Many large retailers are rethinking their strategies this holiday season, and their actions offer lessons for smaller merchants, too.
In its annual holiday forecast, Deloitte projected that sales would rise between 4% and 6% during the November to January time frame, reaching between $1.45 trillion and $1.47 trillion. The increase reflects a slowdown from last year’s growth of 15.1% during that period.
Small Business Saturday, which takes place the day after Black Friday, represents an important opportunity for small, local companies to capture a share of that pie. Last year, Americans spent more than $20 billion on Small Business Saturday, according to Balboa Capital.
Small companies can take a page from the playbooks of retailers such as Best Buy, Walmart, Amazon, Target, Kohl’s and others to fine-tune their strategies and prepare for this year’s event. These strategies include rethinking payment options for customers, optimizing product return opportunities, and creating additional shopping occasions to maximize sales.
Offer payment options for customers
One strategy that retailers both large and small have increasingly implemented involves “buy now, pay later,” or BNPL, payment plans for customers.
These popular “payment over time” plans are similar to layaway, but they generally allow customers to take possession of an item right away with a deposit, and then pay the remainder that is due, usually without interest, with just a handful of follow-up installments.
Payment services provider Affirm works with several major brands and retailers, including Amazon, Best Buy, Target, Walmart, and others to allow consumers to make BNPL purchases. Other payment providers that offer similar services include Klarna and PayPal.
The service providers generally charge a small fee to the merchant in order to allow consumers to make the purchase without interest.
This type of offering can serve to incentivize consumers to make a purchase if they don’t have a credit card or don’t want to use one and are unable to pay the full price immediately. Businesses might consider promoting BNPL payment plans as a part of their Small Business Saturday sales strategy to help neutralize advantages that big retailers and brands may have in offering the option for their customers.
A study released this year by the Consumer Fraud Protection Bureau noted the rapid growth of BNPL activity and its expansion into new products and services.
“Once a niche financial offering that was heavily concentrated in apparel and beauty, buy now, pay later has now branched out to industries as disparate as travel, pet care and even groceries and gas,” the report stated.
Apparel and beauty merchants, which combined, accounted for 80.1% of BNPL transactions in 2019, only accounted for 58.6% in 2021, according to the report.
The report also noted that some states view BNPL as consumer credit and require state licensing or registration by businesses to use the payment method, as well as compliance with state consumer credit laws. Other states do not require licensing or registration to use BNPL products, with no interest or finance charges.
Businesses might consider promoting BNPL payment plans as a part of their Small Business Saturday sales strategy to help neutralize advantages that big retailers and brands may have in offering the option for their customers.
Make product returns more convenient
This Small Business Saturday, merchants might want to make their return policies as generous as possible, a trend that has gained traction among large retailers.
Walmart, for example, this year expanded its return policy to include a longer window for returns, with products purchased on or after October 1 eligible for return through January 31, including electronics and items purchased through its online Marketplace. Last year the window began on November 1. The retailer also added curbside returns and a new pickup-from-home option for returning products. Pickup from home is being rolled out to select stores and is only available to Walmart+ members.
By opening its returns window early, and adding convenience, Walmart is giving customers confidence to make purchases knowing that they have multiple options for returning products.
Last year, retailers said they expected about 17.8% of holiday sales, or $158 billion, to be returned, according to the National Retail Federation. Returns have been increasing as consumers conduct more of their shopping online.
Small businesses should consider not only ensuring that they have return policies that meet their customers’ demands, but also that their customers are aware of what those policies are, so that they can shop with confidence.
Create unique sales events
Small Business Saturday also provides an opportunity to promote limited-time sale events.
Large retailers such as Amazon, Walmart, Target, and Kohl’s have all been creating their own sales windows offering deals on popular items, starting early in the season. Kohl’s, for example, held a “2-Day Deal” event on October 11 and 12, which included $10 off a purchase totaling $50 or more.
Limited-time events such as these can cut through the clutter and capture the attention of consumers on the lookout for special deals.
Kohl’s is promising that consumers will be able to find a special deal every day from October 6 through December 24, a strategy to encourage consumers to make frequent trips to the store throughout the season. Creating an ongoing treasure hunt for bargains is a strategy that small merchants can also adopt by making similar promises. An apparel merchant, for example, could rotate “one day only” sales across a range of product categories to keep customers coming back.
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