Holiday shopping season is looking strong — for e-commerce
The holiday shopping season looks promising for retailers this year, with Americans expected to spend a record $720 billion by the new year.
This comes thanks to low unemployment numbers, tax cuts and even a little bit of a raise. The U.S. has added 2.3 million jobs and $410 billion of additional disposable income since last year, said James Bohnaker, associate director of IHS Markit, an economic analysis firm.
Americans feel confident enough to spend 4.1 percent more than last year, according to the National Retail Federation. The bad news for brick-andmortar stores is that websites will take up an even larger portion of the shopping budget, roughly $124 billion according to Adobe Analytics. And the holiday shopping has already begun, with customers using their phones more than ever.
“The traditional delineation between shopping seasons has blurred due to the emergence of year-round online shopping promotions,” Bohnaker said. “In-store promotions are also being advertised earlier each year as retailers hope to compete with online merchandisers.”
E-commerce has consistently taken about 1 percent of market share a year from brick-andmortar stores. This year that portion will grow to 18.9 percent from 17.8 percent last year, Bohnaker said.
The Sears bankruptcy is a vivid reminder of how even the most powerful merchandiser can ignominiously collapse if it fails to adapt. Many large retailers this year will test new tactics.
BOPIS, or buy online and pick up in store, is the season’s buzzword. Target, for an example, is offering same-day delivery in 46 states, a drive-up option at 1,000 stores and free two-day shipping everywhere.
“I’m confident Target will be America’s easiest and most enjoyable place to shop for the
holidays and beyond,” Target CEO Brian Cornell said in a statement.
This new approach will not keep Cornell from the reprehensible practice of making his employees work on Thanksgiving Day. He apparently does not believe the evidence that he’s only cannibalizing sales while mistreating employees.
Cornell does make a good point, though, about making the shopping experience enjoyable. Online shopping offers convenience, so brick-and-mortar stores must create a pleasant or intriguing experience that is worth the customer’s time.
Cooking lessons, elaborate displays, pop-up restaurants and craft cocktails are just a few incentives smart retailers are offering customers. Brick-andmortar stores need more than exclusive products; at their best, they provide a visual experience the customer will proudly post to Instagram or Facebook.
To meet customer expectations, retailers are staffing up. Target alone announced it would hire 120,000 seasonal workers, the most of any retailer.
Altogether, stores are expected to hire a record 704,000 seasonal workers, according to Challenger, Gray & Christmas Inc., a global outplacement firm. Wages for Santa’s elves will also go up.
“The competition for seasonal workers is intense, especially as companies expand their compensation and benefits offerings,” Andrew Challenger, the firm’s vice president, said. “Retailers, logistics firms, transport and warehousing are competing for talent and upping their employee offerings this holiday season to attract potential workers.”
A higher portion of these jobs, though, will be in fulfillment centers, not shopping malls. Amazon said it would hire 100,000 seasonal workers — down from 120,000 last year — and pay a $15-an-hour starting wage, driving up pay in many parts of the country.
Recognizing how traditional retailers are expanding online, Amazon CEO Jeff Bezos is following Chinese e-commerce companies into opening brickand-mortar locations.
Amazon already has kiosks in high-end shopping malls across the country, but the more significant move is a high-tech store called Amazon Go. Your phone interacts with a complex system of cameras and artificial intelligence algorithms, and Amazon bills you as you walk out the door.
Bezos opened his third cashierless store in Seattle and has plans to open 3,000 more by 2021. Chris Walton at Forbes described Amazon Go as “like 7-Eleven had a 1960s love child with Whole Foods.” Since Amazon owns Whole Foods, expect to see the technology there, too.
The formula for retail success is simple: provide the products people want in the most affordable, convenient and exciting manner. Sears set the bar for decades with a hybrid model of brick-and-mortar stores and exhaustive catalogs. The new model requires retailers to elevate the store experience and substitute expansive internet offerings for the catalog, but the basics remain the same.
The American consumer is ready to spend; a retailer’s job is to make it as enjoyable as possible.