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Covid and the Long Tail

An interesting development is happening on the way to retail recovery during the Covid pandemic: Brands and retailers are cutting back on the breadth of products they make and sell.

In August 2020, for example, Todd Kahn, president and interim CEO of Coach, announced during an earnings conference call that the brand would slash the number of products it offered this holiday season.

“Over the last five months, we have taken a dramatically more critical lens to the SKU proliferation and inventory churn. For this upcoming holiday season, we’ve shrunk our SKU count by approximately 50 percent. We believe that this reduction is key to greater productivity and clearer brand messaging to the consumer,” Kahn said.

Coach, the maker of this bag, is reducing the number of styles it produces.

Writing in The Wall Street Journal, reporter Suzanne Kapner described the company’s move succinctly. “Coach went from making 1,000 handbag styles last year to 500 this year.”

Coach is not alone. Kapner notes that retailer Bed Bath & Beyond reduced the number of can openers it carried from 15 to five, and big-box chain Kohl’s reduced the varieties of towels it carried from 320 to 265.

Inventory

Reducing the variety of handbags, can openers, and towels simplifies supply chains and focuses on items with mass appeal.

Imagine an omnichannel retailer selling everything from dog food and hay to clothing and footwear. The company has a good, better, best approach toward most product categories. In the footwear department, this can be seen in the number of work boots available. Here is an example.

 Retail PriceCostGross Profit
Good Work Boot$99.99$45.00$54.99
Better Work Boot$129.99$58.50$71.49
Best Work Boot$189.99$85.50$104.49

This retailer keeps a “size run” of each work boot at all 15 stores and at its two ecommerce fulfillment centers. Thus it needs at least one pair of work boots from size five to 14 in each style at each location.

It also doubles up on popular sizes from nine to 11. So it must carry a total of 13 pairs per run, times three styles multiplied by 17 (15 stores and two fulfillment locations). Bottom line, each initial stocking order consists of at least 221 pairs of work boots per style.

 CostInitial Stocking
Order Units
Initial Stocking
Order Dollars
Good Work Boot$45.00221$9,945.00
Better Work Boot$58.50221$12,928.50
Best Work Boot$85.50221$18,895.50
TOTALS663$41,769.00

As such, the example retailer is investing $41,769. Fill in orders would follow, replenishing each location’s size run as needed. If every boot in the initial order sold, the business would earn $51,044 in gross profit.

The coronavirus, however, exposed at least one potential problem with this approach: What if the supply chain is disrupted?

Two pairs of size 10 at each store might not be enough. The retailer could sell out of these popular sizes and miss sales opportunities while holding 51 pairs of size 14 work boots chain-wide, which is likely too many.

If this hypothetical retail chain focused on just the “better” option, it could purchase something like 714 pairs for the same $41,769 investment. It would have less product breadth but a lot more depth. There could be something like 10 pairs of the relatively more popular size 10 work boots at each store. If every boot in the initial order sold, the chain would generate the same $51,044 in gross profit while avoiding the purchase of additional sizes and the associated shipping, logistics, and warehousing costs.

This retailer could sell more of less and make more money.

The Long Tail

But selling more of less is the opposite of what some retail businesses might expect.

In October 2004, author and entrepreneur Chris Anderson introduced us to “The Long Tail.” Two years later, he produced his now-notable book, “Long Tail: Why the Future of Business is Selling Less of More,” which is the opposite of selling more of less.

“An average record store needs to sell at least two copies of a CD per year to make it worth carrying; that’s the rent for a half-inch of shelf space. And so on for DVD rental shops, videogame stores, booksellers, and newsstands,” wrote Anderson in his famous Wired magazine article 16 years ago.

“Meet Robbie Vann-Adibé, the CEO of Ecast, a digital jukebox company whose barroom players offer more than 150,000 tracks — and some surprising usage statistics,” Anderson continued.

“Vann-Adibé hints at them with a question that visitors invariably get wrong: ‘What percentage of the top 10,000 titles in any online media store (Netflix, iTunes, Amazon, or any other) will rent or sell at least once a month?’”

Most folks guess 20 percent, but the answer is 99 percent. Songs have a long tail, meaning that many, many songs will sell.

Anderson and many others in the industry have argued that Amazon’s success, in part, is due to the long tail — you can find several thousand different handbags, more than 1,000 different can openers, more than 10,000 different styles and colors of bath towels, and something like 30,000 styles of work boots.

Nonetheless, not every business is Amazon. Moreover, Amazon doesn’t fund the items in its marketplace — the participating sellers do. If it were forced to purchase all of the inventory offered on its site or if it experienced circa 2020 supply disruptions, Amazon might reduce SKUs, too.

During Covid, Ecommerce Founders Can Invigorate Their Companies

Entrepreneur-lead businesses can become unwieldy as they grow. To survive, founders often must embrace a management system and delegate responsibilities.

“An entrepreneur slips and falls off the edge of a cliff. On his way down, he manages to grab onto the end of a vine. He’s hanging there, a thousand feet from the top and a thousand feet from the bottom,” wrote Gino Wickman in his book, “Traction: Get a Grip on Your Business.”

