Retailers ramp up digital efforts to prepare for an unprecedented holiday season

Source: Noam Galai / Getty Images

The month leading up to the holidays is known for mad rushes on toys and other goods at stores. But with customers continuing to turn to online shopping to stay safe during the pandemic - and with many strapped financially - retailers are bracing for a season like never before, in which shoppers primarily buy online and require a bargain to hit that order button.

Retailers are doing everything from ramping up drive-through pickup lanes and transforming online fulfillment centers to selling through Postmates in order to facilitate these changes.

Shopping habits consumers adopted during lockdowns earlier this year are sticking. Online sales are expected to see record numbers, according to JLL’s 2020 holiday report. And, while 58.5 percent of consumers are sticking to online-only retailers, many shoppers are heading to stores - or, in many cases, the curb outside of stores - to pick up orders they placed with a mouse click. The percentage of shoppers who plan to order online and pick up at physical retailers nearly doubled, climbing to 48.5 percent.

"To put it bluntly, shoppers are looking to stay safe," says James Cook, Director of Retail Research, JLL, Americas. "So retailers have had to pivot to put in place a whole new delivery model."

Retailers pivot for purchases

Curbside pickup and BOPIS (buy online, pick up in store) are gaining steam this holiday shopping season, Cook says. Many shoppers, in addition to picking up in-store, are looking to consolidate trips. In other words, they are seeking out retailers that serve all their holiday needs in one fell swoop.

"When shoppers head to the stores for gifts, I expect they'll try to get the job done with as few stops as possible," Cook says. "This means holiday winners this year will be mass merchandisers offering BOPIS that have low prices and lots of choices under one roof."

Such retailers are making sure their digital capabilities are up to the challenge to secure shopper spend. Target, for example, is offering online reservations to avoid holiday crowds, in addition to other expanded pickup and delivery options. The retailer is also enhancing features like contactless payment and socially distanced drive-up order pick up.

Third-party grocery shopping services have seen increased demand during the pandemic and the concept is proving to pan out for holiday shopping as well. Postmates is partnering with Los Angeles retailers to offer customers prompt delivery of items ordered from clothing, home, beauty and wellness retailers. This virtual storefront provides small businesses with the opportunity to sell online. Meanwhile, Instacart is teaming up with retailers like Sephora, Bed Bath & Beyond and buybuy BABY to offer shoppers same-day delivery services.

"These partnerships create a win-win for the retailers and the customers during the busiest season of the year," Cook says. "It’s a great way to get the customer’s goods right to their doorstep, incredibly quickly."

Racing against the clock

The increase of online holiday shopping and deliveries is putting added strain on supply chain systems, says Kris Bjorson, Co-lead of the Retail and Industrial Task Force, JLL.

The holiday season isn’t canceled – in fact, it’s lasting longer, with retailers advertising deals online in early November to help curb shipping delays, Bjorson says. Delivery companies are hiring thousands of additional drivers to alleviate delays, and retailers are emphasizing alternative shipping services.

“Some are staggering holiday deals to help offset supply chain capacity, capture market share and avoid last-minute bottlenecks,” he says. This method also allows cash-strapped consumers who need those deals to shop earlier and still receive their products on time.

There’s also a focus on building more resilient supply chains, Bjorson says. Retailers are bringing in more inventory to all nodes (retail and distribution) and continuing to invest in robotics and technology to flatten the reliance on seasonal workforce support.

“Thinking about retailers and their supply chains for the 2020 holiday season, there is a naughty and nice list of challenges,” Bjorson says. “On the naughty list, expect indecisive consumer purchasing patterns, inevitably mishandled inventory and increased shipping charges and delays from transportation service providers. On the nice list, e-commerce builds on its 2020 growth pattern and there’s more curbside pick up, BOPIS and deliveries from physical stores to further evolve fulfillment obligations of bricks and mortars.”

The bottom line

But no matter how retailers and supply chains adapt to this unprecedented season, there’s no avoiding the fact that spending is down - significantly.

The first wave of stimulus checks provided an upswing in retail sales, but there’s no corresponding stimulus check to buoy the all-important holiday purchases. Overall, holiday spend is projected to fall 44 percent this year. 

With job uncertainties and no guarantee of a second stimulus coming ahead of the new year, many consumers are searching for a lifeline.

“Fiscal stimulus remains vital to support the economy in the short term until we have moved past the pandemic,” says Ryan Severino, Chief Economist, JLL. “In the absence of it, consumers will do their best to make the holiday season happen with the deals available - on a timespan much longer than just Black Friday - from retailers.”