Consumers know Black Friday isn’t going to be the one and only big sale of the year anymore. And this year, consumers are faced with less time to spend, which means convenience will play a big role. In addition, consumer behavior is changing, resulting in 77% of consumers returning at least one gift this year. How does all of this affect retailers and what strategies should be put in place year-round to be successful during the holiday shopping season?
In this episode, Kristin Demel, retail strategy director at Callahan, shares insights she’s taken from retailers she has worked with, what happened in 2018 and speculation for 2019 holiday shopping.
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Welcome to Callahan’s Uncovering Aha! podcast. We talk about a range of topics for marketing decision-makers, with a special focus on how to uncover insights in data to drive brand strategy and inspire creativity. Featuring Kristin Demel and Jan-Eric Anderson.
Jan-Eric:
Hi, I’m Jan-Eric Anderson, chief strategy officer at Callahan.
Kristin:
And I’m Kristin Demel, retail strategy director at Callahan.
Jan-Eric:
So pumped to have Kristin here on the podcast. We’re going to talk about the big shopping holiday that is right upon us, Black Friday. I can’t believe it. It’s, I guess, the signal to the beginning of the holiday shopping season, so it’s a huge deal for retailers and brands alike. It can make or break your year, or depending on when your fiscal year lines up, this could get you off to a great start at the beginning of your year depending on how you look at it. But we’ve got Kristin in the booth today to talk about, from a retailer’s perspective, the importance of Black Friday and everything that goes into that. So thanks for being here. I guess I’d love to start out with getting some perspective from you on, as we’re approaching Black Friday, how are consumers different today maybe than how they’ve been in the past? What’s going on with consumers? What’s the mindset for a consumer heading into Black Friday?
Kristin:
Yeah. I think it’s a great place to start because as a former retailer, we always want to make sure that what we’re putting out there is resonating with consumers, and so what I’m going to share is based upon hindsights that I’ve taken from the retailers that I’ve worked at, as well as reading up on what happened in 2018, and speculation about what’s going to happen for 2019.
Kristin:
I think the thing that’s the most interesting to me is that while Black Friday started as this kickoff to gift giving, and the day that’s the end all be all for all sales that could ever come for the whole year, that’s not necessarily how consumers view the day anymore. Black Friday has now transitioned to become the symbolic start to the holiday season, and you start to see that play out in consumer purchasing behavior. So while consumers plan to spend $1,200 to $1,300 this holiday season, almost a third of that’s going to be spent on themselves, and that’s what you really see start to play out in Black Friday these days, is that this has become a day to shop for myself and not necessarily a day to complete my gift giving.
Kristin:
Additionally, I would say that consumers used to think that the best sale they were ever going to get the whole year was going to happen on Black Friday. Well now with the rise of Cyber Monday and Amazon Prime Day, that happens throughout the season, and the holiday sales that you’re going to get all through December, and the big bang you’re going to get on December 26th, consumers know it’s not the best sale they’re ever going to get.
Kristin:
And so that’s really transformed the way consumers are spending their money on Black Friday.
Jan-Eric:
Well, yeah. It seems like even that, that even goes beyond just the shopping, the holiday shopping season. I mean, I feel like that if you want to find a deal, you’re one click away. Go onto Google or go onto Amazon and you can shop around and find a deal. The fear of missing out on a deal just seems like it’s an antiquated idea anymore. The old saying is, “If you ever bought a pizza that wasn’t on deal, you were getting ripped off.” And if you’ve ever bought a mattress that wasn’t on deal, I’d like to know where you bought that mattress that you didn’t get a mattress on deal, because it seems like you can’t find those things that aren’t on deal anymore. I feel like almost consumers are being trained to expect you’re always going to be able to find a deal. So the whole urgency around Black Friday is kind of changing. So it’s interesting, it’s like a symbolic start. Today it’s more maybe more like it’s just another word for the day after Thanksgiving, and an excuse to get away from family and get out and shop maybe.
Kristin:
It used to be the shopping holiday, and now it’s a shopping holiday.
Jan-Eric:
Yeah.
Kristin:
It used to be the time of year you could go shop at 4:00 AM. Well, now I can get on my phone from my bed. I don’t have to get up and I can shop anytime I want.