“His situation seems hopeless, so he looks up to the clouds and decides, for the first time, to pray. ‘Is anybody up there?’ he asks. After a long silence, a deep voice bellows down from the clouds, ‘Do you believe?’ ‘Yes,’ replies the entrepreneur. ‘Then let go of the vine,’ says the voice. The entrepreneur pauses for a second, looks up again, and finally responds, ‘Is anybody else up there?’”

Letting Go

Wickman’s point is that many businesses fail to grow because their entrepreneurial leaders are unwilling to let go. These over-involved leaders may have a hand in everything from developing products to responding to customers or even packing orders during peak selling periods.

Passionate and engaged, these individuals might work long hours, and their work might be paying off. The company could be growing. But with each new growth milestone, the burden becomes heavier, and the entrepreneur must work even more. It’s an unsustainable model.

In this way, letting go of the vine might represent building a leadership team to take on some or even most of the entrepreneur’s responsibilities. This delegation elevates both the entrepreneur and the business.

But having a good or even great leadership team may not be enough. The entrepreneur will also need a management system she can believe in. This founder needs to have faith, if you will, before letting go.

Management Systems

The good news is that established management systems can help entrepreneurial ecommerce businesses run extremely well.

Wickman’s system, for example, is called EOS — entrepreneurial operating system. The idea is that, like a computer, every business has an operating system. So, why not have an organized, named approach to setting a business’s goals and developing the various areas of the company? EOS has six areas of focus: people, vision, data, issues, process, and traction.

Pie chart of the EOS model showing vision, data, process, traction, issues, people.

The EOS model focuses on six aspects to help companies become organized and growth-oriented: people, vision, data, issues, process, and traction.

Similarly, Verne Harnish’s Scaling Up business management system has helped many entrepreneurial companies achieve exceptional results. One of the best-known examples is Atlassian, an Australian software company that owns Jira and Trello (respectively, software-development and collaboration tools). The business started in 2002 and adopted Harnish’s system. In 2015, Atlassian went public with an initial market capitalization of around $4 billion.

Now, some five years later, Atlassian’s market cap is around $48.7 billion.

The point is that EOS, Scaling Up, and similar approaches provide a structure that a founder can trust. They provide a level of insight and control that makes letting go feel safe and appropriate.

The Pandemic

Sometimes it is easiest to accept change in the midst of turmoil, such as the global pandemic.

The status quo has been tossed out the window for most businesses. Some ecommerce companies have enjoyed an explosion of sales, forcing them to invest rapidly in inventory, systems, and even warehouse space.

Others have experienced unprecedented supply chain challenges and changing shopper behavior. Traditional brick-and-mortar retailers have suddenly invested millions in ecommerce.

Some companies that had on-premises staff — purchasing, finance, marketing — had to pivot toward a remote workforce. And now, several months on, many of those remote workers have no intention of returning to an office, ever.

The pandemic, in this sense, is an obstacle and a change agent. It’s an opportunity for entrepreneurs to invigorate their companies with new frameworks, such as EOS or Scaling Up, and to develop a broader objective for the enterprise — the Hedgehog Concept that Jim Collins describes in his book, “Good to Great,” or Wickman’s vision component in EOS.

2020 ‘Time Machine’ Elevates All of Ecommerce

The ongoing global pandemic has accelerated retail and B2B trends that make it relatively more difficult for some businesses to survive while upping the competitive bar for the entire ecommerce industry.

These trends include everything from an increase in online sales and the growth of click-and-collect shopping to how software is built and integrated.

“We’ve got two products in the market,” said Peter Sheldon, senior director of commerce strategy at Adobe. “We’ve got Magento Commerce and Adobe Analytics. Between the install base of those two, we collect a huge amount of aggregated data around online behaviors, online retail spend, and so forth.

“And every month we publish what we call our ‘Adobe Digital Economy Index.’ This is our finger on the pulse of what happens with online sales, and it has been really interesting since March versus our forecasts. We were always very accurate on our forecasts. Coming into 2020, we knew exactly what was going to happen under normal circumstances. But what we’ve seen so far since March [is that] online spend in the U.S. has resulted in an extra $107 billion.”

To further make Sheldon’s point, consider recent headlines on Practical Ecommerce.

A Time Machine

Many industry insiders see the explosive ecommerce growth as something of a time machine transporting the industry to some future date in terms of technology and business practices.

“If we ask, ‘What has Covid done over the last 12 months?’ — it has put us in a time machine. Meaning, it has accelerated [ecommerce]. The forecasted growth we had for the shift of retail spend from brick-and-mortar to digital was going to happen anyway. But two-to-three years of forecasted online channel shift and increased spending online was effectively compressed into six months,” said Sheldon. “We’ve just moved forward the inevitable. This was always going to happen; it’s just happened way, way faster.”

The speed of this transition has impacted the entire ecommerce industry.

