Retailers Brace for a Black Friday Without Crowds
(Bloomberg Businessweek) -- Most years, Cassandra Davis wakes up at the crack of dawn on Black Friday armed with a battle plan formed with circled newspaper ads and some online research. She warms up her car in the Minneapolis winter for half an hour before driving to Target, Walmart, or J.C. Penney to cash in on the deals they’re offering. Her biggest prize in the past decade: a large flatscreen TV she scored for $700.
In 2020 she’s not sure her tradition will survive. “I have to think about all of the what-ifs,” 50-year-old Davis says. “I’m really just watching the dollar even if things are inexpensive. We still have to be careful, because we don’t know what happens day to day with this pandemic.”
Shoppers like Davis may be wary, but American malls and stores are desperate to make Black Friday happen. Traditional brick-and-mortar holiday shopping has been declining for a decade as consumers flock to e-commerce, and the Covid-19 outbreak and recession will only hasten its fall. The U.S. retail sector has been devastated after monthslong shutdowns and dozens of bankruptcies, battering the survivors’ hopes that shopping patterns would get back to normal by retail’s busiest day. With barely seven weeks left, merchants are scrambling to prepare stores and websites to make up for lost time.
The holiday playbook of opening stores right after family Thanksgiving feasts, lining the weekend with doorbuster sales, and cramming shops with inventory and workers has been thrown out the window. Stores will be reconfigured, with fewer racks on the floor and service stations spread farther apart. Online sales will take center stage. Supply chains will be strained like never before as businesses try to keep up with record e-commerce purchases, with distribution centers hiring tens of thousands more workers to package and ship orders.
What’s more, the pandemic has made shoppers wary of going to crowded stores and left many tight on cash after mass layoffs in most industries. Unemployment—at 7.9% in September, more than double what it was this time last year—remains high, and another round of stimulus checks hasn’t come. “This will go down as the most difficult holiday season to prepare for, whether you’re a retailer, a vendor, or anything in between,” says Joel Bines, co-head of retail consulting at AlixPartners LLP.
Covid has already cost the U.S. retail industry billions of dollars. In a normal year, department stores and apparel sellers get about a quarter of their annual sales in November and December, according to Fitch Ratings. This year’s fourth-quarter shopping spree will be even more crucial; many sales were missed when stores were closed, and consumers refrained from buying gold necklaces, designer handbags, and other discretionary items. Almost $122 billion in U.S. retail sales have evaporated since the pandemic caused store shutdowns in March. Sales at clothing and accessories stores plunged 34.9% in the first eight months of 2020 from the same period in 2019, according to the U.S. Census Bureau.
Many stores that have reopened still have limited capacity because of social distancing restrictions and are likely to bring in only a fraction of their typical holiday season haul. Take Macy’s Inc., whose Manhattan flagship is one of the busiest stores in the U.S. Chief Executive Officer Jeff Gennette says crowds are bound to be an issue on Thanksgiving weekend and the final days before Christmas. The company will continue following the guidelines it created when it reopened its famous Herald Square outpost in June. Some of the main entrances will remain shut, shoppers will be required to wear face masks, and hand sanitizer and sneeze barriers will be everywhere. Security guards and signs will remind them to keep a safe distance, putting a damper on the typical holiday frenzy.
Lululemon Athletica Inc., an athleisure giant that’s benefited from the pandemic’s cozy-at-home trend, will set up about 20 smaller hubs within malls where it already operates a store to help reduce long lines. The leggings company will also open 50 seasonal pop-up shops around the country as it has in years past. “We’re confident in the demand behind our product,” CEO Calvin McDonald says.
At upscale merchant Neiman Marcus Group, the big change will be how shoppers maneuver inside the store: Clientele who don’t feel comfortable wandering the aisles can book private rooms where associates will bring them Louboutin pumps and silk Ferragamo ties. It’s an offering the department store, which emerged from bankruptcy in late September, is leaning into heavily this holiday season. “We don’t know what’s going to happen, but we want to have options,” says CEO Geoffroy van Raemdonck.