Jan-Eric:
Well, and am I imagining this now too, that speaking about Black Friday maybe not being the premier shopping day, am I imagining it now or am I seeing Christmas ads and Santa Claus, and the music is starting to appear on my TV and in POP that I’ll see in different stores? I mean, it seems like we can barely get through Halloween before I’m starting to be almost like people trying to get into my head that Christmas is around the corner. We skip Thanksgiving altogether in the stores. It’s like we go from Halloween straight to Christmas. Am I imagining this or is Black Friday creeping forward earlier and earlier?
Kristin:
It is, totally. Consumers are shopping earlier and earlier, and you’re going to feel it more in 2019 because there’s less shopping time this year between Thanksgiving and Christmas. This is the shortest season that you’re going to get in any calendar year, thinking about how late Thanksgiving is this year, so retailers, as they’re planning the business that they’re going to get during this timeframe, they’re a week short.
Jan-Eric:
Now, that’s interesting. Does that even have an impact, though, on what consumers are going to spend, or is that just mean that there’s more to be spent … The same amount of money to be spent in a shorter period of time for consumers? I mean, it doesn’t mean consumers are going to spend less. Is that fair?
Kristin:
That’s fair.
Jan-Eric:
Retailers are just going to stress more.
Kristin:
They’re going to stress more, because the playing field is shorter. It’s like instead of playing your football game over four quarters, you’ve got three. So you got to play a different strategy.
Jan-Eric:
There’s a greater level of urgency on each day that comes through. But in theory, assuming spending is flat or up or whatever, the same amount of money is there to go around. It’s just in a shorter period of time.
Kristin:
Totally.
Jan-Eric:
But stress will increase inevitably.
Kristin:
Well, and then think about how that plays out into the consumer mindset. When you think about the top two things that consumers want during their holiday season, it’s to save time and to save money. So this time of year, consumers have less free time because they’re going to holiday parties, they have kids’ concerts that they need to attend, and they have to buy all these perfect gifts for all of their friends, coworkers, teachers, the dog walker, the random neighbor that dropped off a pie to you last week, if that’s still a thing. So they’re crunched on time, and because they’re buying all these gifts, they’re going to be crunched on money. So when you think about how that plays out now with the shortened holiday season, it puts even more pressure on convenience being an important thing that consumers are looking for from whoever they purchase from, from a retailer or a site.
Jan-Eric:
So I’m curious if a condensed shopping period of time changes the type of gifts that are purchased. The the mix of things, the types of purchases, are they bigger purchases? If I’ve got a condensed time period and I couldn’t really figure out a thing, am I more likely to give a gift card this year? Is that going to be like the hot item this year, or we’re going to see an increase in those? Does that mean that people are going to miss on the gifts that they give, and so we’re going to see more returns? Like what’s the deal with that?
Kristin:
Well, don’t stress out about finding the perfect gift, because the recent consumer data would say 77% of consumers are already expecting to return at least one gift.
Jan-Eric:
Oh my gosh.
Kristin:
And 20% of people are already expecting to return half of the gifts that they receive. Talk about a changing consumer behavior.
Jan-Eric:
Now I’m sitting here wondering how many of the things I’ve gifted people have been returned. Do they return it because they don’t like it, or is it returned because it wasn’t a good fit, or just because they want to be able to pick out their own thing?
Kristin:
I think the answer is yes. But let’s put that together. So consumers want to save time, but they also want to return gifts. So as a retailer, what does that mean for your experience? So you’re going to have 77% of all the people that received a gift potentially from your store back in your store, back in your site, gift in hand. This is a great time to make a good first, second impression. Let them understand the kind of convenience and service that you provide, and how you can make it easy for them. So it’s a really good gut check for retailers to say, “Are you ready to handle this?”
Jan-Eric:
Because you’ve already had the transaction from the person who purchased the gift, the gifter, right? But the recipient then coming back into the store to do a return, what number did you say? Percentage of people that will return something?
Kristin:
77%.
Jan-Eric:
77% of recipients will, in theory, assuming they need to go to a brick and mortar location, are walking back into a retailer, which is a great opportunity to create a positive experience. So making returns easy is actually kind of a customer acquisition play from a retailer’s perspective. So you’re able to get more out of the holiday shopping season. Are returns a good thing then from a retailer perspective? Is that a good thing, because you’re getting an opportunity to make a positive experience, create a positive experience for a new shopper?