“Call it a slow hunch,” said Brian Walker, chief strategy officer at Bloomreach, who spoke in early August 2020. “I think many of us expected that digital commerce — the digital experience — was going to continue to grow in importance, and it certainly has. But since Covid began, it went from important to urgent for many companies.”

Investment

Not every business or industry segment was ready to make these sorts of changes.

At-risk companies, if you will, had financial or structural challenges before the pandemic began. These challenges made it relatively more difficult for them to pivot, expand their ecommerce operations, or take on new software projects.

As a result, longstanding retailers such as J.C. Penney, Neiman Marcus, J.Crew, and Lord & Taylor have filed for bankruptcy.

Some of these retailers will emerge from bankruptcy. J.C. Penney, for example, was purchased by its landlords, mall operators Simon Property Group and Brookfield Property Group. Other businesses will not survive. Lord & Taylor was in full liquidation mode at the time of writing.

Lord & Taylor is one of many businesses that will close because of Covid-driven market pressures.

Lord & Taylor is one of many businesses that will close because of Covid-driven market pressures.

The problem, in part, is investment. “Time traveling” to three years in the future meant that businesses must spend digital-transition funds in just one summer that would have otherwise taken 36 months.

A retailer that had planned to build click-and-collect capabilities over a couple of years had to execute, instead, in a few weeks.

Competitive Advantage

Those companies that were able to invest tended to gain a competitive advantage.

Walmart, which benefited from the types of products it carries and its strong infrastructure, enjoyed a 97-percent increase in ecommerce sales during the fiscal quarter ended June 30, 2020. And, on September 23, the company announced that it would hire 20,000 seasonal workers to help with holiday sales.

Similarly, Target, which has fewer total sales than Walmart, saw a 200-percent increase in ecommerce sales in the second quarter and plans to hire about 130,000 temporary workers for the holidays.

Smaller businesses that were able to invest may have seen similar results.

Elevate

When they make significant improvements in such a short period, already strong B2B brands and retailers raise the bar for everyone.

For example, a new online retailer must compete not just with enterprise ecommerce sellers, but also with newly aggressive in-store merchants that offer click-and-collect, curbside pickup, and home deliveries via Uber or DoorDash. Thus, the pandemic-driven “time machine” might elevate the entire ecommerce industry.

Covid-19 Exposes Inefficiencies in B2B Accounts Receivable

The ongoing pandemic has exacerbated long-standing inefficiencies with the B2B accounts receivable process, such as manual entry, little standardization, and errant data.

Accounts receivable personnel have historically overcome many of these problems, but an increase in remote work may require B2B sellers to move to a more automated or integrated process.

Manual Processes

“In general, accounts receivable, particularly in a B2B context, can create challenges [for a business] because it’s much more manual than most people realize,” said Brandon Spear, president of MSTS, a B2B credit provider.

Brandon Spear believes that the pandemic has exposed problems in the B2B accounts receivable workflow.

Brandon Spear believes that the pandemic has exposed problems in the B2B accounts receivable workflow.

These manual processes can exist at nearly any step in the accounts receivable workflow. As recently as 2017, a representative for a larger brand told me that orders from its popular B2B ecommerce site were printed and turned into its accounting department to rekey into the company’s siloed accounting software to create an invoice. This was done hundreds of times daily.

This particular B2B brand and perhaps many others had not consolidated the ordering process and still had a significant number of customers — think brick-and-mortar, ecommerce, or omnichannel retailers — submitting orders by email, phone, or (unbelievably) fax.

Not Standardized

The electronic data interchange is meant to solve just this sort of manual-process problem by electronically communicating purchase orders and invoices. Unfortunately, according to Spear, different organizations have implemented EDI differently, meaning that it may not be a true standard that B2B accounting teams can depend upon.

So while it is true that some industries have a common EDI standard, that level of integration is more likely between large sellers and large buyers.

The retail industry, for example, frequently has large brands selling to small or midsize companies — or the reverse. The larger firm often dictates to the smaller ones how an order or invoice must be submitted. This too can create manual processes as accounts receivable clerks might be forced to manually enter invoice information into a portal of some sort or create several invoice templates to match a buyer’s format requirements.

Missing or Errant Data

Manual processes and not enough standardization also contributes to the problem of missing data. An order could come in via fax that lacked important info or was illegible. Or, an account receivable clerk could hit an errant key or reverse a single digit in a long purchase order number.

“Imagine you’re a smaller supplier, and you’re sending your invoice into a large buying organization, and they don’t know what to do with it. They don’t know where to route it. They don’t know what expense bucket it goes to. Just trying to navigate your invoice through an internal accounts payable process can be complicated. And more often than not, that’s got to do with data missing from the invoice that would help AP identify it to know where it has to go,” Spear said.

Covid’s Impact

Before the global pandemic, the accounts receivable departments at many B2B brands slogged through these challenges. Some took pride in their abilities to run down problems or create systems to make manual processes and errors less of an issue.

