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Retail Strategic Update: September 2020 Review

Many client and agency teams are currently working day and night crafting their 2020 holiday and 2021 brand plans. In a more normal year (remember those?), the process for data-driven marketers would start with a review of FY20 brand and channel performance in order to determine what initiatives should be continued, stopped or re-imagined.

This year, however, has been like no other, so historical year-over-year metrics provide little direction in planning and forecasting the next phase of our “new normal.” Every piece of data seems to have a big asterisk next to it requiring context and caveats. Foresight is in short supply when it comes to determining new challenges retailers will face, so plans must be more flexible and agile than ever. Organizations that take a longer view and invest in customer relationships, build differentiated experiences, nurture brand loyalty by eliminating friction points, and deliver real value will see greater overall success.

Scenario planning that identifies reasonable contingencies, a test and learn approach to channel investment and innovation, plus a continuous learning plan that reveals actionable customer insights have never been more important. An emphasis (i.e., bigger budget allocation and staffing support) should be put on advanced analytics, customer experience, and market research like never before. The more intimate each brand becomes with the changing landscape, the better prepared they’ll be as things shift and evolve.

Customers are engaging with retail companies (and each other) more than ever through digital channels at the expense of in-store shopping.

All this change will force smart marketers to push beyond the boundaries of their tried and true playbooks and embrace new opportunities across digital channels. The toughest decisions may be what NOT to do.

Despite the uncertainty, there are some key trends that retailers can act on this holiday season to connect with customers. This includes starting holiday promotions earlier, becoming a health and safety advocate, understanding that consumers are more value conscious, delivering convenient experiences and focusing on personalization to stay relevant.

Industry Insights and Trends

A few significant factors are shaping the backdrop heading into the 2020 holiday season: The continued health crisis, the recession, and social unrest.

The health crisis is continuing

The US infection rate is coming off its July high, yet it’s clear that the pandemic is far from over. Headlines tell the story of a continuing pandemic where there have been over 150,000 coronavirus deaths in the US alone. According to CNN in July, experts at Johns Hopkins called for a reset in the national coronavirus response effort.

COVID retail chart

The recession is contracting the US economy

The next wave of economic contraction is hitting businesses and consumers. It has been reported that the road to economic recovery will be a long one, as the coronavirus pandemic pushed the US economy into its worst-ever contraction. While job gains are happening, it has been reported that hiring slowed down in July as US employers added 1.8 Million jobs.

Social unrest is happening in response to racial injustice

Racial inequity in the US continues to be exposed, and brands are taking a stance.

Retailers are helping share Black perspectives

In July, Lowe’s announced that it is a founding partner of the BlackInfoNet (BIN) from iheartradio. Lowe’s notes that BIN is the first and only 24/7 national audio news service dedicated to providing an objective, accurate, and trusted source of news with a Black voice and perspective.

Lowes announcement

Brands are supporting organizations for a more equitable society

Bloomingdale’s is supporting NAACP Empowerment Programs, the Black Retail Action Group, and the National Museum of African American History and Culture. Bloomingdale’s is also encouraging customers to donate to the organizations by using their Bloomingdale’s Loyallist Reward Card or rounding up their next purchase at the register.

Bloomingdales

Retailers are working with nonprofits to promote community participation

The department store, Neighborhood Goods, hosted a Q&A with a nonprofit focused on creating vibrant neighborhoods, called The Better Block, on why community spaces matter.

Neighborhood goods

Consumer Sentiment

Six months from when the COVID-19 crisis began in earnest in the US, Americans, while still experiencing prolonged shock and grappling with the realities of the pandemic, are beginning to live their new normal and even experience signs of recovery.

Many consumers feel the health crisis is stabilizing and are feeling more grounded in their personal lives as well. This is translating into greater concern for other pressing national issues, such as the economy and the nearing presidential election. Consumers are tired of staying home and waiting to re-start their lives, many have already made life-event decisions, like deciding to move to the suburbs, going ahead with their wedding or starting their families. These “special moments” for consumers also translate to financial needs. 

Consumers are split 50/50 about their comfort levels with going out in public since March and tend to feel more comfortable doing activities that are fundamental, like grocery shopping, exercising, or attending medical appointments. Conversely, activities that are discretionary carry higher levels of discomfort (like travel and beauty services). 

During this time, consumers have increased their use of e-commerce for their shopping needs. They have increased digital exploration, and there are 7.4 Million new e-commerce buyers projected in 2020. E-commerce has also accelerated and is expected to grow by 3X.

US consumers have changed their shopping routines as 60% plan to shop less in-store this holiday season. In this time of changing behaviors, consumers are also re-examining their brand choices. 50% of US consumers tried new brands and products during the pandemic. And the recession has decreased their discretionary spending, which is down 20% since February.

