What’s the Story?

The 2020 holiday retail shopping season is not going to be business as usual. The year started off with trade tensions, followed by Covid-19 lockdowns and gradual store reopenings. Consumers became cautious, plowing income into savings and increasingly turning to shop via e-commerce. Shoppers primarily looked to buy essentials and goods to enhance the comfort of their homes. Furthermore, Coresight Research’s latest weekly surveys of US consumers show that nearly 60% of consumers remain reluctant to enter stores and visit malls. Some changed behaviors are likely to continue, with major implications for the holiday shopping season. We present and provide answers to Coresight Research’s first four of 12 questions about the upcoming holiday season. In this report, we focus on changed consumer behaviors.

Why It Matters

The holiday retail season is the most important selling season of the year, typically signified by the turning point of “Black Friday,” when retailers become profitable for the year. In 2020, with many retailers losing several months’ revenue due to forced store closures, in addition to the current challenging retail environment—with sales down significantly year over year—the holiday retail season is likely to be even more essential for many retailers’ survival. There remain a large number of variables—encompassing both supply and demand—that will be key for retailers this holiday season.

Our Questions for the Holidays: In Detail

1. How will social distancing impact in-store shopping this holiday season? Social distancing is a pandemic-driven behavior that is as important to the vibrancy of the 2020 holiday selling season as prevailing macro-economics, consumer sentiment and election outcomes. With daily updates on new Covid-19 cases and mortality, any change in the spread of the virus could impact store traffic. Without the availability of a vaccine, consumers are likely to avoid physical shopping events that traditionally draw a crowd. Black Friday store traffic in 2020 will therefore be a fraction of the store traffic seen in 2019. In a “mask economy,” product discovery will begin online, so there may be less testing and touching; in lieu of that, consumers may opt for tried and true brands, showing less willingness to venture out and try new products and brands. In a contact-light holiday season, many more shoppers will opt for BOPIS or curbside delivery. 2. Covid-19 has reduced consumer spending choices; will fewer choices mean more spending on gifts (and self-gifting)? Many working consumers are spending less money as they work at home, with reduced spending on transportation, meals away from home and their morning coffee. Fewer entertainment and experiential spending choices—such as fitness, leisure travel and the performing arts—has resulted in more money in the wallets of working consumers, that could be used to purchase holiday gifts and so flow to retail. Another source of funds is the probable absence of corporate holiday parties, office gift giving and friends and family socializing during December. In 2020, holiday get-togethers will be few and smaller, among trusted friends and family. With consumers reluctant to participate in crowd-gathering events or go to busy public places such as restaurants and cafés, and with many entertainment venues still shuttered, Covid-19 is driving a shift to products from experiential purchases, reversing a decade-or-more-old trend. We discuss key products this season as part of the next question. 3. How will changing consumer needs for work-from-home office supplies and electronics and new consumer demands for safety first, then comfort, affect holiday spending? At present, there appears to be little change in employers’ willingness to allow their employees to work from home—for example, Google recently announced that it is allowing its employees to work remotely through summer 2021. Furthermore, many employees like working from home and are anxious about returning to the office. Labor Day typically marks the traditional end to summer and a return to the office, and many states are developing plans to reopen schools. As we write, the outbreak remains at high levels (although is becoming less severe), and there is unlikely to be a significant change in employees working at home. Since March, consumers have shifted purchasing toward items to help them work from home, entertain themselves, and make their homes more presentable and comfortable. These trends are likely to persist for as long as large numbers of consumers remain at home. Assortments that resonate with a stay-home lifestyle will therefore be key products for retailers this year, aligning with the themes of home comforts and coziness (such as slippers and sweatpants), home furnishings and homewares—including home-office products, , small appliances such as juicers and popcorn makers, and gaming consoles. 4. Will reduced travel and few, if any, corporate parties mean fewer gifts and/or fewer gift recipients? With less travel and fewer holiday parties, the need for gift giving is reduced, and we could see less gifting if retailers do not adjust their merchandising, messaging and timing: As we noted above, shoppers will have fewer reasons to buy gifts for colleagues, friends, event hosts and maybe even family members this year. In addition, shipping capacity may be constrained during the holiday, and shippers have already given notice that there will be seasonal shipping surcharges. Early holiday marketing could thus provide the impetus/prompt for purchase decisions, such as “Your gift can arrive on time even if you can’t”—i.e., retailers can encourage consumers to ship gifts to recipients rather than relying on the limited gifting-in-person opportunities. Retailers and service providers should get the message out early and often to consumers to encourage them to buy online and ship early—meaning that the season begins earlier to present more gifting opportunities and reduce operational strain for retailers, and shoppers can access guaranteed timely delivery. Last-minute shoppers can use platforms such as Loop Commerce’s GiftNow, which enables digital gift giving via email for retailers such as Coach and Uniqlo—with the gift being “opened” online. Online video calls have rapidly become part of US lifestyles, particularly amid the pandemic, and much of America has already participated in virtual dates, birthdays, Easters and Passovers, job interviews, coffees and cocktails. Prepare for a digital Thanksgiving, Hanukkah and Christmas! Consumers can share the joy and excitement of a loved one opening their gift via online video platforms.

What We Think

Implications for Brands/Retailers

• It is important that brands and retailers stay flexible and entrepreneurial to handle possibilities like early shopping, higher e-commerce shopping and consumers seeking alternative shopping and delivery options.
• With fewer everyday prompts for shoppers to buy gifts for colleagues, friends, event hosts and maybe even family members, retailers must work harder to capture spending—and they may ultimately find that those lost purchases simply offset additional discretionary dollars available to some shoppers from reduced spending on services.

Implications for Technology Vendors

• Technology vendors can assist retailers to fine-tune their supply chain management tools to adapt and handle unexpected changes in the pandemic outlook, as well as different consumer demand patterns.
• Tech firms can help retailers to provide virtual or remote gifting platforms and personalized marketing that will help them capture discretionary spend.