“Now if you take those underlying base challenges [of manual processes, missing data, and similar], and then you overlay on top of it the fact that a lot of people are not physically in the office” it is easy to see the potential problems, Spear said.

Spear argues that the very people who were making the manual accounts receivable process function may, in the current environment, have less access to the information and resources they need. How, for example, would a system that relied on printing a B2B order and carrying it to an accounts receivable clerk for rekeying work now? Email? Slack? And how would invoices be sent?

“If your primary distribution mechanism for invoices is the post office, you can imagine how complicated that becomes all of a sudden because if your customer doesn’t have personnel who are receiving mail, opening mail, deciding what to do with the invoices…that creates delays. You could imagine that if the customer pays you via physical checks that could also create delays,” Spear said.

Accounts receivable inefficiencies, which existed before the pandemic, are now much worse, forcing some B2B accounting departments to move forward with new software and integrations. These companies may have had new software implementations on their roadmap for 2023 or 2025. But Covid-19 is transporting those businesses forward.

In the end, the pandemic might help make B2B accounting departments more efficient. It may help them manage credit better. And it could make doing business easier.

Forget Black Friday Sales this 2020 Holiday

The upcoming holiday shopping season is bound to shake the ecommerce sector. If you haven’t yet finalized your holiday sales schedule, now’s the time to get it done. But you may want to rethink your strategy for November and December.

Some of the large retailers will kick off deals in early October when a newly proposed shopping event will reportedly launch. This, coupled with a lengthier sales season, could change everything.

Adios Black Friday?

Many big retailers will be closed Thanksgiving Day and limiting foot traffic the Friday following. To make up, several plan to launch aggressive sales much earlier. Home Depot, for example, plans to offer Black Friday prices from November 8 through the entire season; Best Buy says its sales will begin in October.

Bloomberg reported the launch of a new shopping event called 10.10 — a take on China’s 11/11 Singles’ Day, which was the world’s most profitable day for retailers in 2019. 10.10 would occur on — you guessed it — October 10. We know little more than the date and that 24 undisclosed retailers are working in conjunction with the Shopkick app.

Amazon has yet to announce when its delayed Prime Day will occur. Many observers speculate mid- to late-October.

Home Depot holiday header with announcement

Home Depot is running Black Friday 2020 deals for two months.

Focus on the Season

The Black Friday weekend is historically critical for many online stores. This latest shift could be an unwelcome disruption. Still, it’s necessary to compete with physical stores, who must follow local restrictions and accommodate the concerns of in-person shoppers.

Another reason for season-wide deals — versus the Black Friday weekend only — is to alleviate the stress on supply chains and shipping companies. By enticing consumers to shop earlier, merchants have time to restock and ensure that gifts will arrive on time.

Here are some tips to encourage shoppers to buy now rather than later.

  • Launch your holiday sales in early October. If 10.10 gains traction, give consumers a reason to browse your catalog. Regardless, we can expect other retailers to follow Best Buy’s lead of starting way early.
  • Switch things up. Even if you have a large inventory of a few sale items, swap out some of the deals each week. This keeps content fresh and consumers intrigued about what comes next.
  • Showcase your company. If you’re part of the small business sector — 99 percent of U.S. companies — get a little personal. Spotlight your employees and showcase your company’s history.
  • Display stock levels on products in limited quantity. This helps shoppers decide quickly about purchasing while emphasizing the “fear of missing out” — FOMO.
  • Disclose shipping delays. With most people shopping online this year, UPS, FedEx, and USPS will be stretched during December. Give your customers a heads-up during the shopping and checkout process. If possible, provide anticipated delivery dates in an “arrives by” format.
  • Focus on staying-at-home trends. Way fewer people are traveling this year, so promote products they can enjoy at home. Study sales by big retailers and smaller competitors. Monitor what your target audience is talking about online. Look at data — wish lists, site search— from your store over the past two months. Otherwise, think home entertainment, relaxation, backyard festivities, and housework items.
  • Feature accessories and add-ons on the product and cart pages. This can increase order totals without interrupting the checkout process. Restrict offerings to items related to what’s in the cart.

Pivot Quickly

You’ll be navigating uncharted territory in the 2020 holiday season, no matter the projections. Expect surprises. Take a proactive approach to products, sales, and shipping practices. Pivot quickly as conditions change. Consumers understand we’re in different times. How you manage the season, starting now, determines success.

2020 Holiday Shopping Is a Tale of 2 Consumers

Covid-19 has throttled the U.S. economy, dropping the nation’s gross domestic product 31.7 percent in the second quarter of the year. The economic effect, however, has impacted folks differently.

The onset of the pandemic created economic uncertainly for most worldwide consumers. Many were furloughed. Some are working from home for the first time.

Their trepidation was reflected in the U.S. stock market. On February 19, 2020, the S&P 500 Index stood at $3,386.15. A little more than a month later, the index had dropped more than a third to $2,237.40, just a few days before the CARES Act, the first U.S. stimulus package, was signed into law.

The economic effect, however, has impacted folks differently.