Kristin:
I think the subsequent trip is a good thing. I think there’s always going to be frustrations that come with returns, because the expectation is that as a consumer you get the full value back in cash, would be their dream, or as store credit. But now you’ve got this item that, “Can you resale? Yes or no? What kind of condition is it coming back? And what’s the additional store labor that I have to put in to repackage it up, get it back on shelf and presentable for the next consumer?” So is it a great thing for a retailer? I don’t think from a margin perspective it’s probably a great thing for retailers. However, it’s inevitable. Consumers dictate what needs to happen from a retail perspective, and if they don’t like the way that you handle their return, they’re going to pick somewhere else to go shop.
Jan-Eric:
So maybe it’s not what you would wish for as a retailer, but it’s an opportunity to turn lemons into lemonade, I guess, and make the most of it. Because if it’s going to happen, it’s going to happen. You might as well make the most of it.
Kristin:
Absolutely.
Jan-Eric:
So what’s going on with retailers? We’ve been talking a lot about the kind of the changing nature of customers or shoppers leading up to Black Friday and the returns and all that. So the primary focus for a retailer is getting a transaction? What’s the top priority for a retailer?
Kristin:
So retailers are doing everything that you would imagine them to do, from, “When should I start my sales? When should my store be open? What should my labor look like? How many associates do I need? What goes on the floor?” But from a buyer’s perspective, there’s one thing that matters the most, and that’s getting the transaction in the store. You’re more likely to do impulse shopping along with your trip if I get you in store versus if I get you online. Now, I’ll take you either way, but as a buyer, I was always thinking about, “What’s going to get my consumer off the couch and in my door on Black Friday or to make some sort of subsequent holiday purchase?”
Jan-Eric:
Have retail locations, the brick and mortar locations, become a museum or a gallery to go see things that then maybe get purchased online later, to do competitive shopping or things like that for our competitive pricing shopping? Has that become a challenge then if people are there to just kind of look and see what it looks like in real life, and then make a purchase online later? Is that a thing?
Kristin:
It is a thing. You see people that will go into a store to try something on, to get the right size, than pull out their phone and make sure that what they’re standing in front of, looking at, is it the same price as online or within an arm’s reach of online? And if it’s not, they’re out the door.
Jan-Eric:
Gotcha. So here we are. I mean, the reality is for 2019, if you haven’t gotten it figured out by now for Black Friday and the holiday season, you’re out of time. How does a retailer or a brand who relies on retail distribution, what can those companies or people in those positions be doing now to set them up for a great holiday shopping season in 2020?
Kristin:
So thinking about consumer behavior that’s changing, thinking about that consumers have more options than they’ve ever had before on how to purchase, that puts a lot of pressure on retailers to come up with the right strategy, have the right items on sale, have the right amount of level of inventory in store. So as a brand you can definitely have a big place with your retailer from a strategic standpoint if you have the right data and insights to inform what those decisions should be for 2020. So now’s the time to start thinking about, “What should I measure? What should I watch? What competitive insights can I glean that I can take to my retail partner to help them be the most informed that they can and have the best strategy for 2020?”
Jan-Eric:
And that can encompass the types of brands that are right price points, categories, all that type of thing, that kind of lead into what worked and what moved products.
Kristin:
Absolutely. Retailers are going to be digging into their POS data to understand, “What items were purchased together? What items caused a return trip? What items were purchased at what hour of the day?” But as a brand, you should have eyesight to, “What went on in the market? What shopping experiences outperformed your retail partner? Who sold more items than somebody else?” You can look at your own data to help them get that understanding from a market share perspective. So thinking about competitive set for your retailer will help you inform their purchase decisions.
Jan-Eric:
Yep. Totally. Makes sense to me. Well, I would throw out one more thing. I think that brands and retailers ought to be thinking about … It kind of goes back to, you think about the holiday shopping season is really about trying to get the transaction, right? So the brands and retailers are really focused on driving store traffic, creating action, right? “Get off the couch, get into my store, buy a thing or two, and walk out of there.” That’s sales activation focused, and it seems like when a brand asks or a retailer is asking for that transaction, a big contributor to making that a success is also doing work ahead of that, ahead of the ask, on building affinity for the brand, it’s seemed to get so important that what a brand or retailer is doing between January and October can actually have a huge impact on the engagement they get with sales activation that starts in November.
