Virtual Holiday Season Begins
Weeks before Halloween, the virtual holiday season has begun.
Amid controversy (including the House Judiciary Committee’s Antitrust Subcommittee more than 400 page report) surrounding its dominance, Amazon kicked off the festivities with Prime Day on October 13 and 14, a three-month delay from the usual July event). Amazon has become such a behemoth among shoppers (the company accounts for 39 percent of total U.S. e-commerce sales) that the October event “could potentially steal up to 10 percent of Cyber Week’s digital revenue,” according to analysis from Salesforce.
Adding to the early-holiday frenzy, Apple chose to launch the next generation of the iPhone the same week as Prime Day, a month later than usual, and other big retailers, like Target, Best Buy, and Walmart created pre-holiday events to counter the Amazon effect. Many of these big box stores have shifted from an in-store experience to a blended approach, where they encourage customers to shop on line and pick up their own packages curbside. It makes a lot of sense to convert less crowded stores into temporary warehouse distribution centers. In fact, Coresight research found that 76 percent of the top 50 store-based retailers in the U.S. now offer curbside pickup, “and we expect this share to creep even higher in the coming months.”
With just 50 days between Prime Day and Cyber Week, many consumers will make holiday purchases earlier in the season, and that could propel global online holiday sales by as much as 30 percent from a year ago, says Salesforce. The big numbers should not be surprising, because even before the holiday season, the pandemic had been accelerating the trend of online shopping.
The Commerce Department reported e-commerce sales now make up 16.1 percent of all U.S. retail sales (as of Q2, adjusted), up from 10.8 percent a year ago. That share of the total was powered by a whopping 44.5 percent increase from a year ago, a time period that saw total retail sales drop by 3.6 percent.
The combination of ease, familiarity and straight up anxiety of the physical shopping experience, is likely to translate into continued gains for e-commerce for the 2020 holiday season. A recent Bloomberg/Harris Poll found that almost half of those surveyed said they intend to purchase gifts mostly or entirely online. That’s likely to translate into a robust holiday season for any retailer that is able to deliver a customer-focused e-commerce experience.
And what about the actual spending? As the U.S. emerges from the pandemic-induced recession, which continues to keep millions of Americans unemployed, it’s no surprise that consumers are planning to spend less than they have in the past. According to September 2020 data from Morning Consult, “People at all income levels have economized during the pandemic, and at least some of this economizing is bound to persist.” 39 percent plan to cut back on the amount they spend on gifts and amid concerns about health and safety issues, physical gatherings will be greatly reduced. As a result, more than two-thirds will be spending less than usual on celebrations with friends, family, and co-workers.
What does that mean for the beleaguered brick and mortar retailers? The sector has been acutely impacted by the pandemic, which has forced a record number of stores to close this year (more than 8,000 already this year, according to Coresight Research) and has caused 29 retailers, like Neiman Marcus, J.C. Penney, Pier 1 Imports and GNC Holdings, to seek bankruptcy protection in 2020 (through mid-August), according to a report by professional-services firm BDO.
The dour conditions mean that the 2020 holiday season will be make-or-break for many retailers.