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Buckle Up Retailers, the Holidays Are Here

Retail experts discuss the coming holiday ’22 season

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Reva You’re listening to Next in Retail from Publicis Sapient. The podcast that shares insights on unlocking what’s next in digital transformation.

Reva: In 2020, Cyber 5 or Thanksgiving through Cyber Monday, saw the highest online spend ever. With the shifting tides and consumer behaviors comes the clear call to action to retailers. It’s never too early to start planning for holiday and ensuring you’re prepared for what the ever-evolving customer is seeking.

In today’s episode, we ‘re going to discuss what 2021 expectations are and how retailers should be preparing. Joining me today is Andy Halliwell, Publicis Sapient Retail Strategy Lead for EMEA and APAC and Hilding Anderson, Retail Strategy Lead for North America at Publicis Sapient. I’m your host for the session Reva Bhatia. Now let’s dive in.

So, I’m going to kick things off with a question for you, Andy. Can you discuss the changes in behaviors we have seen in consumers when shopping over the holiday season over the past few years?

Andy: Thanks. Reva, it’s good to be back again. So last year was a really interesting year. I mean, you know Black Swan events left right and center everybody scrambling to deal with, you know, COVID-19 and lockdown or not lockdown and then suddenly back into lockdown as we experienced here in the UK. In Europe, obviously it was a slightly different situation, with people going in and out of lockdown, and then, you know, obviously in Asia and other places it was a wide mixed bag of kind of how people were dealing with the pandemic.

Obviously, because of those lockdowns, we saw huge spikes in ecommerce and sort of digital shopping. Some of my favorite stats are that rather than going into stores nine out of 10 consumers were researching shopping on YouTube with about 40% of them, then going on to purchase either through Google Shopping or going directly to Amazon. But also, one of the things I liked was we saw a spike in shoppers wanting to support local businesses. So, shopping in sort of local winter markets and sort of shopping locally within their kind of their village, their town, their nearby geographic area.

We saw online sales for many brands spike anywhere between sort of 20% and 500% depending on kind of your brand and your category, and some of our clients had you know amazing bump years. But obviously if you were working in grocery, big supply chain problems, especially in and around Christmas with people wanting to secure Christmas dinners and, you know, large turkeys, thinking that they were going to have a huge number of members of family over for the first time since the outbreak began.

Andy: Only then to be scuppered at the last minute, and so everybody scrambling around and realizing that they weren’t going to be dinner needed for three or four people, and so trying to change what they wanted at the last minute. So, you know, massive changes.

We also saw a lot of consumers going into stores, so people were very bored and so stores that were open, we saw huge queues around the block for them, so if you were going into home furnishings DIY, those kinds of areas we were seeing problems with people queuing for not just minutes but up to hours in order to try and get into places like Bean Cube or IKEA and In Europe. And once people were in store, we saw a lot of pressure on businesses to provide omnichannel experiences in those stores.

So heightened expectations around being able to add stuff to my basket. And then why can’t you see what I’ve been interested in? Or why can’t you find what I was looking for? Why don’t you have these things in stock? The website says this stuff in stock. Why can’t I find it in your store? So major challenges around the kind of the matching of omnichannel expectations between digital and physical environments.

So yeah, last year was very much a mixed bag. I mean it was hugely successful for those that were prepared and invested in digital transformation, and it was less successful for those that hadn’t.

Reva: Awesome, thank you, Andy. Good synopsis and really interesting to know that I’m not the only one who shops on YouTube and like look at videos of products on YouTube. I do that.

So now that we’ve looked back, Hilding, and Andy’s done a great double click into what we saw last year and years prior and the general transformation we’ve seen over the holiday shop, I’d love for you to now tee up what you think some of the expected trends going into the holiday season this year are.

Hilding: Yeah, sure thanks, Reva. Great to be on and, Andy, nice to chat with you as well. So, as I think about going forward, I think there are five kind of key trends that I’m looking at. You know, first of all, we expect the Cyber 5 to be a huge holiday event this year, 93% of consumers from some research we just completed say they’re at least somewhat likely or very likely to shop on Black Friday. And then, obviously, significant opportunity across the next four days, we see continued growth in ecommerce.

As you noted, Andy, I actually think yeah, we had a crazy year last year. I actually think we’re going to go continue building on top of that rather than kind of snapping back to a lower number. I think consumers, especially with the variants, still have significant concern. Again, we recently completed some research that highlighted that 74% of shoppers during this period actually prefer to buy online if they can buy the same inventory that they can get offline as they can online. So, I think you’re going to continue to see some tailwinds around that kind of primary growth of ecommerce. We think by 2023 as well that leaders in digital are actually going to capture close to 1/4 of the retail market from just under 20% right now and influence, digital is going to influence three out of our $4 that are spent in retail so pretty significant.