Stimulus checks and even unemployment stipends made stay-at-home orders and temporary business closures manageable. Many of these folks may be thriving in some ways. And many are the same people who have helped drive the S&P 500 back up to $3,401.20 on September 15, 2020.

Others have not fared as well.

For example, in August Fidelity, an investment firm, noted that roughly 711,000 individuals, or about 3 percent of eligible employees, had taken distributions from their retirement accounts to cover expenses related to the downturn. These distributions were permitted in the CARES Act.

While some 90 percent of Fidelity customers continued to contribute to their retirement savings, a FinanceBuzz survey in July 2020 found that “27 percent of Americans have decreased or stopped contributing to retirement savings due to COVID-19.”

The fate of these consumers may have a significant impact on retail sales in the next few months, including the holiday shopping season.

Holiday Spending

“This is a very unfortunate situation, but I think you got a tale of two cities in terms of consumer spend,” said Peter Sheldon, senior director of commerce strategy at Adobe.

“You got two categories of workers in the U.S. You’ve got the category that lost their job — the airline workers, the hotel workers, a lot of people in hospitality and restaurants. They are going to be in a very conservative spend mode. They are not going to buy big-ticket items. They are going to cut back considerably and look for bargains. As it relates to online [shopping], they’re certainly going to buy from merchants that offer installment plans.” Sheldon said, describing some of the trends that could impact holiday shopping in 2020.

“Then you got the flip [side] …. people who never lost their job. They may have had bonuses through some of the government programs, and they may have more disposable income. Plus, they’re not traveling. They haven’t planned a holiday for this winter. They’re not getting on a plane at Christmastime to see family. They’re staying at home.

“There is quite a considerable savings,” Sheldon continued, “and it’s not just happening in the holidays. It’s been building up over the last few months as those consumers have been spending less. A lot of those folks are well placed to spend quite heavily during the holidays.”

Holiday Marketing

Omnichannel and pure ecommerce retailers may want to consider which of these two economic categories encompass most of their core customers.

For example, businesses selling what Sheldon calls “hobby gifts” may benefit from shoppers with available funds and time on their hands.

“There’s going to be a lot of focus on … staying close to family and so forth,” Sheldon said.

“There is going to be a lot of investment in gifts that [help] people take on new hobbies. You know, musical instruments for the kids, family games, getting into woodworking, carpentry. And it’s not just buying a Lego kit for the kids. It’s buying a big Lego kit that keeps them occupied for a week instead of two days. It’s that type of thing,” Sheldon said.

Photo of a consumer building a puzzle

Retailers may want to consider which of two economic categories encompass most of their core customers. “Hobby” retailers that sell games and puzzles could have a strong season. Photo: Tabitha Turner.

Businesses in these spaces can emphasize just the sort of “new hobby” behaviors Sheldon is describing.

In other segments, merchants can cater to the opposite type of shoppers with limited income and savings. This might mean rolling out layaway or financing options or early discounts.

Thus holiday shopping in 2020 could be a tale of two consumers: bargain hunters without jobs and stable earners with pent-up demand.

Ecommerce in Q2 Takes a (Much) Bigger Share of Total Retail Market

The U.S. Department of Commerce reports that ecommerce as a percent of all retail sales jumped from 11.8 percent in the first quarter of 2020 to 16.1 percent in the second quarter, representing a 31.8 percent increase to $211.5 billion. The data also shows a 44.5-percent bump from the second quarter of 2019, adjusted for seasonal variations.

The Department estimated all U.S. retail sales for the second quarter of 2020 at $1.3 trillion, a decrease of 3.9 percent from the first quarter of 2020. Brick-and-mortar sales accounted for the entire reduction.

June 2020 data from the National Retail Federation shows that 45 percent of U.S. Baby Boomers (birthdates 1946 to 1964) are doing more online shopping due to the pandemic. Thirty-one percent tried online grocery shopping for the first time in June and July, according to IRI Worldwide Strategic Analytics, a retail consulting firm.

According to IBM’s U.S. Retail Index, Covid-19 has accelerated the shift from physical-store to ecommerce by roughly five years as ecommerce is projected to grow by nearly 20 percent in 2020, while department store sales are projected to decline by more than 60 percent.

For the full year, IBM’s August “Full Year Retail Forecast Update” projects a net overall U.S. retail loss of 2.86 percent year-over-year. Ecommerce will grow by 19.96 percent over 2019. Online sales accelerated from 13 percent growth in the first quarter to more than 26 percent in the second. Conversely, department store sales declined by 25 percent in the first quarter and 75 percent in the second quarter.

Holiday Shopping

With the uncertainty surrounding the impact of Covid-19, brick-and-mortar retailers will rely more on digital sales. Many chain retailers have already announced that their stores will be closed on Thanksgiving Day. They include:

  • Bed Bath & Beyond,
  • Best Buy,
  • Boscov’s,
  • Dick’s Sporting Goods,
  • Foot Locker,
  • Hobby Lobby,
  • Kohl’s,
  • Sam’s Club,
  • Target,
  • Ulta Beauty,
  • Walmart.

