An increasing number of major brick-and-mortar retailers-led by Walmart, Target, Best Buy, and The Home Depot-will not open their doors on Thanksgiving, giving employees the day off and pushing more spending to digital channels. What\’s more, fewer promotions have been targeted specifically for the day after Thanksgiving, today, traditionally known as Black Friday. Over the past few years, our ramped-up consumer culture has expanded Black Friday from a one-day, to a weekend-long, to a week-long event. However, in the year of pandemic, Black Friday has taken on a whole new meaning and many retailers will remain in the red instead of profiting from the traditional shopping frenzy.
The term \”Black Friday\” was originally coined in the 60s to signify the chaos created by obsessed shoppers looking for deals on the day after Thanksgiving; more recently it symbolizes retailers moving from red to black in terms of profit. But in this pandemic year, many nonessential retailers may not be seeing much of a profit on Black Friday (the notable exceptions are essential grocery, discount, home improvement and pure play).
[callout]In the midst of what seems a difficult, unfair and anxious holiday for many families, our innate resilience and optimism will help pull us through to a better tomorrow.[/callout]
Even retailers who have shifted heavily to online this year due to physical store closings and reduced occupancy are finding that online purchasing can be a deceptively costly business. The added expense of delivery, packaging and high number of returns reduce profitability for many online purchases. Furthermore, stock-in-transit, multiple shipments and shipping from a variety of distribution points (including from stores converted to online fulfillment centers) add complexity and cost.
A Constrained Holiday Weekend
The timing for Black Friday has completely changed in recent history. It now starts essentially in mid-October, kicked off by Amazon Prime Day and bookended by Cyber Monday, and has become one of the longest sales events of the year. Many retailers including Walmart, Target, Best Buy and Lululemon started their Black Friday sales even earlier this year. Black Friday has morphed from a one-day event of highly profitable sales and engaging social shopping interactions into two months of sprawled-out promotions and socially distanced, contactless commerce.
Socialization and interaction have traditionally been an important part of the long Thanksgiving holiday weekend shopping experience. Accelerating Covid-19 cases have put a quash on that and many people are not traveling and postponing socialization with family and friends. State and local governments are urging people to stay home, and in many parts of the country restrictions have included limits on the size of gatherings. Traditions have been upended and we all witnessed the 2020 Covid-19 version of the Macy\’s Thanksgiving Day parade on Thursday.
Other challenges facing retailers are operating with a reduced labor force in stores and warehouses, and occupancy requirements in some states controlling the number of shoppers in stores. Of course, many consumers do not want to shop in stores anyway unless they feel safe. The coronavirus has created a state of anxiety in the U.S. where people feel less comfortable shopping indoors. The sustained and seemingly endless shock of the pandemic has left consumers focused primarily on their own health and well-being over deal-seeking shopping as we enter into the holiday shopping period.
Safe Sales Shift
The emotional state of the nation will have a dramatic impact on the shift to shopping online which is projected to increase 36 percent over last year. Thanksgiving and Black Friday were projected to be two of the largest mobile commerce days as consumers spend the holiday shopping on mobile devices in lieu of entertaining large groups of friends and family. Cyber sales across the five major days of Thanksgiving, Black Friday, Small Business Saturday, Sunday and Cyber Monday are predicted to be close to $40 billion according to eMarketer. Digital sales on Thanksgiving Day were predicted to be almost 50 percent higher than last year as many retailers #optout of being open.
Balance Sheet Woes
The major shift to online purchasing may not be enough to change the balance sheet from red to black. Sales projections for holiday vary widely, with the NRF expecting a 3.6 to 5.2 percent increase (November and December, with some categories excluded); eMarkerter predicting a 0.9 percent increase; and NPD a 2.5 to 3.4 percent increase (in general merchandise categories). Deloitte projects holiday retail sales are likely to increase between one percent and 1.5 percent by a methodology it developed, which considers best and worst-case scenarios. No one has a crystal ball, but the magic eight ball says, \”cannot predict now.\”
Supply Chain Fragility
One thing we know for sure is the push to digital will tax out the supply chain exacerbated by Cyber Monday. Frank Poore, CEO and founder of CommerceHub, believes the extension of Black Friday promotions over a two-month period will be helpful to load balancing on the supply chain. However, Poore says, \”Heavy shipments will be consolidated into the first week after Thanksgiving which makes it difficult to maintain process and puts strains on all parts of the supply chain including warehouse capacity overload.\”
With a substantial influx of online purchasing over the holiday weekend, there will be issues with meeting delivery times and fulfilling orders. The need for retailers and brands to balance worker safety with peak demands will impact the ability to pick and pack orders when large spikes occur leading to missed deliveries and unfilled orders. The good news is that these immediate business challenges will result in innovations to solve the most perplexing problems, including last-mile delivery. According to Poore, last-mile delivery will be revamped. Retailers will maximize their physical footprint to bypass traditional delivery methods and avoid increased shipping fees and delivery delays. \”New solutions will emerge to streamline last-mile delivery processes, and we\’ll begin to see more alternative delivery methods like DoorDash, Postmates and Uber teaming up with retailers,\” he says.
Giving Thanks in the Year of Coronavirus
This year is different. Black Friday is different. The retail landscape is different. The consumer is different. This holiday will be remembered as a pivotal turning point in the retail industry, accelerating the adoption of digitization, contactless commerce and a re-engineered supply chain process. In the midst of what seems a difficult, unfair and anxious holiday for many families, our innate resilience and optimism will help pull us through to a better tomorrow.