Who Will Win the 2020 Holiday Shopping Season?
By: Rishi Kumar
Tags: Holiday Season, Retail, Digital Transformation, Customer Experience

For retailers, the 2020 holiday shopping season is a time of dramatic innovation that will reverberate for years. The major bellwether retailers set the stage for the holidays by redefining Thanksgiving weekend as an online experience that extended beyond the weekend itself. The next phase of innovation is occurring now while retailers manage a changing buying experience during the crucial weeks between Thanksgiving Weekend and January.

Redefining Thanksgiving Weekend

Over the past few years, Thanksgiving Weekend has increasingly become an omnichannel experience as shoppers combine online and in-store purchases. In 2020, of course, online commerce became even more popular as people sought to avoid brick-and-mortar stores during the pandemic. Retailers responded by changing the nature of Thanksgiving Weekend. In the past, the weekend has consisted of shoppers visiting physical stores on Thanksgiving Day and Black Friday, followed by an online spending binge on Cyber Monday.

But in 2020, retailers changed everything. They closed their stores on Thanksgiving and shifted the focus of Black Friday away from the day itself. For instance, Home Depot announced in September that Black Friday prices would be available throughout the entire holiday season, both online and in-store. Walmart held three Black Fridays online throughout November in order to capitalize on the surge in online shopping and to discourage shoppers from crowding brick-and-mortar stores on Black Friday. The approach played to Walmart’s growing digital presence, including its mobile app. As a result, on Black Friday, Walmart saw the most first-time downloads for its native app, besting Amazon.

At the same time, retailers defended their brick-and-mortar presence by taking steps to provide a speedy and safe experience in stores. Target and Walmart had already built up an extensive network of curbside pickup services, and they had installed Covid-19 protocols and procedures to make shopping in stores more pleasant. Both hired and trained many store team members to be dedicated to contactless services, including drive-up and curbside pickup. Both designated employees to ensure a safe shopping experience, such as ensuring that shoppers wear masks and wiping down carts.

The retailers who innovated around omnichannel shopping reaped a reward. During Thanksgiving Weekend, shoppers broke records for online purchases, with Cyber Monday 2020 becoming the biggest online shopping event ever in the United States. In addition, Black Friday broke a record for most online sales, as did Thanksgiving Day. Meanwhile, Thanksgiving Weekend, retailers saw a 52-percent increase in use of curbside pickup even though in-store foot traffic dropped off.

Will Shoppers Visit Stores?

Now in the run-up to Christmas Day, retailers continue to face uncertainty and rapidly changing purchasing preferences. On the one hand, the positive news about the distribution of a Covid-19 vaccine starting December 13 may make shoppers feel more comfortable returning to stores in person (Walmart especially may enjoy a halo effect, as the company is a major center for vaccine distribution). But many shoppers may take a wait-and-see approach especially as stories begin to appear about snags in the vaccine roll-out. In addition, overall, consumers are spending less: retail sales slipped for the second straight month in November, and U.S. median checking accounts are shrinking. In this context, retailers are doubling down on humanizing their brands to make the in-store experience friendlier, as Target recently did by casting the spotlight on how its employees are working hard to welcome shoppers in a friendly and safe environment.

Whatever the case may be, retailers are already sensing and responding to how consumers are shopping differently for more sporting goods and products that can be enjoyed at home. For instance, Best Buy and Walmart, responding to their own customer data, are promoting aggressively merchandise that appeals to the “at-home economy.”

The Delivery Battleground

One reality is certain: the next proving ground for innovation is occurring now around the delivery of holiday purchases. Right now a perfect storm known as Shipageddon is here. The surge in online ordering has put a strain on retailers’ supply chains. And the sudden approval of a Covid-19 vaccine has, understandably, made gift delivery a secondary priority for shipping companies as they focus on distributing a vaccine quickly and safely. As a result, carriers such as Federal Express and UPS are now limiting package pickups, and the U.S. Postal Service says it has become gridlocked.

This situation plays to Amazon’s strengths. The company’s decision to create its own carrier service now looms as a brilliant masterstroke. Although the move created friction with other carriers, Amazon seized control of its own destiny, which positions the company well now. But brick-and-mortar retailers have cards to play. Walmart recently announced it is relying on its vast network of stores to act as delivery fulfillment centers. As Walmart noted:

Today, we operate delivery from more than 2,800 stores and cover nearly two-thirds of the country with delivery, and we have the right processes in place to bring this to life. The advantages are clear: Customers are happy with fast service, and we’re utilizing our full set of assets, which is good for our business. Plus, the program is eco-friendly, as there aren’t as many boxes going out or long-distance miles being driven.

Since 90 percent of Americans live within 10 miles of a Walmart, this approach makes Walmart much more effective with the last mile of delivery. Turning stores into distribution centers is an increasingly popular approach being adopted by other retailers such as Apple and Best Buy. In addition, retailers are relying on same-day delivery services to master the last mile. Best Buy and Instacart have formed a relationship that enables Best Buy to deliver products on the same day. Target, meanwhile, has bolstered up its own same-day delivery service, Shipt, specifically to handle last mile deliveries during the holidays.

Where do the retailers go with last mile delivery from here? Likely the answer is to refine the process with technologies that improve route optimization with real-time tracking and reporting. Hiring people temporarily to manage a surge in demand eventually delivers diminishing returns. The key is to optimize services such as curbside and rapid delivery to reduce errors and to make delivery faster.

Looking Ahead

How will the story of the 2020 holiday shopping season look like when retailers report their earnings in early 2021? We can surely expect a continued growth in e-commerce. During Walmart’s most recent quarterly earnings, the company reported Its e-ommerce business had risen an astounding 97 percent year over year, reflecting a surge in popularity of curbside pick-up services. (We should also expect Walmart’s growth in mobile usage to increase given the popularity of its app downloads.) At Target, e-commerce services saw dramatic growth, too. Target’s curbside pickup service grew by more than 700 percent. Both companies exceeded investors’ expectations for overall profit growth.

It is likely that the winners will consist of a small number of retailers such as Target and Walmart that had invested into an omnichannel experience a long time ago. They did not know a pandemic is coming, but they saw the rise of e-commerce a long time ago.

Welcome to post-Covid-19 retailing.

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