The nights are getting longer, and retailers across the UK, Europe and the US are preparing their Black Friday bonanzas, Thanksgiving promotions, Christmas pop-ups and Boxing Day sales. This season, tensions remain high. After two years of Covid disruption to the holiday season, attention is turning to the global economic crisis and how it may impact consumer behaviour. For fashion brands and retailers, careful inventory management, an aspirational — yet affordable — positioning, and well-timed discounting will be key to success.
Retail sales growth is expected to slow in several important markets after a Covid spike last year drove up sales of “durable” products, such as treadmills and TVs. In the US, holiday retail sales (from November to January) are expected to increase by between 4 and 6 per cent year-on-year in 2022, according to Deloitte’s annual forecast – down from 15.1 per cent growth the year prior. It expects a similar story to play out in the UK, where inflation is higher than in the US.
Behind this slowdown in growth is high inflation and the energy crisis, which is driving up the cost of living. In the UK, the number of people visiting shops this Christmas is forecast to remain 18 per cent lower than pre-pandemic levels in 2019, according to retail data company Springboard. Economists anticipate the US will slide into a recession by next year.
“Disposable income isn’t growing nearly as much as wages would suggest, because of the impact of inflation. That’s going to somewhat mute the growth we see in the holidays,” says Rod Sides, global leader of Deloitte Insights and vice chairman of its US retail and distribution practice. However, he predicts that fashion will be one of the top three best-performing categories this holiday season, as people update their wardrobes.
A study published earlier this week by US research firm Gartner found 28 per cent of American consumers plan to spend less this holiday season. Nearly half of the consumers surveyed were planning to start earlier, in October or November, while 16 per cent were shopping year-round for gifts. “We expect to see US consumers shopping earlier, seeking coupons and bargains and purchasing fewer or smaller goods than last year, but you can expect that to be even more so the case in the UK,” says Gartner’s UK-based director analyst Matt Moorut.
With inflation weighing on consumer spending, the top factors that encourage buying are price (65 per cent of respondents), value (53 per cent) and free shipping (51 per cent), according to Gartner’s survey. Moorut says these factors are also consistent with UK consumer behaviour: “Price sensitivity is at a high level currently, and this will have been exacerbated by the falling [value of the] pound.” While high-end luxury players tend to stay relatively immune to short-term economic downturns, this renewed focus on bargain hunting could affect those fashion retailers and brands positioned in the affordable luxury segment, some of whom — including Coach — have been increasing prices to offset rising costs. It could also drive e-commerce sales as fashion consumers look for discounts online.
The convenience factor
Deloitte forecasts that e-commerce sales in the US will grow by 12.8 to 14.3 per cent year-on-year, during the holiday season, compared with 8.4 per cent in 2021/22. While in-store shopping has returned in the US and Europe, 21 per cent of consumers plan to increase online shopping, per Gartner’s study.
E-commerce is convenient, points out Deloitte’s Sides. “The other thing that happened is, in the pandemic, we had a group of older consumers who realised you can buy items and have them delivered to your house. I believe that we’ll continue to see the holiday season become more and more digital. We’re never going to replace the stores, and that’s OK, but I do think that the convenience factor of being able to shop when you want to, being able to compare pricing and deals, is a big part of the [holiday] season.”
This, he says, makes good stock management all the more important. “Now, generally when we go to a store, we know what we’re looking for. Therefore, inventory’s really important. It needs to be accurate, so we [the consumer] know what’s in stock before we head to the store.”
More than a quarter of respondents to Gartner’s survey were willing to pay for shipping that guarantees or expedites on-time delivery. “I think there’s an opportunity for retailers and brands that have partnerships with same-day delivery [services] to be able to utilise omnichannel, buy-online, pick-up in-store or local shipping options,” says Gartner retail analyst Brad Jashinsky. “That becomes a big advantage for brands, in particular during that week or two where shoppers have waited until the last minute to start shopping.”
With supply chain issues ongoing, ordering the correct amount of stock is top of mind. “The biggest challenge is trying to make sure that you have enough stock available that you’re not stocking now and missing out on sales, but also making sure you’re not overstocked on the wrong items and you have to do extreme discounting,” says Jashinsky. “We’re seeing retailers and brands streamlining the number of items they’re selling and doubling down on the ones they feel are going to be bestsellers. That’s the way that we’ve seen brands become more conservative, while still ensuring they’re going to have enough items on sale during these key holiday periods.”
French department store chain Printemps began its 2022 holiday preparations early in the first week of January 2022 — 12 months in advance, in comparison to the usual 10 months. “We learned our lessons from Covid. […] We could feel the tension on supply to order and prepare all the elements of decor for stores since most of the supply chains have been impacted by Covid and then the recovery of this year,” says CMO Stéphane Roth. Printemps is known for its extravagant themed window displays and holiday campaigns.
The retailer is expecting a big increase in online traffic across November and December. For bricks-and-mortar, it’s about creating “a sense of magic” for all consumers, whether they’re making a purchase or just coming to window shop or grab a coffee. The retailer received all the decor elements over summer and September — a large portion of which are made to order based on the annual theme (this year’s is the circus) — and will begin the three-week installation process in mid-October.
Getting the inventory balance right
Discounting is often seen to be the scourge of the holiday season, with retailers and brands running Black Friday promotions earlier and for longer each year, drawing spend away from items that otherwise would have been sold full-price in the run-up to Christmas. But for retailers faced with ongoing supply chain delays and consumers with less to spend, carefully timed promotional activity could be key to success, says Deloitte’s Sides.
