Will the COVID Grinch Steal Christmas?

New report from BRG Retail Performance Improvement professionals outlines Holiday 2020 considerations for Retail industry

Retail faces another inflection point. The impact of COVID-19 on the way we live, work and shop has been unprecedented—and the 2020 holiday shopping season will not be immune, according to a new report from BRG Retail Performance Improvement professionals. While retail works to shift in an ever-changing world brought forth by the pandemic, the industry is left asking: “Will the COVID Grinch steal Christmas?”

“October is when industry pundits start releasing their predictions for sales trends for the coming holiday shopping season, and in recent years those numbers indicated positive growth, generally between 3.5% to 5% year over year,” said Richard Maicki, a managing director in BRG Corporate Finance who specializes in performance improvement. “But with COVID-19 cases still rising and further shopping restrictions possible, predicting 2020 sales compared to previous years will be difficult, if not impossible.”

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While the pandemic is primed to supercharge holiday ecommerce, with projected sales reaching $200 billion, the report evaluated the key drivers of uncertainty for the season and how retailers can prepare for various scenarios as the industry moves through the remainder of a difficult year.

Fundamentally, the report predicts that retailers will be faced with a cautious consumer, driving a decrease in discretionary spending and gift giving. Research shows that at least 45% of consumers intend to spend less this season, and potential shutdowns brought forth by a “second wave” could restrict access to those who wish to shop. Online platforms and the omni-channel experience (including in-store shopping) must be compelling and offer value with consumer demand historically low.

At the same time, retailers are faced with unprecedented challenges brought forth both by consumer concerns and government oversight, leading to sweeping changes to their operations. Safety—for customers and employees alike—is of utmost priority for businesses and remains top of mind. With most Americans saying that social-distancing and COVID precautions should continue, retailers need to take the necessary steps to ensure their customers feel safe when shopping.

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While “how” consumers shop has undoubtedly changed and will continue to evolve throughout the pandemic, the “what” consumers are buying has shifted for now. Consumers are faced with the new normal of working from home and avoiding unnecessary trips. As such, their buying habits have changed substantively to focus on home comfort rather than social outings. This year, the “when” they shop will shift significantly, creating an elongated holiday season. In the two years before the pandemic, retailers saw customers begin their shopping earlier, skirting the late November and early December rush. COVID-19’s impact has furthered this trend, with Amazon Prime Day held in mid-October, and retailers using “10.10.20” as their holiday kickoff.

“To win during Q4 and the holidays, retailers must drive a cohesive approach that incorporates agility and flexibility to respond to shifting needs,” said Corinne Lim, a consultant in BRG Corporate Finance’s Retail Performance Improvement team. “Responding to new market conditions requires retail executives to make rapid critical decisions with a small margin of error, both for the upcoming holiday season and to reposition their businesses for the future.”

BRG’s Retail Performance Improvement practice suggests careful revenue modeling, redefined customer engagement and critical review of direct-to-consumer fulfillment capacity and capabilities, including rapidly growing local delivery methods, among strategies to help organizations maximize the holiday season and weather the COVID storm.

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