How is Christmas and Golden Quarter Shaping Up This Year?

A boom in online shopping or will there be a return to in-store shopping in the lead up to Christmas this year? We all know that more and more buying decisions start online. According to our latest research, that figure sits at a hefty 84 percent.

With inflationary pressure continuing to overshadow the public purse, it wouldn’t be surprising if we saw more online shopping this year, particularly with more consumers actively seeking discounts and retailers incentivizing Christmas gifting for early holiday shopping via Black Friday sales.

A significant and interesting bellwether to consider for this is Black Friday and Cyber Monday, which will indicate what Christmas spending might look like this year. Most shoppers, even when visiting a physical store, are now inclined to check if the product is cheaper online. It’s important for retailers to recognize that, per the Federal Reserve, credit card debt reached a record high in Q3 with a near 5 percent increase. As a result, the consumer is more conscious and capable than ever before with respect to price matching.

Another big question for retailers during the golden quarter: How can they ensure Christmas is as profitable as possible despite the ongoing focus on cost-of-living, conservative buying patterns and its impact on the consumer purse? With recent research finding that 89 percent of shoppers have altered their spending habits in response to cost-of-living challenges, it's clear that more shoppers will start their buying journey much earlier, thus extending the holiday shopping period, while seeking better value for their money.

One way of ensuring that retailers are making the holiday season as profitable as possible will be to accompany the discounts and deals with exceptional customer service across all channels to enhance the shopping experience. Store associates must be equipped with the right digital skills and tools to satisfy shoppers’ needs. If done properly, shop associates using a modern, mobile point-of-sale solution will have the opportunity to redefine customer relationships. Ultimately, consumers value convenience and quality in their purchasing experiences. This remains a critical opportunity for all retailers.

Given the bargain hunting mindset of consumers, retailers must look to deliver profits by leveraging every single piece of inventory across in-store and digital networks. Many brands are re-evaluating the roles of their stores, recognizing the value of strategic hubs for online sales, in addition to fulfilment hubs for click-and-collect, returns, endless aisles, and same-day delivery.

Overall, efficiency in the supply chain, ultra-personalization, and clear visibility of stock (i.e., having the right products in the right place at the right time) are essential factors that will really drive customer preferences and increase brand loyalty, which in turn will have a positive impact on a retailer's profitability in the countdown to Christmas.

Regardless of physical footfall in stores, online shopping will play a significant role in retail P&Ls. So what should retailers be looking to prioritize in their e-commerce strategies in the countdown to Christmas?

The first is a more unified approach to help overcome the challenges of such busy periods. Right now, retail and consumerism revolve entirely around convenience. Digital technological advances have placed the power in customers’ hands, and retailers need to respond with agile solutions to meet contemporary customer expectations.

By unifying and streamlining inventory data, brands can provide a consistent shopping experience across all selling channels. Furthermore, unification of peripheral transaction data allows associates to track cross-channel customer data and access all order history while simultaneously providing customers the flexibility to purchase products and navigate the retail experience seamlessly.

Secondly, retailers must make mutually efficient fulfilment a priority. If customers do (as we expect) spend more during the busy Christmas period, their expectations will remain heightened as gifting is a more emotionally involved purchase experience. The comfort of providing the customer with real-time and highly accurate fulfillment information provides a level of comfort that keeps customers coming back for their most intimate purchases.

Store fulfillment is one piece of the efficiency pie. That said, store labor is already under tremendous strain during the holiday season, so being dynamic with each order is the goal. Just because an order can be fulfilled from a store doesn’t mean that it should be. There are several variables, namely margin, that retailers should factor into their order allocation methodology. The ability to segment fulfillment strategies by product category and customer loyalty are the type of advanced capabilities leading retailers are deploying.

By putting such approaches into practice, retailers should be able to bring the supply chain and products (as well as deliveries and returns) closer to the customer, while also balancing profitability and sustainability.

So, what does consumer sentiment look like around Christmas this year? Predicting consumer sentiment this year is difficult as it differs from brand to brand and country to country. For example, our latest research showed that the cost-of-living crisis has forced almost nine in 10 (89 percent) consumers to change their spending habits and almost half (49 percent) are actively buying from brands that are more affordable.

On the other hand, recent data from the National Retail Federation tells us that holiday spending is expected to reach record levels in December. One plausible explanation for the differing views could well be that the majority of shoppers are using the September, October and November more strategically to save in preparation for a rush of targeted spending during December.

It could be argued that with the economy faring slightly better than speculated, shoppers may feel inclined to spend more, and, if customer sentiment does creep up, there's a good chance that people may be more generous after the challenging year we’ve had. Retailers need to keep it simple and focus on delivering the right experience for the customer. If they succeed, then customers will be more likely to shop with them this holiday season and come back as soon as their needs arise again.

Tony DiPaolo, currently working as the vice president of retail solutions at Manhattan Associates, has spent his career analyzing, operating and building various commerce technologies for enterprise retailers around the world.