Once again, it’s the make-or-break holiday selling season, that time of year when retailers, quite predictably, generate a disproportionate chunk of their annual sales.
What’s less predictable is what drives those sales in a retail landscape upended by online shopping, digitally native upstarts, challenged legacy chains, and a savvy, convenience-driven consumer who wants what she wants when she wants it from her smartphone-tethered fingertips.
Still, some themes have emerged: This holiday season, purposeful shopping pushes further from the margins to the mainstream. Purchases that align with shoppers’ values and sensibilities — be it eco-friendly goods to reused items and rented holiday fashions — are gaining momentum, just as social media engagement figures more prominently in consumers’ purchasing journeys, experts said. And despite digital disruption, stores still matter, accounting for the lion’s share of U.S. retail sales.
Here, Matthew Shay, president and CEO of the National Retail Federation; Jill Standish, senior managing director, global retail of Accenture; and Allison Stone, PwC’s consumer markets manager, weigh in on what’s critical to driving retail sales this holiday season. Let the games begin.
‘The in-store experience has really gotten much more important’
Matthew Shay, president and CEO, National Retail Federation
For retailers, holiday sales success is customarily tied, in part, to stocking hot products like the “it” toy of the season, Shay said, “[but what’s] really going to separate winners and losers this year goes more towards the kinds of investments retailers have made to create real opportunities for engagement with consumers to drive traffic and create differentiation in the marketplace, that’s reflective of consumers tastes and preferences.”
Shay pointed to new immersive, interactive retail concepts such as SHOWFIELDS, which bills itself as offering a “theatre experience that bridges art and retail”; Camp, a family-geared general store with revolving themes, from cooking to toys; and Neighborhood Goods, which purports to be a new generation of department store with a changing mix of direct-to-consumer brands, as “great examples of making the store a meaningful destination,” he said.
Meanwhile, kitchenware retailer Sur La Table sets itself apart with culinary education and classes: “It’s more than a store; it’s a date night,” Shay said.
And in beauty, “Sephora is a fabulous example of using technology to enhance the customer experience,” he said. All told, “the in-store experience has really gotten much more important.”
Despite the narrative that online shopping has rendered stores obsolete, brick-and-mortar merchants still dominate the retail landscape, accounting for nearly 90% of U.S. retail sales, according to NRF estimates.
“What continues to be somewhat counterintuitive is the incredibly high number of young shoppers who express their commitment to actually being in the stores,” he said. “They enjoy the social aspect of being in the store; we see that particularly on Black Friday and Small Business Saturday.”
At the same time, it’s become increasingly important for retailers to speak to shoppers’ brand values, Shay said, noting retailers like Toms, which donates a pair of shoes to a child in need for every pair sold, and Patagonia, whose migrant worker employee standards and promise to implement solutions to the environmental crisis, for example, are baked into its mission statement.
Accenture has dubbed the conscious-consumption trend, which has shifted into a bona fide movement, “responsible retail,” and its influence will be keenly felt this holiday shopping season, the consultancy predicts.
More than half of consumers (54%) want to see clear labeling for products made in sustainable or ethical ways, according the consultancy’s holiday shopping survey.
And it’s not just environmental issues that shoppers believe retailers should tackle. A hefty 53% of respondents said retailers have a duty to address wider social issues through their business practices and working conditions, and 45% said they are more likely to do their holiday shopping with merchants that do just that.
What continues to be somewhat counterintuitive is the incredibly high number of young shoppers who express their commitment to actually being in the stores.
Matthew Shay, president and CEO, National Retail Federation
The NRF notes one of the big trends fueling retail spending this holiday season is emphasis on the in-store experience. If you're considering a brick-and-mortar location for your business, read on.
Tech-enabled personalization can nurture ‘superfans’ year-round
Jill Standish, senior managing director, global retail, Accenture
Retailers luring shoppers with big deals and doorbusters are as much of a holiday tradition as Santa Claus. But “the real aim should be to translate this annual boost into stronger year-round sales,” Standish, told CO—.
Accenture’s own research has shown that, on average, 4% of a retailer’s customer base drives 40% of profits.
“Retailers must use the holiday shopping surge to identify and attract the consumer cohorts who will really buy into the brand purpose and become highly loyal, highly profitable customers for the long haul,” she said.
Nordstrom’s digital personalization provides a “first-class recommendation engine” with “more looks for you” suggestions and discounts on popular items sent straight to shopper’s inbox, complete with name, products and loyalty-point personalization, Standish said. “Each online customer has a profile with his or her style preferences and purchase history,” she said.
Meanwhile, Under Armour is tapping artificial intelligence to personalize fitness recommendations, collecting its shoppers’ health information on physical activity, sleep and diet to create customized workout regimens and health goals, Standish said. “After analyzing the data, the [technology] can compare the customer to others in their age and gender group to provide actionable insights,” she said.
As Standish sees it, customization begets customer engagement, begets loyalty, which can engender “superfans,” and ultimately drive business. Under Armour’s “extensive fitness and health data will shorten the distance between the brand and the consumer and create a bond of trust. This better connection with the consumers enhances consumer engagement and drives value to their community,” she said.
‘Social media plays a huge role in the rental market around the holiday'
Allison Stone, consumer markets manager, PwC
More than one-third of millennials (36%) said they’d shop for rental and reused items this holiday season, according to PwC, which speaks to a generational mindset.
Recommerce — the reselling of previously worn clothing — is one of fashion’s fastest growing businesses, with disruptors like The RealReal, ThredUp and Poshmark posting thousands of new items on their sites daily, just as legacy brands like Macy’s and J.C. Penney forge partnerships with these online marketplaces.
Relatedly, online rental brands like Fernish, Rent the Runway and Joymode, which offer goods from clothing and furniture to experiences, remove the burden of ownership and, for a monthly membership or subscription fee, supply renters with a revolving assortment of goods.
“Social media plays a huge role in this rental market around the holiday,” Stone told CO—. Rentals grant millennials in particular, who have a heightened appetite for newness, a way to sport a host of fashion looks for what can seem like an endless calendar of seasonal events, and then “share what they’re doing on social media,” she said. When they post a picture on say, Instagram, “they want to be in a new outfit every time.”
The inclination toward rentals and recommerce is uniquely millennial-esque, Stone said. The generation has grown up amid the sharing economy, where ownership — be it of a car, house or even a dress, doesn’t have the same pull it had for older generations.
What’s more, millennials have sustainability in mind, “which plays a huge role in rentals” and recommerce, Stone said. Both trends reflect circular-fashion models, which are designed, in part, to eliminate waste. And “young people want to shop for brands that align with their core values,” she said.
The rental economy can also be a profit windfall for retailers. Operating margins for rental and recommerce markets are 61% and 39%, respectively according to a Fashion for Good report.
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