English theologian and historian Thomas Fuller once (roughly) said “it is always darkest before the dawn.” It is a saying we imagine has been on the minds of the nation’s retailers as they contemplate both the latest physical retail figures out from RetailNext and the coming holiday season.
According to the firm’s latest Pulse Report on physical retail, the scariest thing about last month was not Halloween, nor the attendant rush of horror movies that filled theaters and Netflix queues. No, the big bone chiller last month was consumer behavior and a continual indifference to shopping in-store, which approached critical levels.
As has been the trend throughout the year, sales were down — though this month by a big 12.2 percent as opposed to 8.7 percent in September. Foot traffic also took a big hit of 10.7 percent, following (lower than forecast) 8.1 percent declines the previous month. Also down were sales per shopper and conversion, which had both shown signs of growth in earlier reports this year.
Certainly not the results physical merchants wanted to see, and, as Karen Webster noted in a debrief with RetailNext’s Vice President of Retail Consulting Shelley Kohan, a very weak report even by the standards of a year of weak reports in physical retail. Previous Pulses this year indicated have falling sales and traffic. But there had been a balance in sales-per-shopper and conversion increasing; customers may be going to stores less, but when they did, they were buying more and buying more often.
But last month, Webster noted, consumers were both going less and buying less often when they did, which surely looks like something of an alarming trend, particularly ramping up to the spending season around the holidays. Should merchants be alarmed?
Kohan agreed the figures were both arresting, and required response — but immediate fear for the holiday season shouldn’t necessarily be one of them.
“I always caution people against drawing big conclusions about holiday retail from October shopping because they are very different animals,” Kohan noted.
There are key points of the data that can — and should — be kept in mind by retail players across the board: Black Friday, holiday season and beyond.
The Bigger Context
Kohan noted that among the reasons that drawing a lot of inferences from October results might be a dicey proposition is that esoteric factors had some pull this year.
“Quite honestly I think a very large factor involved here is the weather,” Kohan told Webster. “It is so warm outside and stores are chock-full of winter goods. It is very difficult to make a purchase because literally the wrong stock was on shelves, and I think that was a tremendous blow for the brick-and-mortar stores, particularly in apparel.”
Global warming, now messing up retail along with polar ice sheets. Luckily, (barring truly unusual circumstances) the weather will get with the program in November and December, which means that problem may iron itself out.
The other factor Kohan called out was auto sales, which she noted were at unusually high levels. Which matters quite a lot since cars are rather expensive.
“Auto sales have been very strong in both September and I hear again in October. Consumers only have so much money and making a very large purchase will have big impacts on what will be spent in other areas.”
And while those transient factos played a roll, she said there are also bigger structural changes underway.
“Is the consumer just changing?”
That was one of Webster’s main questions for Kohan in the wake of the latest retail figures: Are we seeing evidence of consumers who are just going to shop different from here on out? Kohan thinks we are.
“Consumers are shopping differently absolutely and we have a different consumer that has evolved over the last three years even than has ever existed before,” she said.
Part of that reflects in how consumers are sold to, Kohan notes. Instead of hoarding sales on a “big day” like Black Friday, merchants are pushing their discounts through the season (a la Amazon and Walmart) to create a more even keeled, less frenetic shopping experience, which consumers have been voting against with their feet.
“The other big factor is that a lot of shoppers are really looking for experiential things — they are spending money on that,” Kohan noted. “Retailers that are able to marry up some kind of experience in the in-store shopping environment will see big results in the holiday season.”
In fact, she notes, you are already seeing some of those big results now.
The Changing Merchant
Earlier this week, H&M customers around the world lined up and in some cases camped out for the chance to buy the brand’s new collaboration collection with French couture house Balmain. The smashing success, Kohan notes, points to what the experiential merchant of the future looks like and does.
“The collaborations that are happening I think they are really great for many reasons. In this kind of mass market we have a lot of sameness, so product differentiation is getting more competitive and challenging. I think the designer collaboration puts into the market a differentiated product.”
The draw, Kohan noted, is the experience of accessing it at a discounted price in a highly socialized (and social media enhanced) atmosphere.
“If you can take a luxury product and integrate it with luxury experience, you’ve got something that customers are looking for,” Kohan said.
Kohan also noted that beyond a branding experience, merchants are also focusing on a technical one, albeit one that is supposed to exist just at the margins of consumer awareness.
“You are also going to see a lot of enabling tech in the store to help customers with the shopping journey and to make it more convenient, quicker and accessible for consumers to be in-store,” Kohan told Webster. “We used to think more time in-store was always better; now we are seeing that isn’t the case. Consumers want their goods and quickly.”
To that end, she noted, she expected to see big advances in omnichannel, and big rewards for brands that actually get it right.
Actually Getting It Right: Holidays 2015 Edition
So how does the evolving merchant respond to the evolving consumer during the coming holiday shopping press? More access? Less access? Open on Thanksgiving? Closed? Digitally enabled with lots of pushes? Playing it cool with a few targeted promos?
Kohan said it isn’t so much about having the right answer so much as it is about the right retail attitude at this point, when experimentation is still the name of the game. That right attitude, for her part, more or less boils down to “go big, or go home.”
“It’s not about whether you should be open or closed,” Kohan said. “It is about having a good strategy. If you’re going to be open, do it all the way — have great offers, keep supply up, have pumped-up staff who are ready to help. If you’re going to close, really get credit for it for the customer.”