For Black Friday, no leading retailer has announced changes to its in-store schedule. However, retailers will likely limit the number of people in the store at one time to maintain some semblance of social distancing. Many shoppers will likely forego the crowds and do their shopping online. Black Friday has been losing its significance as many retailers have spread the holiday discounts over several days.

Here is how one major retailer is handling the holidays. In a note to customers, Target CEO Brian Cornell stated:

Let’s face it: Historically, deal hunting and holiday shopping can mean crowded events, and this isn’t a year for crowds. That’s why our biggest holiday deals will be available earlier than ever, so you can shop safely and conveniently without worrying about missing out on deals that usually come later in the season. Starting in October and continuing throughout the season, you’ll find Target’s lowest prices of the year on items in stores and online…

Target’s second-quarter 2020 ecommerce sales grew by 195 percent year-over-year.

Macy’s CEO Jeff Gennette said his company will start its holiday marketing soon after Halloween and will focus on digital sales and curbside pickup.

Ecommerce Challenges

Soaring ecommerce sales will tax the supply chain. The announced elimination of overtime for postal workers by new U.S. Postmaster General Louis DeJoy could affect the Postal Service’s ability to deliver gifts on time during the peak holiday season. Many merchants, including Amazon, use the Postal Service for last-mile delivery.

Amazon is in discussions with Simon Property Group, the owner of many of the malls that J.C. Penney and Sears occupied, to turn some of the large anchor sites into distribution centers. Simon Property Group’s malls have 11 Sears stores totaling more than 2 million square feet and 63 J.C. Penney stores with more than 10 million square feet. Delivery drivers could unload packages and, separately, pick them up for last-mile delivery. Other potential uses for these locations include customer product return sites — a logistics component where brick-and-mortar stores such as Walmart have an advantage — as well as curbside pick-up.

The downside for Simon Property Group is that a lease to Amazon could create problems with retail mall tenants, as distribution centers would not generate as much foot traffic as retail stores. Such a move could trigger clauses in lease agreements that allow tenants to reduce their rent or break their lease.

As for 2020 holiday sales, merchants that offer the most shopping and shipping options will be the winners in what promises to be an unconventional season.

9 Holiday Selling Tips to Pandemic-driven Consumers

The holiday 2020 shopping season will be unique. Pandemic-driven concerns of safety and economic uncertainty will prompt shoppers to look for both functional and entertaining gifts at competitive prices. Free shipping will win more than ever this year.

Here are some tips for ecommerce merchants to gear up now.

Holiday Selling in the Pandemic

Create a holiday section. Target.com’s “Holiday Shop” section addresses the big events throughout the year. This makes it easy to promote Christmas decorations and supplies without appearing too aggressive. A simple link in the navigation bar and home page does the trick.

Target's subtle "Holiday Shop" section features Christmas decor and supplies.

Target’s subtle “Holiday Shop” section features Christmas decor and supplies.

Focus on trends. This year, gift-giving will center on items that make home living more convenient and comfortable. High-end luxury items will take a back seat to unique and memorable goods for recipients to appreciate sooner rather than later.

Offer gift wrapping. Many consumers will shop online for safety and convenience. Stores that offer gift wrapping and personalized messages will be preferred.

Think virtual connections. During the 2020 holidays, families and friends will connect via video calls and chats. Showcasing products with this in mind can encourage purchases.

For example, sites that sell tech gadgets could emphasize selfie tripods and ring lights. Fashion and makeup retailers might post lifestyle shots and tips about looking your best on camera. Wine and food merchants can inspire shoppers to host a virtual family toast or snack.

Argaux, a wine retailer, offers a quarantine edition of its blind tasting kits. Customers can purchase multiple kits, each shipped to a different address.

Web page showing how people can hold virtual taste tests.

Argaux rethinks taste-testing for the pandemic.

Think creatively. Most product types are suitable for virtual holiday celebrations.

Promote at-home experiences. Showcase items for the experience. For example, gifts for avid readers could include snuggly blankets, loungewear, and Bluetooth speakers for audiobooks. Portable projectors and popcorn gift baskets would likely appeal to movie fans.

Instill trust. Gift givers want to know their orders will arrive on time and error-free, especially if they’re being shipped directly to the recipient. Now’s the time to revisit and reinforce your store’s trustworthiness via security badges, customer testimonials, and active social media accounts, to name a few.

Provide real-time guidance. Live chat is critical during the 2020 holiday shopping season. No consumer wants to hold or wait for email responses. At the least, turn on Facebook Messenger.

Empathize. 2020 holiday shoppers are worried about their health and finances. Many will be distraught over U.S. election results — one way or the other. Empathy is crucial to online shopping experiences. Train staff accordingly.

Introduce your staff! Plenty of shoppers want to support people over companies. Telling stories about staff members — including photos and videos — is an excellent way to demonstrate that customers’ purchases help employees’ families.

Match prices if necessary. Consumers will pay more for unique shopping experiences. Stores unable to do this should focus on live competitor-price matching.

