Retailers are already seeing some holiday gift purchasing but that’s doing little to ease anxieties over a holiday season seen riddled with hurdles to cross.
“There’s nothing predictable about 2020,” said Meghann Martindale, CBRE global head of retail research, in a conference call Wednesday covering the giant Los Angeles-based commercial real estate services and investment firm’s holiday trend report.
Retailers are still facing a lot of economic headwinds impacting consumer spending and concerns over hotspots, where COVID-19 cases are spiking. Brick-and-mortar retailers, she said, are on the lookout for restrictions and closures regionally, that could ruin shopper traffic at the stores.
Among the key trends cited in the CBRE report: retailers’ sales growth will slow to under 2 percent, compared to 4.1 percent for the past 10 years. That’s consistent with the Deloitte holiday retail forecast for sales to be flat to 1 percent up, or 2.5 to 3.5 percent up.
According to CBRE, for the November-December period, e-commerce sales alone will be 40 percent over last year’s two-month period, more than double the record 14 percent last year, Martindale said.
E-com growth will offset brick-and-mortar declines enough to push retail into the positive sales column for holiday 2020, she added.
“This will be the longest holiday shopping season we have seen,” Martindale said. “Many retailers have decided to start this gift messaging four to six weeks earlier than previous seasons to control crowds and to spread out sales and promotions to avoid that supply chain strain and inventory shortages we saw earlier this year.”
She said Amazon’s Prime Day, which happens next week over two days, “will drive e-commerce growth. Traditional brick-and-mortar competitors will be going head to head against Amazon with their own holiday promotions.”
“Consumers are going to want to maintain some semblance of gift-giving and festivity…to try to preserve some of those [holiday] traditions,” said Martindale.
But she expects a lot of variation in brick-and-mortar traffic between urban and suburban markets, and with northern versus southern regions. In the South, she said, retailers have the advantage of the warmer weather and the ability to utilize outdoor space.
Hot products for holiday 2020 will be those related to ath-leisure, home furnishings and decor, home entertainment, games, fitness and do-it-yourself, according to CBRE.
“We will see modest growth this holiday season, as brick-and-mortar sales will be challenged and overall consumer confidence is tepid. However, e-commerce sales will hit new highs in 2020,” said John Morris, CBRE retail leader, during the conference call.
But e-commerce, Morris warned, negatively impacts margins, inventory carrying costs and shortages. “It’s more challenging to working capital. Transportation is 10 to 15 times more expensive [to deliver] a box to a door than a pallet to a store,” Morris said. “That makes the business hard to break even sometimes.” In addition, e-commerce has roughly a 30 percent return rate “and that number goes up significantly during the holiday season. That waste is a huge part of margin decay during the holiday season.”
Martindale predicted “some leveling off” of the big surge in e-commerce that happened last April and May, and the one expected for holiday 2020.
“The immediate concern is can we keep our shopping centers, our malls open for the remainder of the year,” if COVID-19 cases continue to rise, she said.
Morris stressed the need for malls to adapt and predicted that in the next 12 months some malls will add a logistics infrastructure. “The mall itself becomes a shipping structure as well.” It’s important, he said, for the long-term viability of malls, amid their declining sales and traffic trend.
Martindale said that retailers in malls will push some of the services they offer into common areas, vacant or outdoor space, to make shopping safer and more convenient. Expect retailers to maximize the use of “in-and-out” shopping, she said. Payment, gift-card purchases, wrapping and returns could be pushed out of the store into common areas and outdoor space where weather permits.
Other trends cited by CBRE’s holiday 2020 forecast: pop-up store activity will increase to expand retailers’ reach and support social distancing; curbside pick-up and “buy-online-pickup-in-store,” or BOPIS, will continue to attract customers who want to minimize their time spent in stores, and many shopping center owners and retailers have opted to close on Thanksgiving Day.