shopping experiences are in demand with 73% of those surveyed planning to have items delivered compared to 62% in 2019; preference for curbside pickup more than doubled this year.
The pandemic has sparked a heightened awareness of the environment and the need to take care of nature. Shopping behaviors will continue to shift, but at a faster rate, to purpose-driven consumerism, circular economies and making purchasing decisions based on a company being a “good world citizen.” Shopping and gifting will revolve around reducing the environmental footprint.
The holiday season started with Amazon Prime Day in October and will extend through December. Holiday shopping will be centered on safe shopping environments, streamlined commerce, and making purchases at companies that care about the environment.