No surprise I suspect to most of the people on this call, but I think one of the surprises is going to be how constrained the supply chain environment remains this year. If you remember last year, it was bonkers, right? Last year there were, you know very, very few promotions going on.

Hilding: You know a lot of stock outs happening early. A lot of people ordering. We had the Amazon Prime Day actually move right before the holiday period. This year, retailers with... I’ve been very surprised that the supply chains remain as disrupted as it has, and retailers are really trying to get it right.

Walmart, for example, has increased their inventories. They will jump 20% in Q2 as they started to stock up. I think it’s not going to be enough. I think we’re going to have another period of stock outs, and it’s going to be going to be challenging for a lot of retailers. As a result, I think the promotional environment will be more constrained. You’re still going to get a big hit, I think around the Cyber 5, but then I think the balance is going to be a lot tighter, so all that is kind of linked to and suggests kind of continued growth in ecommerce.

The second kind of thing I’d highlight is around the integration of digital and physical. We’re seeing a jump in conversations around the physical spaces, and retailers I think are really thinking about this as hey, we’ve got to reintroduce what is for many our biggest asset, which is our physical space. And if you look at Q2 performance, from Target and from Lowe’s and from others, you see actually significant footfall continuing to go in those stores.

And I think that there’s some real questions. I don’t think this is going to affect the holiday season because it takes a little bit too long once that’s locked in, but I think next year we’re going to see some really interesting conversations around, physical and digital, and what do you need to do in terms of around your store footprint? More of the conversations I’ve seen around, OK, we’re not going to, we’re not necessarily going to build out entirely new stores. We want to reconfigure the stores that we have, so some pretty interesting things going on there.

Hilding: Just real quick, a couple others I think, continued focused around consumer behavior and a focus on value. You know consumers are going to be seeking out price competitiveness, especially during Cyber 5. We’ve a bunch of stats in our research I could share on that one. Consumer's pre-researching deals, so kind of proactively going out in the weeks before the Cyber 5, so making sure that you talk about some of those deals a little bit earlier could be, could be helpful.

And then finally a real focus on experience. I think you can’t overlook the notion of kind of frictionless commerce. There are a lot of tools now, whether it’s, you know, things like Apple Pay and other payment technologies allow faster checkout or just having a higher quality mobile app, so that you can quickly find their products as well as convenience around shipping, whether it’s same day or overnight shipping. All of those kind of play out, and I think will continue to play out over this holiday season.

Reva: Here’s to hoping I actually get an Xbox this year. They figured that out, so Andy, shifting gears now to you. You know, I know Hilding started to touch on like what should retailers be doing to prep based on expectations and consumer shopping patterns. Is there anything that you want to add in terms of how retailers need to be preparing now if they haven’t already or what they maybe should be doing differently, or indexing more heavily on that they perhaps haven’t years prior?

Andy: I mean, I’m going to double click into the supply chain point that Hilding was making ‘cause I think that’s really the area where retailers have got to be focusing. I mean, we’ve seen massive disruption in supply chain. You know, I kind of alluded to earlier, but you know, between the recent sort of lockdown that we saw in Vietnam, for example, which I know has got a lot of athleisurewear manufacturers scrambling.

You’ve got the flooding in China in one of their main manufacturing regions. Same thing in Germany, which is a strong location for sort of furniture and hardware manufacturing here in Europe, I mean, earlier in the year you had Brexit and then you had the Suez Canal incident. We’ve got ongoing microprocessor shortages. So yeah, your Xbox is not coming this year I’m afraid, Reva. Sorry. If I can’t get one, no.

Andy: You’ve got, uh, you know, all the kind of tensions that we’ve seen in kind of like, you know, global trade and instability and sanctions and that kind of stuff so you know this year you are going to see the same thing we saw last year. There’s going to be huge pressure on shipping costs for getting product out of China and Asia and through to North America or Europe, so you know anybody that has managed to build a more flexible supply chain where we’re seeing companies like you know, one example I came across recently was Salomon, who recently moved their manufacturing from Asia back to North Africa and to Europe in order to maintain the supply chain of some of their running gear and their trainers, for example. We’re seeing companies like Patagonia and The North Face are doing some similar things where you’re seeing manufacturing moving to kind of near shore locations like you know Canada or Mexico or North Africa and those kinds of things.