Most stores haven’t yet laid out specific guidelines, so customers don’t know what to expect when they enter Black Friday mainstays including Best Buy, Target, and Walmart. So far, the stores are saying they’ll continue to stick to the guidelines they’ve been using—masks are mandatory, stand 6 feet apart, don’t touch things you’re not going to buy—which could deter some of the frenzy the shopping holiday is known for.
One big change is that merchants are trying to encourage earlier spending. Retail veteran Deborah Weinswig, CEO of Coresight Research Inc., has persuaded two dozen large retailers—including Guess? and JoS. A Bank—to inaugurate “10.10,” a shopping holiday that will offer discounts for several days around Oct. 10, as a way to get shoppers to purchase gifts earlier and make shipping easier.
Amazon.com Inc. has rescheduled its Prime Day promotion, usually held in July, to begin on Oct. 13. Home Depot Inc. is offering Black Friday-esque sales right after Halloween. And the National Retail Federation, which represents America’s largest stores, is pouring money into advertising that tells shoppers “there’s no reason to wait until Thanksgiving.”
Coach’s interim CEO Todd Kahn says he’s coaxing people to shop earlier so stores don’t get too busy. “Given this world we’re living in now, the intensity of some of those key days will probably get elongated over multiple days or weeks, not just a one-day event,” he says. It might actually work. Almost half of U.S. consumers said they planned on beginning their holiday shopping before November, up 7% from last year, according to a survey from AlixPartners. A kickstart might help retailers with another challenge: the piles of unsold goods that have stacked up over the past nine months.
Once the holiday season is in full swing, some shelves may be left bare on purpose. Levi Strauss & Co. CEO Chip Bergh says he’s willing to forgo a sale rather than get stuck holding excess merchandise. If he tries to sell too much product, he could end up needing extensive markdowns just to get rid of it. No retailer wants that.
Stores still need merchandise on their shelves, though, if they want to turn a profit. “Retailers are looking to get the fresh products on the shelves,” says Marjorie Kaufman, managing director at consultant Getzler Henrich & Associates LLC. “But the problem is we don’t know what’s going to happen this fall and if the stores start shutting down again.”
Inventory problems are expected to affect shipping as distribution centers, already pressured by record online purchases during the pandemic, will be stressed during the busy shopping season. Three-fourths of Americans say they will do at least some of their holiday shopping online this year, compared with 65% last year, according to Accenture.
Online deal seekers had already been chipping away at Black Friday sales in recent years, and now consumers have grown more comfortable with shopping for all types of goods on the web. More than 90% of consumers said they will choose online Black Friday discounts over in-store doorbusters, according to a recent survey by digital coupon provider RetailMeNot Inc. That could stifle the impulse purchases stores typically get when holiday shoppers walk past, say, a display of $35 air fryers on the way to the checkout.
Nonetheless, during the shutdowns retailers realized the value of beefing up their website capabilities for Black Friday loyalists like Davis, who might forgo stores and click from their couches. Bed Bath & Beyond Inc. overhauled its site and looked to improve its speed and convenience, including launching same-day shipping in late September. Kohl’s Corp. CEO Michelle Gass says, in addition to offering curbside pickup this season, the department store chain will emphasize home decor, kids’ toys, and other categories that performed best online during the stay-at-home days.
All these preparations are being made without knowing if shoppers are ready to shop until they drop so soon after living through a health crisis. Expectations remain modest: Total holiday spending on average is expected to be up 1.5%, according to consultant Deloitte LP, far less than the 4.1% growth seen in 2019. But that spending will be concentrated among the wealthy and middle class who still have income flowing. Millions of Americans including Davis, who was out of work for three months, haven’t been so fortunate. “We could get to the holidays, and there could be a spike,” says Davis about Covid. “I could clearly be back out of work again, just sitting at home.” It’s that prospect that has retailers worried.
©2020 Bloomberg L.P.