As the results come in for the 2018 holiday season, we can say that, by and large, things went reasonably well. According to Mastercard SpendingPulse, retail sales as a whole grew 5.1 percent, with online sales seeing gains of over 19 percent.
However, the satisfaction wasn't equally distributed, especially for traditional retailers. A few, like Target, seemed to benefit from idiosyncratic factors such as the absence of Toys"R"Us, while others, like Macy’s, saw more meager gains. So, what did we learn about which retailers succeeded, which barely held on, and what can be done to grow in 2019?
Digital Grows, Physical Holds On
The shakeout in traditional retail — with numerous high-profile bankruptcies — and the growth in digital make it seem like a zero-sum game in which one is destroying the other. In reality, the retail landscape is far more nuanced.
Digital-native brands such as Casper and Warby Parker are now creating their own physical spaces as an attractive way to connect with customers. At the same time, traditional retail brands, such as Best Buy, Target, and Walmart, have disrupted themselves in order to deliver digitized customer experiences that help them remain competitive.
The latter brands have used data to selectively build out their retail footprints in geo-targeted areas where they can reap the best returns on their investments. They’ve also realized they don’t need to be everywhere to be relevant. They’ve limited store openings, reduced the size of their typical store, pared down inventory, and invested in digital tools and better-trained associates. Thanks to these efforts, physical retail may not be growing, but it remains an extremely relevant piece of the omnichannel puzzle.
The most interesting recent development, made clear during the holiday season, is that these supposed rivals are also teaming up. Casper and Harry’s have dropped their digital-only status and are now sold at Target and Walmart, just like traditional brands. On a slightly different front, multichannel retailer J.Crew now has a store within a store on Amazon.com.
In other words, the book of how to build a digital brand is being rewritten. No longer do we create a brand offline and then conveniently capture sales online. Now you can establish your brand online, determine what works with e-commerce, and then expand with lower risk to distributed physical retail. Or vice versa. As a result, digital-native brands and traditional retailers might want to expand their partnership opportunities in 2019.
Stop Stressing Showrooming
The supposed threat to retailers from showrooming (i.e., in which a consumer researches a product in-store and then purchases it online from a different retailer) seems to have dissipated. A recent study found that only 6 percent of consumers begin shopping in a store to then make a purchase online.
That same study also revealed that it has become common for consumers to research online and purchase offline (ROPO), a practice that's responsible for as much as 20 percent of retail sales. The 2018 Future Shopper report showed similar trends, with an astonishing 90 percent of shoppers claiming to use online reviews and ratings when shopping in-store. At first, this may seem negative, but in an age when we see fewer experienced in-store staff, e-commerce can help close the gap. Moving forward, retailers must ensure that their digital experiences complement their in-store ones, aligning everything from content to merchandising to deliver a seamless brand. experience.
Another side effect of this newly empowered shopper is the diminishing ability of retailers to drive cross-sells and upsells in-store. With excessive research done in advance, shoppers have become more single-minded in purchasing only what they intended. They're so used to “spear fishing” online that they're bringing that behavior to the offline experience. Brands that fail to adequately support this behavior may find themselves looking in from the outside in 2019.
BOPIS Grows Big, From a Small Base
Lastly, buy online, pick up in-store (BOPIS) shopping scenarios proved to be a winner over the holiday shopping season. According to Adobe, such purchasing behavior was up 47 percent year-over-year, with the major beneficiaries being big retailers such as Walmart and Costco. BOPIS obviously saves busy shoppers time during a frantic time of the year, which is giving some retailers a competitive advantage over Amazon (though the latter will likely respond in similar ways). This trend will almost surely continue, making it imperative for regional and niche players to build out such capabilities, or find partners who can.
For next year, the path forward seems clear: increased digitization, openness to collaboration, and willingness to innovate in channel strategies to be available to customers wherever they want. While the market often talks about disruption, the trend lines in holiday retail are relatively stable, making it easy for brands to strategize ways to win in 2019. Execution, of course, is another matter.
Randy Kohl is head of marketing at Gorilla Group, a commerce experience agency that provides end-to-end experience-driven commerce solutions and services.