Hilding: One of the interesting things that we are also seeing is, you know, even in this, this notion of strategic supply chain has really popped as a key topic among MBAs and in the undergraduate program. So, enrollment in supply chain and strategic supply chain programs that I saw one data point was up 80% over, you know, a couple years ago. And the notion of you know using me, you look at some of the leaders like Tim Cook and others who grew up in a supply chain skill set you’re starting to see what used to be uh, you know, really nerdy and Reva’s smiling over here and she’s a she’s a supply chain expert as well with her…

Reva: Nerdy was a bit harsh.

Hilding: I think nerdy is totally fair having taken some supplies here, but it’s actually really fascinating and I you know there is this whole debate about OK, what does the natural supply chain look like? You know in 2023 or 2024? With the constraints, I yeah, I, I don’t think it’s going to be a fundamental change.

Personally, I think that the cost benefits are going to be too great generally for a lot of the offshore manufacturing, but I think that, I do think there will be a more focus on managing it more tightly and specifically on using some of these new technology tools to do better demand sensing to understand where your inventory is, and to handle both inbound and outbound logistics much more efficient.

Yeah, we’re seeing a lot of conversations with clients around building those types of tools.

Reva: And bringing it back to holiday. Obviously like over a time frame where consumers are just like deal mining, and retailers in and of itself like outside of that struggle to manage supply chains in a cost-effective way when they’re not offering a 20-30% discount on the products. You know you add in the layer of needing to provide the best deals and manage through supply chain complexity, so peaks and volume and lower margins. It becomes something that, to your guys’ point, like they should be planning for now. And I’m sure many are. But yeah, it’s likely to be a big problem this year.

Andy: Which actually brings me to one of my key points, which is that I think people that are going to go deal mining are going to be sorely disappointed this Christmas, right? I mean, I think over Black Friday Cyber Monday there is going to be way less promotion.

There’s going to be way less discounting. I think you’re not going to see the, you know, slashed prices on TV’s and X boxes and games consoles or kind of electronics in general because of the you know the shortage of microprocessors and so you know people can’t get the manufacturing done. I think you’re going to see the real challenges in anything which is coming from China or from Asia.

I just, you know, you’re not going to see the depth of inventory and so therefore you’re not going to see the discounting ‘cause you know retailers are not gonna see the need. In fact, you might actually see the reverse.

You might actually see a move towards more surge pricing, where you know as soon as people realize that they’re onto a hot product. They’re going to start ramping up the price or, you know, people are going to start buying in bulk, and they’re going to start reselling on Amazon and they’re going to start demanding a 5, 10, 15% premium.

We’ve seen it in automotive in the past with, you know, rare Porsches and Ferraris and McLarens. You know, as soon as that trend starts to penetrate down into kind of you know luxury goods, for example, I don’t think you’re going to see the same level of discounting. You’re going to see retailers you know potentially, you know, holding the line on kind of their main flow items.

Reva: That’s a hot take Andy I would my soul would be so sad if there weren’t, you know the I mean standard good deals over that holiday season. But it is, you know, I I think about the prisoner’s dilemma right like if your core competitive set if you assume they’re going to be running good deals.

You don’t want to lose market share during such a pivotal time of the year, and so again, like going back to game theory and the prisoner’s dilemma, you assume your competitors are going to be running deals, and so you run deals, so you don’t lose market share.

Hilding: I think there are some differences across the pond a little bit we have. I mean, I think we’ll carry larger inventories overall and we can have we have bigger warehouses, and there’ll be a little bit more inventory carrying capacity here than in in parts of Europe anyway.

But I do agree with the broad point, so the way you handle the prisoner dilemma is you still have the low-price headline, but you have two units available at that price, and then it’s then it’s up to the higher price and you can be pretty agile. I think the idea of surge pricing and dynamic pricing. Yeah, we’ve done a lot of implementation around dynamic pricing in the last 12 months and I think people are a lot more sophisticated now as it relates to that topic and not consumers, businesses and as a result I think they’re you’re, you know, there’s going to be, there’s going to be opportunities there.

Andy: I think the other thing you the other thing you might see is that there was an American TV show where I saw they were offering half priced TVs, but they were putting them. They were putting him in a small room behind a locked door at the back of the store where you had to get past alligators in order to complete your purchase. Maybe that’s how they’re going to dissuade people from taking up with the bargains. I’ll tell you what you will…

Reva: We love our reality TV and game shows here.