2020 Holiday Email Marketing Starts Early

With the fluid retail environment surrounding Covid-19, protocols and expectations change daily. According to Coresight Research, a consulting firm, 23 percent of U.S. consumers plan to start 2020 holiday shopping earlier than in prior years. Ecommerce merchants should plan holiday email marketing now.

Early Marketing

Consider:

  • Moving up last year’s email marketing schedule by two to three weeks.
  • Emphasizing potential product scarcity. The pandemic has conditioned shoppers to the possibility of items being unavailable.
  • Offering short-lived email promotions to encourage orders and avoid shipping delays.

This holiday season will presumably see a decrease in travel, holiday parties, and in-person buying. Online shopping will likely increase. Product availability could be limited, and shipping could be slower.

  • Clearly explain offer and shipping deadlines. In every holiday-marketing email, provide order-by dates to guarantee arrival before the holidays.
  • Create triggered emails to alert shoppers about product availability when inventory runs low. Most email marketing platforms offer trigger-based notifications that tie to product views on your site.
  • Compose and save last-minute email offers now in case shipping delays dictate a shift in deployment dates.
Create triggered emails to alert shoppers about product availability when inventory runs low. This example is from Zulily, which sells clothing and home goods online.

Create triggered emails to alert shoppers about product availability when inventory runs low. This example is from Zulily, which sells clothing and home goods online.

Confirm Deliverability

Many consumers have changed or otherwise left jobs during the pandemic. Email addresses have likely changed, too. Cleaning your email list could be more important than ever this holiday season. Options include (i) email verification services to ensure addresses are active and deliverable, and (ii) email change-of-address firms to locate new addresses from undeliverables.

Email providers — Gmail, Yahoo, many more — frequently change deliverability algorithms that determine whether a marketing message lands in a subscriber’s main inbox versus spam. Those algorithms are typically a combination of a domain and IP reputation as well as subscribers’ interactions with a brand’s emails. Positive engagement, such as frequent opens and clicks, will lead to better inbox placement.

A sudden algorithm change by, say, Gmail could be catastrophic to a retailer if it causes all messages to be filtered to the spam or junk folder.

To help ensure deliverability:

  • Monitor open and click rates by subscribers’ domain, such as mary@gmail.com or bob@yahoo.com. This will quickly surface drop-offs from Gmail or Yahoo or any other domain.
  • Maintain a consistent sending volume and schedule. Abrupt changes in volume or frequency can cause domains to block or filter your email temporarily.
  • Check your sending IP and domain reputation weekly on Sender Score from Return Path.
  • Monitor blacklists to avoid an accidental listing. Even the most reputable email senders occasionally get listed on blacklists and must act to be removed. Leading blacklists include SpamHaus and MX Toolbox.
  • Remove or segregate non-responsive email addresses.

Creative Offers

The demand for certain products has changed due to the pandemic. This year’s holiday gift-giving will likely be different from 2019. Create product or gift suggestions that solve the problem of remote, distant giving. This can be as simple as personalized gift-wrapping or custom gift baskets.

Remember that most email opens are on smartphones. Increasingly, purchases are on a phone, too. Make email content easy to click from the mobile device, to land directly on pages deep in the purchase funnel.

Holiday Selling without the Crowds

Pandemic-induced social distancing, reduced hours of operation, and even continued lockdowns and closures could dramatically change Christmas shopping behaviors in 2020, requiring retailers to find new ways to serve holiday shoppers and generate sales.

“There is definitely uncertainty around in-store shopping … with Covid,” said Robert Fagnani, head of business development and operations at Formation, a personalization platform.

“If you imagine crowded stores and long lines, especially around Black Friday — I don’t think we are going to see that happening. One, because people are getting smarter about how to stay safe in the pandemic. And two, a number of state and local governments or jurisdictions … are going to place requirements that won’t allow that type of behavior to happen.”

If you imagine crowded stores and long lines, especially around Black Friday — I don’t think we are going to see that happening.

No Crowds

Notwithstanding local or state mandates, omnichannel and brick-and-mortar retail businesses don’t necessarily want packed aisles and crowded stores on Black Friday either. Thanks to the ongoing coronavirus pandemic, crowds create at least three potential problems for physical shops.

Danger to employees. An employee who contracts Covid-19 is certainly in danger. That should be a company’s primary concern. Beyond that individual’s wellbeing, the business loses a worker for two weeks or more, and, in some areas of the country, that retailer will have to close its store while the rest of its staff is tested and, potentially, quarantined. A bit of Black Friday hype and the associated in-store crowds could shutter a shop for the rest of the holiday season.

Some consumers are looking for a fight. There have been many instances of consumers entering stores and challenging employees or other shoppers over the requirement to wear a mask.

“Two men were not wearing face masks when they entered a Trader Joe’s in Manhattan earlier this month. But when some of the grocery store employees asked the pair to cover their faces, they refused — and went on a rampage instead,” wrote reporter Teo Armus, in The Washington Post on July 29, 2020.