“Being able to have really sharp promotions early on to bring people in would be really important. Because we know that the consumer’s hurting — and they’re hurting worldwide, by the way. So it’s not just a US phenomenon or a UK phenomenon,” he says. “And being nimble [with online promotions] will be really important — it’s easy enough to create a coupon or a QR code.”
“The other thing that works is the notion of scarcity. Supply chains have bounced back pretty well overall, but being able to create that demand that says, ‘look, these things are moving quickly. You need to act.’ That’s another thing that retailers can do. But you need to have real-time, dynamic inventory. Having that information at the fingertips of the consumer is really helpful.”
For most retailers and brands, buying for the holiday season happens in the first quarter of the calendar year, January to March. But Sides points out that many are still resetting after the pandemic, which skewed the past two years of customer data. “It’s going to take them a season or two to get back to where we were in terms of managing overall demand.”
For accessible luxury brands looking to boost their luxury positioning by cutting down on discounts, the stock balance is even more pertinent. However, it’s often “better to be a little overstocked than understocked, particularly for [accessible luxury brands] that have a lot of avenues to sell that excess inventory, whether it’s through outlets or some of the retailers they work with”, Gartner’s Jashinsky says. “[During the holiday season] we’re appealing to consumers that are only purchasing [luxury goods] a couple of times a year. If they can’t find what they’re looking for, they’re probably going to go to another brand.”
Unlike the UK and the US, the discount season in France is defined by law, so Printemps won’t begin its sale until 7 January. “Last January, we had very low inventory. We were lucky in the fact that we succeeded in optimising our stocks and ordering the right amount,” says Roth. In addition to the intuition of the buying departments, the company analyses shopping trends across brands, products and even colours, and also has a number of products that are ordered on demand that brands make to sell exclusively at Printemps, noting the retailer’s signature colours to go along with the annual theme. This year expect a lot of green, white and gold, Roth says.
Nailing that aspirational positioning
Still, inflationary periods may not be the best time for accessible luxury brands to be rising up the ranks, Jashinksy says. Instead they should cash in on consumers that are looking for lower priced luxury goods during hard times. “I think there’s an opportunity for [accessible luxury] brands to grow their market share during this time when so many consumers are looking for value,” he says.
Gartner’s study found that 82 per cent of shoppers are expecting to get less for their money this holiday period. “The great thing for a lot of brands is that the luxury industry typically takes a longer-term approach to brand positioning and brand building, so it’s an opportunity for those brands to get additional sales right now and not nickel-and-dime those consumers out there,” explains Jashinksy.
In March, Printemps repositioned as an aspirational retailer rather than pure luxury, with the aim to target a wider variety of consumers through experiential retail strategies. For this year’s circus-themed holiday display, it will have acrobats and performers in stores every day, for instance.
It’s about “being more accessible both in terms of price points and in terms of experiencing a place where you can spend time and have coffee at one of the restaurants”, Roth says. “It’s essential today, especially after Covid when people were isolated, to ensure that our digital platforms are not only just to sell product but that there is a true connection to bricks-and-mortar and when we speak of omnichannel approach it needs to be completely synchronised.”
This approach is one of the key ways Printemps is able to attract consumers to spend during the holidays. In addition to the window displays and experiential elements, Printemps invests its largest budget of the year into magazine, digital and outdoor advertising, and contacts brand partners and clients from its database.
The accessibility hasn’t hurt sales, either. “On average, families tend to still spend more or less the same amount [during the holidays] because they will save up, but since we launched our new brand positioning, we have had double-digit growth for our traffic and a very strong increase of turnover.”
This summer, Printemps’ results matched pre-pandemic levels and so far has seen a strong influx of German, British, American, Korean and Middle Eastern customers, as well as European consumers travelling within Europe.
The resale advantage
Outlets have advantages for accessible luxury brands to sell directly to their consumers during periods of supply chain disruption and inflation, but so does resale, according to Jashinksy. “It’s an opportunity, especially for those mid-tier brands to build into the sustainability message and also add more value because they can control [brand value] because they can authenticate and verify those items. […] It’s a way for brands to get consumers more comfortable with [buying] items that in the past were either destroyed or offloaded to a bulk discounter.”
Printemps has also seen higher demand for sustainability among its consumers, which prompted the retailer to stock from more sustainable brands this holiday season. In September 2021, Printemps launched a space dedicated to facilitating the buying and selling of secondhand goods and saw that in the first three months of resells they sold nine months’ worth of goods — consumers weren’t turning away from secondhand during the holiday period, Roth noted.
“We’re facing one of the toughest consumer environments we’ve seen in more than a decade, and we know that when budgets get tight, consumers seek — and demand — value. Fifty-eight per cent of consumers say that shopping secondhand has helped them in some way during a time of inflation, and we expect this to continue through the holiday season,” says Anthony Marino, president of US-based resale platform Thredup.
For retailers, brands and resales companies alike, there is another unknown looming over the 2022 holiday season — Covid. Earlier this month, the head of the World Health Organization (WHO) said the end of the pandemic was “in sight”, while US President Joe Biden has controversially declared it is already over. Yet last year, the Omicron variant of the virus swept the world in December, shutting down retail in several countries just before Christmas.
In the face of such uncertainty, retailers with an omnichannel approach, who are in tune with consumer demand and offer convenient and affordable products, will be well positioned for success this season. The online experience, whether driving to on-site check-out for delivery or driving store traffic, will be critical.