For months, retailers have been sending up flares as they get ready for the holiday season. Supply chain woes, coupled with a seemingly insatiable demand for goods, have led them to issue a clear warning to consumers: Buy early this holiday season. Or risk disappointment.
So is it working?
So far, yes. Stores that started pushing holiday promotions back in September and October are seeing steady sales. Some of the biggest retail players — Target, Walmart, Costco, Macy’s, and Home Depot — have seen their third quarter revenues soar. In a supply-crunch flex, many of those same brands even chartered their own container ships to ensure inventory would hit store shelves by the holidays.
Still, retailers are contending with a rather muddled mindset on the part of consumers.
The Delta variant, a steady drumbeat of news about supply chain upheavals, price hikes, and fears of inflation have tanked consumer sentiment; in early November, the University of Michigan’s decades-long survey of Americans’ perceptions on the economy showed confidence falling to the lowest levels in a decade. This despite the fact that overall, most Americans are doing as well or better economically than they were before the pandemic, and jobs lost last year have largely come back. There are some signs that the approval of vaccines for children ages 5 to 11 could nudge sentiment numbers back up. But, let’s face it: It’s a weird time.
To drum up enthusiasm for the holiday shopping season, Governor Charlie Baker and Retailers Association of Massachusetts president Jon Hurst launched a series of #BuyInMA ads on Monday. The radio spots underscore the need to patronize businesses still recovering from the pandemic, reminding listeners that by buying locally, “you keep the economy strong.” Hurst is predicting that holiday shopping sales in the Commonwealth will rise 6 percent over last year — a bit short of the National Retail Federation’s predictions of a 10.5 increase nationwide.
Kate Ferrara, a retail expert with Deloitte Consulting, said there’s plenty of reasons for retailers to be optimistic. Eighty-two percent of Boston-area shoppers report doing the same or better financially than they were a year ago, according to the firm’s annual holiday retail survey, and 73 percent say they expect to spend more this holiday shopping season than last year. And over 70 percent of Boston-area shoppers said that season would start before Thanksgiving.
“They are going to spend this year. They’re feeling good about the economy, and they’re feeling good about their own financial situations,” Ferrara said. “Anytime you see customers starting earlier in the season, generally they’re going to spend more.”
How and where they’re buying will obviously look different than last year, when fears about COVID-19 and the lack of vaccines kept people home and led to a surge in online shopping. So far, things are already picking up online. Adobe reported that consumers, lured by early deals, spent $72.4 billion on e-commerce in October, up 8 percent over the same time last year.
But those early birds also saw the number of out-of-stock messages skyrocket — Adobe tracked over 2 billion such messages online in October, a 250 percent increase over pre-pandemic levels.
Analysts at Bain & Co. expect these trends to continue as we get deeper into December, with 77 percent of consumers planning to shop online this season, and 23 percent planning to do all their shopping on the Web. And among online storefronts, Amazon reigns supreme. Bain expects Amazon to rake in 45 percent of all US e-commerce sales in the second half of 2021; 89 percent of its survey respondents said they plan to buy from Amazon during the holidays.
Aaron Cheris, a retail analyst at Bain, said that despite supply chain challenges, his retail clients, whether e-commerce, general merchandise, grocery, or home improvement, are “happy as clams” heading into the end of the year, seeing “crazy good growth.”
And while some niche categories have dipped — pandemic winners like Peloton and Wayfair saw sales slide as people left their homes again — revenue for grocery and apparel companies has kept pace at high levels, he said, and not just because of price increases. It turns out we’re still eating at home a lot and treating ourselves to fancy coffee beans, and now we’re picking up new ensembles as we venture out more.
Still, shoppers looking for deals may have to search a bit harder this year, said Mark Cohen, a professor of retail studies at Columbia University. Stores are still trying to recover from the losses they incurred during pandemic-imposed shutdowns, he said, and have ramped up wages and benefits to lure back workers. Getting items on shelves hasn’t been cheap either — chartering cargo ships or putting freight on planes are costly ways to import goods.
That means there’s less inclination to cut jaw-dropping sales around Black Friday this year, he said, underscoring the fact that the shopping holiday has lost its place in the pantheon of commercial celebrations.
“We’re looking at a feast-famine cycle,” Cohen said. “Retailers are discounting more conservatively than they ever have and curtailing store hours and not opening on Thanksgiving.”
But, he said, there’s a silver lining. Backlogged goods are going to arrive in stores at some point, and when they do they’ll be “heroically discounted.”
“We’ll see conservative prices now, which will lead to ridiculous prices post-holiday,” Cohen said. “Most will have to liquidate.”
Overall, the key theme of this year will be tempering consumer expectations to get through the next few weeks.
Retailers big and small have encouraged customers to shop early and choose expedited shipping to avoid delays, or — gasp! — actually head to stores where they can walk out with gifts in hand. Online, they’ll likely rely more on algorithms to offer alternatives when things are out of stock, said Cheris, the Bain analyst. And they’re mapping out staffing contingency plans: Macy’s asked its corporate employees to work Black Friday shifts folding clothes and restocking items after it struggled to hire enough seasonal help.
All told, they’re hoping to inject a level of humility and humanity into the holiday season and hope consumers, newly schooled in supply chain theory, will understand.
That’s the playbook Eddie Bauer CEO Damian Huang used in an e-mail to customers outlining the brand’s own holiday struggles. Like other companies, he suggested in-store shopping and picking things out early. But he also offered a different message. Get outside and take a break from the holiday stress, he said. And if you’re “waiting for that perfect parka to arrive,” he added, why not rent one for the time being, from the rental program Eddie Bauer launched this summer?
So far, Huang said, he hasn’t seen too many people opting to rent their way out of a holiday tight spot, but he hopes it will come in handy as the end of year approaches.
“We saw all these e-mails from other brands saying, ‘Buy early and beat the holiday rush,’ and we thought that’s kind of a strange ask,” he said. “There’s still a lot of inventory coming, it’s actually coming later, and it felt disingenuous.’”
“You can choose to be patient,” he added. “The things will come.”