Hilding: Down in Texas that won’t be a problem. That should be, you know, more alligator skin for my boots.

Reva: Texans are used to that.

Andy: It’s I tell you what, I tell you what I do, think you are going to see a lot, although I think you’re going to see a surge in demand for people buying experiences. I think you’re going to see a lot of those kind of red-letter day kind of events where you can go with friends to a track day, or you can go paintballing, or you can go karting, or you can go and spend the day doing safari.

I think you’re going to see a spike in demand for some of those kinds of things as people are starting to get out of lock down. They want to start going to do stuff with friends and family. I think you’re going to see a lot of that. I think you’re going to see a big resurgence in travel as well, potentially. And you know across the board, regardless of what people are purchasing, I think you’re going to see this heightened demand for digital sort of shopping omnichannel experiences, people wanting to be able to check out from their phone.

People wanting to have this kind of unified basket concept where you’re putting stuff into your basket online and then you go in store, try it on and if you like it, you check out from your phone, just like you can do in some of the more advanced Nike stores in places like New York for example. So, I think you’re gonna see a lot of kind of leading-edge organizations stepping up and offering all those experiences and companies that don’t, you know, they’re going to start to suffer, I think, so….

Hilding: Yeah, and I think it’s worth noting how important data and loyalty programs and relationships, the one-to-one relationships are to enabling all those experiences. You know very quickly you go from a conversation around OK, we want to create a unified experience with the physical store and the digital to OK well, how well do we know our customers, and how do we build a relationship with those customers on the one-to-one basis? And a lot of our clients still aren’t there yet, you know. They’ve got, they probably have the data, but they don’t know how to activate on top of it. And I think that is going to be the foundation for a lot of these new experiences.

Reva: And during such a critical time, like holiday, where frankly people lose all sense of loyalty as it is, right? Like we recently led some consumer research, and it looks like because people do have a higher propensity to value mine, and because they do pre-research deals, and you mentioned this at the onset of the session, Hilding, they are willing to go to anyone who’s offering the product they have in mind at the best deal.

And so that really underscores exactly what you’re describing, Hilding, which is retailers need to think beyond the transaction in order to curry loyalty, right? And think about bridging between what you said, Andy, and what you said, Hilding, offering experiences, right? Like getting people to care about your brand for beyond just the price that you’re offering and super critical during holiday, right?

Andy: Yep, I completely agree.

And you’re also starting to see this blurring the line between like retailers and brands as well, so organizations like Dyson or Sonos, Nike, Adidas, they are taking consumers away from the stores and away from the kind of the traditional kind of high street brands, which would sell multiple different products from multiple different organizations.

And they are creating a sort of a sense of loyalty where you want to buy direct from them because you’re buying into an ecosystem, you can guarantee the quality. You can guarantee something is going to arrive on time. You can potentially get even better pricing, and you buy into the kind of brand love.

I mean it started with Apple, but you know, there’s a lot of there’s a lot of brands who are operating in that space now where they’ve kind of moved from just being a manufacturer to actually being a direct-to-consumer retailer who, and they’re really, you know, there in some cases more nimble, they are more appealing. They hold the loyalty of the consumer, and you know they’re definitely taking the fight to retailers.

Hilding: Yeah, I think the other thing we haven’t talked about is this broader shift towards monetization of sites as well, which is built off of data. And I think you know for holiday it’ll be interesting to see how that plays out. I actually think that you might see, you know a little bit less investment immediately in the in the kind of monetization, but then I think very much into next year we’re seeing a lot of activity around, you know, how can you monetize? You know how do you think about sponsored search? How do you think about onsite and off-site programmatic advertising as well? Big, a lot of conversations happening around that right now.

Andy: That’s huge business in Europe in grocery. Huge business in grocery.

Reva: Yeah, and our research showed that consumers are willing to give more information about themselves during holiday in exchange for a better deal, right?

So, and you couple that with the fact that retailers are likely attracting new customers if they’re offering better deals during the holiday season, so how do you actually leverage the data you’re getting about this new customer set and use it in a way to bring in additional revenue? And you know, get them to stay in your transactional fold beyond the holiday season.

So, I think that whole concept of data monetization has a lot of nuances, and there’s a lot of different elements to it, and that, that is a really interesting one for holiday, which is, you know, what are you going to do to retain these customers that are coming in?

Hilding: Yeah, and I have a colleague who who’s launching a startup right now and basically he’s his point is that anybody who sells online direct has the potential to monetize a portion of what they’re selling and to sell, you know, kind of what some of your suppliers decide which products should be highlighted, which ones shouldn’t which kind of discounts to offer even more than you do already, so it’s pretty. It’s pretty crazy, frankly.

