’Tis the Season to Be Shopping: 4 Tips for Maximizing Holiday Sales

With only a few weeks left until the end of the holiday shopping season, retailers are looking forward to closing the season on a strong note. The National Retail Federation (NRF) is forecasting holiday sales to increase to $720.9 billion for November and December. Compared to recent years, 2018 brings a consumer set with more discretionary funds and confidence to make larger purchases. What does that mean for the 2018 holiday season?

End-of-Year Shopping Opportunities

Consumers are driving opportunities for retailers this holiday season as they look to embrace holiday cheer with high certainty in both their spending power and the overall U.S. economic landscape. Twenty-six percent of shoppers said they will spend more on gifts this year than in 2017, which could increase overall holiday sales by 4.1 percent. While price point is still a driver for holiday purchases, in recent years retailers that provide consumers with high-quality, differentiated products and seamless shopping experiences have continuously gained market share and shifted consumer mind-set along the way.

With the rise of e-commerce players like Amazon.com disrupting the market, the recent consumer sentiment may be that brick-and-mortar stores are on the decline, as consumers are able to shop for gifts on mobile devices and order them directly to their homes. However, research shows that 88 percent of consumers will shop at a physical store this year — 6 percent higher than last year. This statistic implies that the retail apocalypse may just be a myth, and indicates a huge opportunity for traditional brick-and-mortar retailers.

Lastly, 2018 is the first U.S. holiday shopping season in 70 years without major toy retailer Toys“R”Us. While the company restructures itself among an uncertain future, consumer demand for toys remains. Reports note that “the absence of Toys‘R’Us has left an $11 billion hole in the toy industry, and hundreds of toy vendors without a major brick-and-mortar platform to sell their goods.”

Retailer Challenges

While many signals present favorably for retailers this year, the holiday shopping season isn't without challenges. Although retailers are confident of the increased demand this upcoming season, predicting where the demand will come from (e.g., geography, channel, product line) is still a very big challenge.

A prospering market is great for driving consumer spending, but can also be difficult for retail operations. Highly dependent on a seasonal labor force, holiday season retail success is largely determined by the ability to correctly staff stores and distribution centers. The U.S. unemployment rate is at historic lows, with only 0.9 work-eligible humans in the U.S. per job posting. This means that there isn’t the same level of urgency among eligible employees to find temporary, seasonal work, creating a significant challenge for staffing up to handle extra demand. Since people can now easily find flexible part-time work, brands must be smarter about how they entice employees to work during the holidays — and convince them that a retail gig isn't so bad after all.

Retailer Solutions

Now that consumers are ready to spend, what does this mean for retailers? The table stakes are to lure customers in through multiple channels, but the differentiator is to create a great shopping experience once they’re in-store. Additionally, getting consumers into the store would be pointless without the staff or inventory to support customer demand. Here are a few examples of ways retailers are positioning themselves to maximize holiday season sales in today’s booming market:

• Creating engaging in-store experiences: With more brands tapping into the emotions and values of their customers, Q4 2018 brings an increase in one-to-one marketing to promote products through specific channels. This approach will best serve more premium brands as they look to create brand attachment rather than compete on price alone. Optimizing in-store experiences to motivate consumers will be critical. Last year, Walmart offered in-store holiday parties and Best Buy offered virtual reality demos of new products. These experiences cannot be created solely by an online retailer.
• Shoring up the labor void: In 2018, seasonal hiring is beginning earlier, with retailers such as Kohl’s beginning hiring efforts as early as June. Amazon, which is planning to hire 100,000 holiday workers to service 100 distribution centers, has raised its labor rates to $15/hour. This will certainly cause ripple effects in the industry. Many retailers are offering higher seasonal pay, more flexible hours and greater possibilities of converting temp work into ongoing part-time or full-time positions.
• Flexing their inventories: Retailers are positioning supply chains to meet heightened market demand and the flexible nature of customer expectations, and are developing capabilities to redeploy inventory effectively and quickly. This means that if a customer is in-store and the products they want aren’t available, the retailer can quickly pivot inventory from another store or a distribution center to the customer's home within a matter of days to keep the sale. Another trend has been the development of “buy online, pick up in-store” (BOPIS) capabilities to maximize convenience for the customer, while also creating the opportunity for attachment sales once they get to the store.
• Filling the Toys“R”Us gap: Various retailers are stepping up to try and fill this void. Walmart is adding 30 percent more toys to its stores and online. Kohl’s and Party City are expanding toy inventory for Q4, and Toy City pop-up shops will offer temporary brick-and-mortar destinations for hands-on toy buying. Many others are ramping up digital toy store presences as well. The fluidity of buying and selling platforms available this season bodes well for toy sales as a large revenue generator this year.

Establishing a solid foundation of in-store experience, staffing and inventory support, followed with a relentless focus on the customer are several factors that will benefit retailers. When all is said and done, the 2018 holiday shopping season will provide an interesting retrospective and a preview for what’s to come in the retail sector throughout 2019. Although a rising tide lifts all boats, we expect to see a few retailers which prioritized their holiday season preparations rise above the rest of the competition.

Nelson Ho is a manager in North Highland’s Retail and CPG practice.