Unfortunately, this is just one example. There are many more, and Black Friday crowds could make things much worse.

Legal liability. At the time of writing, there was no legal protection for businesses from coronavirus liability. If she became sick with the coronavirus, a store’s shopper could, in theory, sue the retailer, arguing that Black Friday promotions encouraged crowds and, thereby, irresponsibly spread Covid-19.

As insane as this may seem to some in the retail industry, it is important to remember that there is also very little protection for coronavirus victims who may need to take extreme steps to pay their medical bills, which for some patients exceed $1.5 million.

Changed Behaviors

“I think many customers today — even if they are living in parts of the world that have stabilized Covid … or where we don’t feel at high risk because everyone is wearing masks — are still feeling very unsettled and uncertain going out, certainly for anything that isn’t very targeted, very specific like grocery shopping. They’re just going to opt-out of doing it that way,” said Brian Walker, chief strategy officer at Bloomreach, a customer experience platform.

To Walker’s point, many shoppers have changed their buying behaviors so that despite Black Friday promotions, they may not want to venture out to a store, especially if they expect it to be packed.

A Different Plan

So here is the rub. Nearly all retail businesses — brick-and-mortar, omnichannel, and pure ecommerce — need a robust Christmas shopping season with lots of sales. But this year they probably cannot promote Black Friday, Cyber Monday, or even Christmas Day the same way that they have in previous years.

Brick-and-mortar stores will require an online presence if they hope to compete.

“Call it a slow hunch,” said Bloomreach’s Walker, “I think many of us expected that digital commerce, that digital experience was, of course, going to continue to grow in importance, and it certainly has, but since Covid began, it went from important to urgent for many companies.”

Retailers that don’t have at least some form of online presence and the ability to offer pick-up or delivery will likely miss out on some holiday sales this year.

Omnichannel retailers should emphasize ecommerce and click-and-collect shopping to avoid the dangers associated with overcrowded stores and Black Friday lines. This may require better, cross-channel shopping experiences.

Selling things during the pandemic and advancing the digital experience “has played out in a number of ways during the Covid crisis,” said Walker, “including [merchants] adding the ability to search, and sort, and refine based on what’s available for pick-up in their local market rather than [the customer] being frustrated to purchase an item and discover later that it is not available in their local store.”

“Consumers have already been programmed over the last four, five, six months to shop online. Granted, most of it is for consumer staple products and essential items, but I think we will start to see that shift more into some other discretionary categories as people are thinking more about gifts,” said Formation’s Fagnani.

“For people that want the certainty that something is in stock — I’m sure everyone has found something that is out of stock throughout the last six months,” Fagnani continued, “we will probably see an uptick in people doing contactless delivery or pick-up at the store for certain products so that they know they are actually getting the item that they want.”

With this focus, omnichannel retailers may still be able to enjoy a strong holiday season with their stores open. The aim is not to close stores completely, but rather to avoid long lines and massive crowds. And by avoiding crowds, these businesses may be preserving the in-store shopping experience.

<img aria-describedby="caption-attachment-355726" class="wp-image-355726 size-large" src="https://www.practicalecommerce.com/wp-content/uploads/2020/08/080620-shopping-with-mask-auturo-rey-570×321.jpg" alt="For brick-and-mortar or omnichannel retailers, the aim is not to close stores completely, but rather not to encourage long line or massive crowds. Photo: Auturo Rey.” width=”570″ height=”321″ srcset=”https://www.practicalecommerce.com/wp-content/uploads/2020/08/080620-shopping-with-mask-auturo-rey-570×321.jpg 570w, https://www.practicalecommerce.com/wp-content/uploads/2020/08/080620-shopping-with-mask-auturo-rey-300×169.jpg 300w, https://www.practicalecommerce.com/wp-content/uploads/2020/08/080620-shopping-with-mask-auturo-rey-768×432.jpg 768w, https://www.practicalecommerce.com/wp-content/uploads/2020/08/080620-shopping-with-mask-auturo-rey-150×84.jpg 150w, https://www.practicalecommerce.com/wp-content/uploads/2020/08/080620-shopping-with-mask-auturo-rey-500×281.jpg 500w, https://www.practicalecommerce.com/wp-content/uploads/2020/08/080620-shopping-with-mask-auturo-rey.jpg 1002w” sizes=”(max-width: 570px) 100vw, 570px”>

For brick-and-mortar or omnichannel retailers, the aim is not to close stores completely, but rather not to encourage long line or massive crowds. Photo: Arturo Rey.

Pure ecommerce retailers would seem to have an advantage because they are already online. And with big businesses cutting back on some advertising spending, promotional costs for ecommerce merchants may be flat or up only a bit in 2020.

Unfortunately, there could still be challenges with shipping, new competition (i.e., omnichannel and brick-and-mortar companies now focused on online sales), and even product availability. With this in mind, ecommerce retailers in 2020 may want to “flatten the curve” of holiday revenue, and generate sales as early as possible.

Regardless, treating the 2020 holiday like it was 2019 won’t work.