Andy: Yeah, and it’s even more important in a cookieless environment, right? So, as you start to move forward, especially here in Europe because of things like GDPR regulations, it’s it has taken off in a major way. It’s just been, you know, it’s been a way of kind of guaranteeing that you’re accessing the right kind of consumer for the right kind of, you know product that you’re selling. So yeah, massive.

Reva: So, I guess the key takeaway for retailers this holiday season is a lot more of what we recommend to retailers not during holiday, which is don’t lose sight on experience. It still matters. Make sure you cost effectively, manage your supply chains. Make sure you harness data effectively to keep consumers in your fold.

So, it’s a lot of the same recommendations that we typically levy, but it’s obviously times whatever you want to call it because it’s exacerbated because of the additional volumes that are coming in during that time frame. So interesting to hear where we’ve landed in this in this discussion. Which is more of the same for retailers.

Hilding: So, Reva, fun question for you, what are what are you in the market this holiday for anything you’re looking forward?

Reva: I mean listen I.

Hilding: To besides the Xbox, the Unobtanium, unobtanium, PlayStation 5.

Reva: Besides Xbox.

Reva: Well, I will say I feel I felt kind of bad ‘cause like I said, Publicis Sapient just led some consumer research on what to expect this holiday season and one of the key trends was that people actually do predominantly shop for loved ones during Cyber 5 or Holiday 5, and I primarily shop for myself during that season.

And so, what I’m in the market for during that timeframe is clothes that aren’t sweatpants because that’s all I’ve been investing in the past year and a half, and I find so I need to I need to usher the button back into my life.

Hilding: Mean you have been the poster child of athleisure for so long, I mean.

Reva: Huge enthusiast. I will say Andy, when you said Vietnam is experiencing some issues, and we may see a dip in access to athleisure in my heart stopped for a minute ‘cause I can’t live without it.

So yeah, that’s I mean, so quick answer to your question is, I’m in the market for clothes for myself over holiday. What about you, Hilding?

Hilding: I’m well, we’re starting to do some more in person stuff, so I need to update my clothes with a new belt line and the other updated styles, so I need to go hit Bloomingdale’s or hit one of these and see what I can find a new jacket or some slacks or something.

Reva: So, it’s mostly the bottoms because people…

Hilding: Yeah, that’s right, yeah. Well, I haven’t, to be fair…

Reva: People still have to have nice tops for their Zoom calls.

Hilding: Although I have not worn a jacket for like 18 months, and I will be, you know, we’ve got some conferences coming up. We got some other things coming up so.

Reva: Time to buy some Blazers.

Hilding: Time to get some Blazers. That’s right.

Reva: Andy, what are you going to get this holiday season?

Andy: That’s going to be an interesting one. I have a, uh, a big birthday coming up. It’s my parents’ 80th birthday this year, so there’s going to be a couple of special items in there, I guess.

Otherwise, so I’ve just gotten back into running again so you know I’m going to have to feed my sneaker habit, which is already dangerously out of control. I’m not going to lie. So, you’re not the only person who’s concerned about the supply chain problems coming from Vietnam, Reva. That stopped my heart when I saw that, so fingers crossed it’s not going to be too bad for me.

Otherwise, yeah, I like Hilding, I haven’t worn a jacket or a vest which most people know me for here in Europe in probably 18 months, so I’m probably going to have to refresh my closet as we start going back into the office. So yeah, there’s going to be a few bits and pieces like that.

So yeah, but the other thing is obviously we moved house recently, so I am going to be spending an awful lot of my hard-earned cash on trying to make the house livable in the run up to Christmas, so.

Reva: Well, this has been delightful, and we should, when this episode airs, make sure our loved ones give it a listen ‘cause we basically just gave them our holiday wish list, so that’s a win. Cool.

Alright, well, thank you both for joining. Delightful as always to have you on and really looking forward to seeing which, if any, of our predictions come to fruition this coming holiday season.

Hilding: Thanks, Reva.

Andy: Excellent. Thanks very much for having us.

Reva: Thanks.

Reva: Thanks for tuning in to Next in Retail. Be sure to subscribe, so you don’t miss a beat on the future of digital and retail.

Hilding Anderson
Hilding Anderson
Head of Strategy, NA Retail
Andy Halliwell
Andy Halliwell
Senior Client Partner at Publicis Sapient, Retail and Consumer Products