The pandemic is reshaping the holiday shopping season
The 2020 holiday buying season is expected to be like no other: An avalanche of ecommerce deliveries, merchants running promotions earlier than ever, and tight crowd controls on Black Friday.
Why it matters: Retailers desperately need the revenue from this critical time of year — and they fear that overwhelmed package-delivery services will leave their customers high and dry (and angry).
What's new: The pandemic is changing the dynamics of the annual gift-buying ritual.
- More people than ever say they'll be buying most of their stuff online.
- With Halloween expected to be a bit of a bust this year, more stores will put renewed emphasis on Christmas and other year-end holiday sales.
- Target, Walmart and others have vowed to stay closed on Thanksgiving.
The intrigue: "All the traditional last-mile delivery carriers [like FedEx, UPS and DHL] will run out of capacity at some point in the season," predicts Caila Schwartz, a senior industry strategist at Salesforce Commerce Cloud. "So we anticipate that 700 million packages are actually at risk of being delayed this year."
- Some retailers will offer 15% discounts to people who fulfill in the stores, she says.
- 2020 is expected to be the biggest year yet for a trend called "click and collect" or "BOPUS" (buy online, pick up in store).
- Returned gifts and packages are expected to reach record levels as well.
Both UPS and FedEx — already strained by the COVID-induced ecommerce boom — are proactively slapping fees on huge mailers like Amazon and Target, sometimes as much as $3 to $4 per package.
- Schwartz predicts COVID-related mailing surcharges will amount to $4.5 billion.
- This price tag could strain the margins of retailers, who may be reluctant to raise prices too much and turn customers off.
- UPS says it has already been seeing holiday levels of demand, and hired 39,000 employees in Q2 to deal with it.
- FedEx, meanwhile, "has limited the number of items that Kohl’s Corp. and about two dozen other retailers can ship from certain locations, as the delivery company tries to prevent its network from being overwhelmed during the coronavirus pandemic," per the WSJ.
What to watch: With so many Americans worried about their finances and fearful of entering physical stores, retailers may have to lower their expectations.
- "Elections are not good for the retail economy," Karl Haller, an IBM retail expert, tells Axios. "The uncertainty about what the future holds tends to depress the desire to go out and spend on discretionary items."
- According to IBM's annual retail survey, Americans will likely be buying more groceries, alcohol and building materials/home improvement supplies, and fewer personal electronics and clothes (except for athleisure).
- As Haller put it: "We’ve got a polarizing election that’s going to boost liquor sales."
The bottom line: Experts advise getting your shopping done as early as you can.