Market watchers might have conflicting opinions about whether consumers will spend more or less this holiday season, but they seem to agree on one thing: Retailers are better prepared this time around.
After a tough holiday 2015 left inventories high and morale low across retail, experts say footwear and apparel sellers are making wiser decisions in hopes of avoiding last year’s pitfalls.
“The silver lining in this current retail environment is that inventory management has been almost better than ever,” explained Steve Marotta, an analyst with CL King & Associates. “Retailers are planning this season conservatively, and I think that’s exactly what they’re going to get — but that’s better than planning for regular sales and only getting conservative sales.”
Now that supply and demand are finally starting to line up, retailers are shifting their focus to boosting customer experience by offering services such as free shipping and buy online, pickup in store (BOPIS).
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“From a service standpoint, everyone is pushing the limit and trying to get faster across the board,” said Carol Krakowski, insights and analytics manager with StellaService. “Having that omnichannel piece in place gives an advantage to any retailer that has physical stores — particularly during that last week leading into the holiday.”
The number of companies offering BOPIS and its counterpart, buy online, return in store (BORIS), is on the uptick as retailers seek to their leverage their brick-and-mortar presence and better compete with e-commerce-only players eBay Inc. and Amazon.com Inc.
“There are certainly more retailers that have rolled out BOPIS ahead of the holidays this year, and it can help drive traffic with incremental purchases,” explained B. Riley & Co. LLC analyst Jeff Van Sinderen. A shift toward digital marketing and advertising is also helping to drive holiday traffic, both to brick-and-mortar and e-commerce, he added.
Retailers — Rack Room Shoes and Foot Locker Inc. are two examples — have made significant investments in their digital components over the past few months in hopes of a landing a bigger slice of the holiday sales pie.
Foot Locker is expanding its launch reservation system — a feature on the company’s mobile app that allows customers to reserve sought-after sneakers from their cellphones on the release date — to a large number of markets for the holiday season.
Meanwhile, Rack Room Shoes will try to drive excitement by offering “app-only” deals on its new mobile shopping platform.
“In this highly competitive time period, it’s important that we build on the trust of our customers who have come to expect Rack Room Shoes to provide an easy shopping experience,” explained Jan Mauldin, Rack Room’s senior director of marketing. “During the month of December, we will be featuring a strong promotional offer on all footwear, select flash sales online and surprise savings in our app for our rewards members.”
The National Retail Federation estimates that holiday sales will hit $656 billion this year, a 3.6 percent increase year-over-year — topping the seven-year average.
While that forecast is impressive, HRC Advisory president Farla Efros is skeptical about some of the more bullish predictions.
“I don’t [anticipate] this holiday season will be that much better — if anything, it will be the same as last year,” Efros said. “Last year, [some experts] predicted a very strong season, and that wasn’t the case. Frankly, the predictions are a bit aggressive.”
And if retailers are going to meet those estimates, Efros and other experts contend that it may take deep discounting to get there.
According to Lynn Franco, director of economic indicators and surveys at The Conference Board, the latest data shows that consumers are searching for discounts more than ever before.
“Our data has found that consumers intend to spend relatively the same amount this year as they did last year, [but] fewer consumers [than the previous year] said that they planned to cut back,” said Franco. “However, there is one caveat: Consumers are not willing to pay full price, and they will hold back if bargains and discounts aren’t there.”
Ryan Rose, VP of business development at marketing technology provider Clutch, expects companies to rely on several tried and true sales tactics in order to motivate tepid shoppers.
“For the most part, retailers are continuing many traditional marketing and promotional strategies such as free shipping on orders over a certain amount and [buy-one, get-one] and BOGO half-off deals as a promotional tactic as well as to help drive inventory movement,” Rose explained.
So far, HRC’s Efros said she could pinpoint several retailers that appear to have all of their ducks in a row. “I expect Macy’s, Target, Best Buy and Amazon to perform well this year,” she said.
For her part, Krakowski lists Nordstrom and Target among the retailers who will score major points with features such as BOPIS and speedy delivery.
On the product side, Van Sinderen and Marotta believe athletic trends remain the footwear industry’s main driver.
“Athletic remains strong, driven partially by surging brands such as Adidas, Under Armour and even smaller brands like Puma that are speaking to the classic retro trend,” Van Sinderen said. “Brands like Steve Madden also continue to resonate extremely well with consumers, and they have great casual-athletic derivative product to augment their well-established position in fashion footwear.”
Marotta also expects to see a solid performance from booties and shooties as well as duck boots if the weather cooperates.
“Weather is playing a role again this year,” he said. “Unfortunately, we can’t talk about pace of sales without talking about weather — it has been unseasonably warm again, and it’s problematic for the products that is currently on the shelves.”