Latest Trends

The findings and observations below were reported in the Dentsu Aegis Navigator September 17th study, a recurring report on the state of COVID-19 consumer trends.

Consumers are beginning to feel stability in the new normal. Many feel the COVID-19 health crisis in their community is stabilizing, and they are feeling their personal lives are more grounded as well. Over the past month there has been a significant shift in respondents identifying with “living the new normal and even moving into recovery” phase of their feelings about COVID-19. Brands should keep an eye on which behaviors are sticking during this period.

For communities of color, stability remains out of reach. For months it has been clear that Black and Hispanic communities are suffering disproportionately from the spread of the virus as well as and the economic and mental strains it’s brought. Our data, unfortunately, indicates that the suffering is not over. Brands should consider how to direct their efforts towards addressing the unique needs and challenges of Black and Hispanic consumers.

Safety and comfort continue to be individual choices. It’s clear that there is no universal standard to which activities are deemed “safe” to resume. Each consumer is deciding what is “worth the risk” to claim some sense of normalcy. Brands will need to present consumers with clear information about in-person experiences and safety measures so consumers can decide for themselves.

Advertising approaches should reflect the new normal. With consumers now more comfortable “living with the pandemic” brands should continue to speak to how they are meeting current challenges. Consumers feel favorably to brands that have adeptly reoriented around pandemic needs and are putting safety first.

Marketers should be prepared for 2021. Most consumers are now of the opinion that life will not return to normal until next year, despite progress in vaccine development. Brands need to have a longer-term plan to address lower consumer confidence.

There are a number of important trends for brands to consider and act on heading into the holiday season:

  • Timing: Start the holidays earlier
  • Trust: Become a health and safety advocate and respond with empathy
  • Value: Consider that consumers are more value conscious
  • Convenience: Deliver on e-commerce, contactless fulfillment, and social
  • Relevancy: Focus on personalization

What We See Working (and Why)

Timing: Start the holidays earlier

Insights:

  • Retailers are finding creative ways to start the holiday season earlier this year, so that businesses can offset their loss in revenue during the pandemic, especially during 1H.
  • Walmart, Target, and Best Buy moved winter holiday promotions up as early as October.
  • The postponed Amazon Prime Day is expected to front-run holiday sales demand, forcing retailers to start planning now.
  • 70% of shoppers said they intend to plan their shopping earlier to avoid crowds.

Recommendations:

  • Prepare for a flexible promotional calendar based on market trends. Amazon Prime Day is expected in the first week in October where impulse buying behavior may occur.
  • Consider moving up (or extending) holiday promotional campaigns (vs. anniversary-ing LY’s promotional calendar).
  • Start promoting holiday messages to customers who already put together their wish list (e.g., favorite items, abandoned browse/cart).
  • Leverage additional relevant holiday moments (e.g., Small Business Saturday, Super Saturday) to generate additional revenue.
Trust: Become a health and safety advocate

Insights:

  • Consumers plan to purchase from those retailers they trust, especially the ones who have proven useful during the pandemic.
  • Retailers are taking measures to ensure customers have safe in-person experiences, as well as encouraging and advocating health compliance.
  • Retailers have the means to put shoppers at ease by providing social distancing and personal protective equipment to both associates and guests.
  • 40% of consumers say they are paying more attention to brands right now, and over half say that brands should continue to acknowledge the crisis.

Recommendations:

  • Clearly communicate how your business is keeping customers and employees safe in stores (or how e-commerce is a great option for safety).
  • Design contactless browsing for stores during the holidays, reimagine store layouts, re-evaluate holiday traffic thresholds, enable mobile wallets and pre-payments, etc.
  • Consider providing protection (PPE for employees and shoppers).
Respond with empathy and positivity

Insights:

  • “The Black Lives Matter movement will impact the future of the retail industry across segments, heightening their awareness, and selective purchasing that will drive positive social change.”
     – Tiffany Lung, Forbes, June 12, 2020
  • Sephora is one of the first retailers that acted and signed on to a pledge by devoting 15% more shelf space to Black-owned brands.
  • Walmart and other essential retailers will close stores for Thanksgiving to give a break to essential staff members who have been working during the pandemic.
  • The holiday season is the ideal time for brands to show genuine appreciation for customers and employees and build long-term loyalty.

