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Holiday Predictions

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‘Tis the season… for pundits and prognosticators to tell us what to expect for holiday sales. That’s not something RSR does, but we do have a few observations to add some context to those predictions. So, let’s dig in to them!

Deloitte’s annual holiday forecast is for a 3.5% to 4.6% increase over the same period last year. That closely tracks with the National Retail Federation’s (NRF) total 2023 forecast of 4% to 6% over 2022.

Salesforce (which analyzes the transaction volume flowing through its Commerce Cloud) is predicting a 1% increase in Ecommerce sales in the U.S., and 4% globally.

Payment network company Mastercard is predicting holiday sales to rise 3.7%. – the same as the rate of change in consumer price index. The company also expects Ecommerce sales to rise 6.7% – considerably more than Salesforce is predicting.

You get the picture – the consensus seems to be that retailers will see very modest results as consumers are being careful with their holiday spending plans. But there are a couple of big caveats to those projections:

First, the increases are not beating inflation. The Consumer Price Index averaged a 4.5% increase in the 8 months January through August – so basically, the sales increases YTD have been “just” covering the rate of inflation. Holiday sales look to be following that trend too; the Consumer Price Index is currently tracking at about 3.2% – very close to the consensus sales growth expected for this holiday.  That what happened last year as well; in 2022, the NRF measured a 5.7% holiday sales lift (the 2022 annual CPI was 6.5%).

Secondly, “when” the holiday season actually starts is becoming a very real question, and that means that sales traditionally associated with big holiday events like Black Friday are getting spread across more reporting periods. Here are just some of the retailers who are conducting early holiday sales events: Amazon (whose “Prime Day” ran in July), Best Buy, Costco, Home Depot, Walmart (which conducted a “Black Friday in July event, as a counter to Amazon Prime Day). Those companies represent a lot of retail in the U.S.! Do those sales get lumped into the 3rd quarter, or 4th? Of course that will vary based on each retailer’s holiday strategy, but it makes industry-wide holiday predictions difficult.

The 2nd observation is supported by new data that suggests that consumers start their holiday shopping earlier every year. A recent study conducted by Jungle Scout found that, “27% of consumers started their holiday shopping as early as August this year, an increase from 19% who had started at the same time last year”.

Do Big Industry-Wide Sales Events Still Matter?

The observations outlined above lead to an underlying question that has been nagging the retail industry for several years: do big industry-wide holiday sales events (like Black Friday) mean anything anymore? The RSR team has opined on this many times over the years; as far back as 2012, then-RSR partner Nikki Baird declared that, “… as for the day’s importance to retailers, I think we are witnessing the death throes of an old way of thinking. Black Friday is already dead. We just don’t know it yet.”

That declaration reminds me of a famous line from the 1971 movie Big Jake, where one character exclaims to John Wayne’s character (Big Jake): “I thought you were dead!” “Not hardly”, responds Jake.

Just like Big Jake, big industry-wide sales events aren’t dead – yet. In a study the RSR team is conducting now, we have learned that while a clear majority of retailers we surveyed “strongly agree” that “industry-wide events are still a powerful source of revenue”, that position is held by over-performing “Retail Winners” by a 3:1 ratio over average and under-performers. As to “why?”, the simple fact is that over-performers are better at it – they aren’t just selling off overstock merchandise, and they aren’t just hoping that general consumer excitement about the holiday season will be enough. The research shows that (as is almost always the case) Retail Winners execute with military-like precision, with the goal to win a larger share of consumers’ purchases. As for non-winners, our advice would be, “hope is not a strategy.”

But the marketplace is changing in some fundamental ways. Over one-half of the retailers in the new study believe that “consumers can get the deals they want anytime”, and over 40% of over-performers think that hyper-personalization will certainly end industry-wide sales events – in just three years. That is why over-performers have ratcheted up their investments in Ecommerce, CRM, and AI search/recommendation & personalization software. Those solutions are all components of a hyper-personalization value proposition.

What does all this mean? For starts, it means that consumers are technologically empowered to shop the way they want and when they want to – and so value offers should not be constrained by the guardrails that were established in the days when the shopping experience began and ended in the physical store (i.e., “this deal will be offered on this day at this place between these hours”).

Value propositions should be offered in consumers’ anywhere/anytime context. That’s what hyper-personalization is all about. In a basic way, that’s the very antithesis of mass marketing events like Black Friday. While there are still social aspects that draw consumers to big physical events (after all, they can be fun!) – their importance as the official kickoff to the holiday season will diminish.

And that’s going to make holiday predictions like the ones quoted at the top of this article a thing of the past too.

Newsletter Articles September 27, 2023
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