By Adam Forrest, Director of Product Marketing
It’s that time of year when conversations rapidly shift to the holidays – new challenges, new opportunities and what retailers need to do to prepare for consumer shopping preferences this year.
Here are some of the top items I read to help inspire new thoughts for you this week.
Summary: Amazon is planning to open its first brick-and-mortar location in New York City, set to open in time for the holiday shopping season. The location will function as a mini-warehouse, offering limited inventory for same-day delivery within New York, as well as serving as a location for picking up online orders and making product returns and exchanges.
My thoughts: Since Amazon explored opening a physical location a few years ago, but eventually scrapped the idea, it’s interesting to see them revisit this option now. I’ve previously talked about how retailers can use their physical locations as an effective way to compete with Amazon for same-day delivery; opening a store in New York City could be Amazon’s reaction to this physical competition in the same-day delivery race. But it’s curious that they opened a “mini-warehouse” in Manhattan – which is obviously a major capital investment – when a similar distribution-like presence could be established for significantly less outside the city. I believe that an off-the-grid location would still allow Amazon to make those same-day deliveries efficiently. Time will tell if this is a good investment for Amazon vs. doubling down on enhancing its distribution network in smaller areas.
Summary: According to the NRF, U.S. retail sales could rise to be the highest in the last three years during the upcoming holiday shopping season. Improvement in employment status is cited as one of the leading reasons, as consumers are now more willing to splurge on gifts.
My thoughts: There are a number of factors that could contribute to an increase in holiday sales, including a stabilizing economy and the fact that it’s a major election year. But I honestly think it’s difficult to compare the 2013 holiday shopping season to this year. There’s a longer runway between Thanksgiving and Christmas 2014, which will most definitely impact the amount of spend that happens during the total holiday shopping season. But another factor that could impact holiday spend – and possibly drive a new type of behavior – is the prediction that we’re going to have a tough winter. Consumers may not remember last year’s shipping and delivery issues right now, but bad weather could bring back memories of not getting their gifts on time. These bad memories could inspire a big area of change for this year, since more people may opt to pay for expedited shipping, reserve items online to be purchased in a store, or buy online and pick up in store.
Summary: According to PwC’s holiday shopping forecast, more than two-thirds of shoppers are considered omni-channel consumers. This means they’re both researching products and making purchases across a variety of channels. And there’s a slight uptick in the forecast this year for online spending – 43% of all spending will be online, up from 42% last year.
My thoughts: Based on how often people research online, then make a purchase through various channels, I’m surprised it’s only two-thirds of shoppers! I thought for sure that number would be higher. Regardless, I think the big takeaway here is that retailers need to think about how their customers’ buying journey and the overall experience plays out over time. Retailers need to create a holistic shopping experience that will help them serve omni-channel shoppers better; it’s something the industry has talked about at length for years. But one area that is yet to be defined is how retailers will measure the sale. Omni-channel enablement has blurred organizational lines; there’s so much cross-pollination around buy online/pick up in store and reserve online/buy in store, to just name a few of the multichannel options. This raises a good question around what the benchmark will be and how the industry will measure sales going forward.
Summary: A new report from BI Intelligence takes a look at the same-day delivery market, exploring which consumers are more likely to be same-day delivery customers, what products make the most sense for same-day delivery options and where these services have the best chances of succeeding.
My thoughts: The conversation around omni-channel strategies has primarily focused on the front-end – what the consumer experience will be and how retailers need to evolve to meet changing consumer demands. But we’ve reached a point where retailers need to look at the impact of omni-channel on the back-end, too. It’s now critical for retailers to think of their inventory and how to get it to customers as efficiently and effectively as possible. The early adopters in this area are already looking into how to move inventory to be more effective with same-day delivery options; Amazon, Macy’s and Bloomingdale’s are just some of the recent examples. At the end of the day, I think those who will succeed when it comes to same-day delivery are the retailers that use their existing stores as distribution centers. After all, the retail world is about survival of the fittest; everyone needs to evolve and innovate.
Summary: The department store – both in the US and abroad – has been impacted by a number of retail trends over the last few years, causing sales to decline. But there may be hope for department stores of the future due to new strategies from luxury players, and it all revolves around “innovating to thrive.”
My thoughts: This has been an interesting topic that we’ve been thinking about for a while; Rob Garf wrote a great post on the “reinventing the box” earlier this year. Expanding on Rob’s thoughts around function and format, this article addresses the idea that the reinvention of the department store revolves around being redesigned to give luxury brands more control over their areas and displays. This will encourage consumers to stay and shop in the department store since they can engage with their favorite brands; they don’t need to go to the brand’s physical location in the mall. It will be interesting to watch how this evolves from multiple perspectives – not only what it will do for the future of department stores, but also if we’ll continue to see standalone locations for luxury brands in the mall.