Recommendations:

  • Focus on social awareness to spread inclusivity and positivity during the holidays. Emphasize the brand’s long-term commitment to the community.
  • Get creative with social distancing — encourage virtual appointments and extend hours for at-risk shoppers and employees.
  • Consider closure or shortened business hours on Thanksgiving — for your employees’ wellness — while strategically pushing expected traffic to online shopping.
  • Leverage holidays to remind consumers what businesses have done for the community during the pandemic.
Value: Consider that consumers are more value conscious

Insights:

  • In 2019, holiday shoppers listed price as the top factor for consideration.
  • Many shoppers will search for the same product on different websites to compare prices.
  • 50% of consumer families have someone concerned about a job. More than a third of them have experienced some loss of income.

Recommendations:

  • Focus on both quality and price when you design your holiday campaigns.
  • Recommend gifts by price points for budget-conscious shoppers and ease of selection.
  • Make sure to include detailed information about the products while featuring competitive advantages of your products for comparison shoppers.
Convenience: Double down on e-commerce

Insights:

  • 60% of customers plan to shop less in-store this season due to fear of COVID-19 exposure.
  • Cyber Monday sales are expected to grow up to 40% YoY.
  • 13% won’t purchase from retailers that can’t deliver in two days, as a result of being a Prime member.
  • 15% of consumers say that they changed their shopping destinations because of difficult exchange and return policies.
  • More consumers, especially Baby Boomers, shopped online for the first time and for products they would normally buy in-store.

Recommendations:

  • Expect a surge in online traffic, and design to create an optimized online shopping experience (e.g., inventory, shipping, site speed, accurate information, etc.) in advance.
  • Consider lowering the free shipping threshold during the holiday season.
  • Communicate shipping options clearly and set up realistic expectations, as shipping may be delayed closer to the holiday with higher demand of online shopping.
  • Run a thorough pre-holiday education series — targeting customers who haven’t shopped online yet — on how to shop online (e.g., website, app) and take advantage of hybrid shopping options (e.g., BOPIS, curbside pickup).
Develop contactless fulfillment

Insights:

  • Even with fewer shoppers visiting physical locations, retailers will transform brick-and-mortar stores to be more optimized for fulfillment rather than shopping this holiday season.
  • Curbside pickup has risen during the coronavirus, and meeting this need will be a factor for retailers to continue to deliver an omnichannel experience.
  • 67% of shoppers said they plan to confirm online that an item is in stock before going to buy it.
  • Sites offering store pickup — curbside, inside, and drive thru — will see a 90% increase in digital sales over the previous holiday season.

Recommendations:

  • Provide customers with store-level inventory visibility via digital channels in real time.
  • Segment customers based on their proximity to store locations. Promote BOPIS to customers who live close to stores.
  • Provide customers with clear and safe contactless instructions. Some customers may want to pick up their order, and others may want it delivered to their car via curbside pickup.
Leverage social for easier shopping

Insights:

  • Social media is the number one channel for capturing holiday shoppers. Social media and influencers will play a bigger role in 2020, especially among Gen Z consumers.
  • TikTok has added in-feed ads featuring a “Shop Now” call to action that have been embraced by retailers. Facebook and Instagram recently announced a new shopping feature to make browsing and buying items in-app easy.
  • 69% of US Millennials say they’ve made a purchase over social media since the onset of the pandemic.
  • 63% of US Gen Z consumers are likely to pay for a virtual version of a traditionally in-person product or experience.

Recommendations:

  • Utilize new in-app shopping features to create an easier holiday shopping experience (e.g., checkout) on social media.
  • Leverage your first-party data to reach your existing customers on social media, so that they do not miss unique holiday offerings.
  • Partner with social influencers who align with your brand’s holiday theme, and promote campaigns and offers.
Relevancy: Focus on personalization

Insights:

  • COVID-19 has pushed retailers to rely more on e-commerce. The key to success will be data-driven personalization to target customers with content that’s uniquely relevant to them.
  • Marketers think that personalized marketing campaigns can boost sales by 15% to 20%.
  • More consumers, especially Boomers, are shopping online for the first time and for products they would normally buy in-store. Retailers need to understand and be able to act on emerging consumer trends to deliver personalized offerings to support changing buying preferences.

Recommendations:

  • Leverage last year’s holiday performance and audience data, and create segments (e.g., gifters, deal hunters, etc.) for more relevant holiday messaging.
  • Recommend gifts by personalities and categories. Create different campaigns with multiple data-driven personalities (even as simple as “him” and “her”) and send a dedicated follow-up reiterating gift ideas and more.
  • Utilize multiple marketing channels beyond email (e.g., social, direct mail, app, SMS) to maximize customer touchpoints during the holidays.

Retailers need to actively address marketing efforts given the new environment to overcome both today’s challenges while also capitalizing on new opportunities. Navigating holiday 2020 will require revised marketing guidelines to end the year strong.

Marketing Guidelines

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