Jan-Eric:
And so to put all the undue pressure of the holiday shopping season, to think that all that work gets done, is going to happen, is going to come down to an eight, 10 week, 12 week, whatever, however we define it period of the shopping season, seems like it’s kind of missing the bigger picture and the understanding of how affinity toward a location or a retailer or a brand itself, actually that if you can be building that between January and say September, you’re actually setting yourself up for success when you ask for the actual purchase, when it gets to the holiday season. And my observation, I guess, my observation in that is that so many brands, and the tendency is to move toward an ongoing perpetual state of sales activation and asking for sales, asking for the transaction, there’s pressure, immense pressure on CMOs to constantly be turning comp sales growth. Right?
Jan-Eric:
And same with retailers. It’s a, “Beat this same week that we had a year ago.” Constant pursuit of that. The drug to that addiction becomes short term sales metrics and store traffic and things like that, and the tactics you have to do and the promotions that you start to create are always about that short term sales gain. But to really maximize your impact in the holiday shopping season, you’ve got to have balance to your marketing mix and your messaging mix, which also gives proper weight to building a brand, so that when you ask for that transaction, you’ve got a better chance of getting it.
Kristin:
So that makes a lot of sense to me, and I’m sitting here thinking about the reporting that I was frantically doing in my past, the Tuesday after Cyber Monday completed, and I’m looking at, “Here’s the items that were on sale. Here’s the lift they got. Here’s how they performed this year versus last year.” Is there some sort of measurement or score or something that retailers or brands can be using to understand the effectiveness, to your point, of January through October?
Jan-Eric:
Yeah. I think that yeah, there are metrics and they’re harder to define. They’re easy to define, but harder to measure. There’s a lot of research, emerging research out there that talks about kind of what these types of things, these things tend to look like, but even brand awareness of brand consideration, which are those traditional use of brand health, they even almost skewed toward the consideration toward a purchase, which is not what we’re talking about. This is more about affinity or loyalty or emotional connection to a brand, an understanding of what a brand is absent of any sort of offer.
Jan-Eric:
One interesting metric on this is price elasticity. So whether or not as you impact price, or as you would increase or have a change in price, does that impact the demand or the desire from consumers to buy your product? You make a candy bar, you sell it for a dollar, you sell a bunch of them at a dollar. If you decide to take your candy bar and now it’s going to be priced at $1.10, did demand for your candy bar go up or down, or did it stay the same? If it stays the same as you increase price, that’s an indication of strong equity for your brand, loyalty to your brand, and emotional connection to the brand, that your brand has to be less price sensitive, which means that that’s an indication of the strength of a brand over the long haul.
Jan-Eric:
Think about being a brand that as soon as you raise your price, no one wants to buy it anymore. That would not be an indication that there’s a strong connection to your brand. So the desire would be to have a strong connection to your brand, and research would show that if you’re constantly operating on deal, asking for transactions all the time, that price sensitivity becomes very high for those types of brands because you train them, like with the mattresses, to buy on deal.
Jan-Eric:
So if you can build equity for the brand between January and September, and then all of a sudden you drop in with a special deal in the holiday season, you might be able to capture and bottle that energy of the fear of missing out for someone who says, “I buy this stuff anyway. I’ll buy this candy bar for a buck. Now I can get it for 80 cents because it’s Black Friday. I’m definitely going to go buy it now.” And all of a sudden it becomes a totally different deal.
Kristin:
Now, that would be super impactful information to bring to your retailer as far as, how are they setting themselves up for success, and something potentially interesting to include in your hindsight reporting for Black Friday in the holiday season.
Jan-Eric:
And what’s fascinating about that is that what drove the effectiveness of that offer had nothing to do with what’s happening in that timeframe, and it was all about what happened prior to the shopping season.
Jan-Eric:
So the parallel for all this, as we wrap this up, is if I would just prepare better for the shopping holiday season, maybe I could avoid doing all of my shopping two days before Christmas. If I could be smarter, I wouldn’t always get myself into a pickle as we get close to this, but all jokes aside, this is fascinating. Again, as we’re heading into Black Friday, people’s stress will be high, for marketers and retailers alike trying to maximize their sales return during this timeframe. This has been a fascinating conversation. There’s obviously a lot of things that will be happening influencing the shopping holiday season. So good luck to you with your own shopping list, and good luck to all the retailers out there in trying to get their sales goals.
You’ve been listening to the Uncovering Aha! podcast. Callahan provides data savvy strategy and inspired creativity for national consumer brands. Visit us at callahan.agency to learn more.