Short Season Creates Delivery Pressures
4 Key Trends
Early Start to Short Season
Retail sales across all channels (excluding restaurant, gas and auto sales) are expected to grow approximately 4.0% to $729 billion in 2019, according to the National Retail Federation (NRF). The optimistic outlook for record-high consumer sales is mainly driven by positive economic and consumer-spending fundamentals, increasing total retail sales by 3.5% year-over-year in both the first half and third quarter of 2019.
Retail sales across all channels (excluding restaurant, gas and auto sales) are expected to grow approximately 4.0% to $729 billion in 2019.
Shopping cycles are distributed more broadly over the calendar year across multi-channel retailing, but the holiday shopping season remains paramount, accounting for 20% of total annual retail sales, NRF reports. The 2019 holiday season is the shortest since 2013, with only 26 shopping days between Thanksgiving and Christmas. As a result, retailers are starting inventory release, holiday sales and events earlier this year. For example, Walmart began holidays sales on October 25 for electronics, toys, home goods and sporting accessories.
Online and other non-store sales are expected to have the highest gains this holiday season, growing by 11% to 14% and accounting for an estimated 20% of total holiday retail sales, according to the NRF. Mobile commerce is growing at a much higher rate than desktop and is predicted to reach 50% of all online holiday sales this season, according to multiple sources.
There still is much uncertainty and concern over tariffs on consumer goods. Many importers accelerated orders in 2019 ahead of the holiday season to avoid paying increased tariffs on consumer goods like electronics, tools and household appliances. While negotiations are ongoing, the Trump administration delayed additional tariffs on $300 billion of Chinese imports that had been scheduled for December 15.
Figure 1: 2019 Holiday Retail Sales Forecast
Source: National Retail Federation, 2019.
Delivery Pressure is On
While buy-online/pick-up-in-store (BOPS) service can extend the holiday purchase deadline, demanding consumers increasingly expect same-day, next-day and free delivery and returns this holiday season. The shorter shopping season with earlier shipping deadlines this year is driving heated delivery competition.
The shorter shopping season with earlier shipping deadlines this year is driving heated delivery competition.
Amazon now offers free one-day delivery and free returns for Prime members in more than 1,150 Kohl’s locations, which is pressuring other retailers already struggling to keep up with two-day delivery and quick, convenient returns. Retailers are responding by increasing their seasonal workforce dedicated to fulfillment and delivery, while UPS and FedEx are strategically aligning with retailers to make the delivery and return process as easy and seamless as possible for shoppers.
The NRF expects retailers to hire 530,000 to 590,000 temporary seasonal workers in 2019, on par with 2018. With the growth of holiday e-commerce sales, a dramatic shift has taken place in the deployment of these employees to support the fulfillment of online orders, delivery and returns. For example, Target is increasing workers in its distribution and fulfilment centers to 8,000 this year from 7,500 in 2018 and doubling the number of in-store seasonal employees focused on fulfilling e-commerce orders.
UPS is hiring 100,000 seasonal workers from November to January to handle approximately 40 million packages per day. UPS also expanded its retail store locations by installing UPS Access Points in 1,100 Michael’s craft stores in October. Other UPS retail partners include CVS and Auto Zone, allowing customers to ship to and pick up from store locations.
FedEx is hiring 50,000 seasonal employees and has an expanded partnership with Walgreens this holiday season to provide shipping and return services in 7,300 stores nationwide. FedEx also is providing pick-up and drop-off services in 8,000 Dollar General stores.
The Permanence of Pop-Ups
Pop-ups have evolved from startup breeding grounds to permanent fixtures in retail centers. Traditional retailers and online brands alike have mainstreamed the use of pop-ups as compelling incubators for special-release product drops, brand collaborations and limited inventory launches.
Traditional retailers and online brands alike have mainstreamed the use of pop-ups.
Exciting temporary retail is prevalent this holiday season and represents a bonafide retail segment across all categories and price points to drive traffic, increase brand awareness, heighten the shopper experience and attract new customers.
American luxury brand Tiffany & Co. launched a new men’s lifestyle collection in a 200-sq. ft. pop-up at The Grove in Los Angeles, while lifestyle brand Goop opened its second pop-up since 2015 in Chicago’s River North neighborhood.
Toys R Us is revitalizing its brand since emerging from bankruptcy as Tru Kids in January and is heavily focused on capturing toy-centric holiday ending both online and in-store. In addition to relaunching the Toys R Us e-commerce platform in partnership with Target, the toy retailer cobranded two playland pop-ups with Candytopia in Chicago and Atlanta. The pop-ups provide an immersive brand and product experience in approximately 30,000 to 36,000 sq. ft. and include gift stores to purchase toys and branded merchandise.
Resale Provides Affordable Luxury
Today’s consumers are more environmentally, socially and economically sensitive while remaining highly fashion-conscious and photo-ready. The resale market is booming as price-sensitive millennials and Gen Zers fuel a trend of recycling and upcycling their clothing to stay fashionable affordably. The preference for disposable fashion is rising and the stigma over secondhand clothing is shifting as consumers now focus on extending the life of garments and reducing environmental impact.
The resale market is booming as price-sensitive millennials and Gen Zers fuel a trend of recycling and upcycling.
According to an Accenture survey, 48% of consumers said they would buy pre-used apparel and accessories as gifts, while 56% said they would welcome secondhand gifts from others this holiday season. Resale and apparel rental companies are thriving and capturing an increasing share of spending on gifts and seasonal attire. From mass-market to luxury, resellers are connecting consumers with premium and luxury merchandise both online and in-store to maintain their fashion stature often at discounts of up to 90% off retail pricing.
The Real Real, one of the leading online luxury resellers to enter the brick-and-mortar market, is making luxury fashion even more affordable by extending buy-now/pay-later (BNPL) payment options. The partnership with Affirm offers short-term, flexible payment installment programs to finance high-ticket purchases as an alternative to cash and credit cards. BNPL has gained rapid traction over the past three years and is now offered by thousands of online retailers. It is expected to become a more common payment platform in brick-and-mortar stores in the year ahead.
Figure 2: Secondhand Apparel Market to Double in Five Years
Source: ThredUP Resale Report, 2019.
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