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The coronavirus pandemic that shuttered much of the worldwide economy in the first half of this year may yet impact Christmas 2020. To prepare, some retailers — both pure-play ecommerce and omnichannel — should plan now.
The holiday shopping season, which in recent years has started just after Halloween and run right up to Christmas Eve, represents half or more of annual revenue for many retail businesses.
It’s essential for those retailers to start planning now, even as some are in the process of reopening.
In this post, I’ll address a few coronavirus-related scenarios and offer suggestions for how merchants can assess the potential Covid-19 impact on their company’s holiday sales.
Will the pandemic impact Christmas retail sales? Photo: Ben White.
A Speedy Recovery
On June 16, 2020, the U.S. Department of Commerce released its “Advance Monthly Sales for Retail and Food Services” report for May 2020. This report showed a 17.7 percent rise in retail sales for the month compared to April. This boost in sales represented the largest month-over-month increase in U.S. retail sales since 1992.
Adding to this is a somewhat positive employment report: the U.S. Labor Department said new unemployment applications fell by 58,000 the week of June 13.
Hence, by the time the Christmas shopping season rolls around this year, the pandemic could be a painful memory and retail sales will have stabilized.
But even if the volume of retail sales is more or less the same as previous years, will shopping behavior change? Will consumers still be social distancing? Will many more consumers purchase online instead of a physical store? Will suppliers be able to keep up with demand?
These are the sorts of questions retail business leaders should contemplate now.
A Slow Recovery
While U.S. retail sales were up significantly month-over-month in May 2020, they were still down when compared to last year and earlier this year.
Total retail sales in May were about $485.5 billion in the United States, down 6.1 percent from May 2019 and 7.9 percent from February 2020, which were some $527.3 billion.
Thus, the boost in sales may not foretell of a particularly speedy recovery. Moreover, supplemental unemployment benefits, which have been adding $600 per week to recipients’ checks, are scheduled to end in July 2020.
If those unemployed and furloughed workers suddenly find their incomes in jeopardy, they could significantly cut spending, slowing any economic recovery.
With Christmas in mind, what can retailers do to keep folks shopping in the event of a slow and lingering recovery? Should ecommerce businesses offer financing options from PayPal, Affirm, Klarna, or similar services? Should retailers promote Christmas layaway programs now, helping gift-givers spread out their holiday spending?
What if the pandemic and its associated economic impact are still with us for the Christmas season?
Dr. Anthony Fauci, who is among the U.S.’s leading infectious-disease experts, has said several times that carelessly reopening stores, restaurants, bars, or even some sporting events could lead to a resurgence of Covid-19 cases this fall.
Plus, as of June 17, 2020, 10 U.S. states — Alabama, Arizona, California, Florida, Nevada, North Carolina, Oklahoma, Oregon, South Carolina, and Texas — experienced increases in the number of new cases of Covid-19 reported daily.
Finally, U.S. Federal Reserve Chairman Jerome Powell told a U.S. House committee on June 17 that Congress needed to continue to support workers displaced because of the pandemic.
If the U.S. and world economies are still languishing come Christmastime, how will retailers cut costs to avoid losses? What sort of inventory position should merchants take? If ecommerce sales surge as shoppers avoid brick-and-mortar stores, will shipping volumes hinder package carriers and impact Christmas deliveries?
Business owners and managers can start answering these questions now to evaluate how the coronavirus might impact holiday shopping.
- Contact suppliers to ensure that inventory will be available. Identify potential inventory problems. Make purchases earlier when possible.
- Consider distribution options to counter another disruption in shipping or a second round of closures. Would it make sense to place some inventory now at fulfillment centers that are near customers?
- Connect with associations. Can your company collect helpful data from retail or business associations?
- Speak to customers. Ask a core group of customers about their shopping plans. What would they like to see from your store?
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