Life before the pandemic seems like eons ago. At the time of writing this article, about 58% of the US population have been vaccinated against COVID. As many adjust to a new normal of living with COVID, retailers are looking forward to a somewhat normal holiday season as more and more customers bravely embrace physical retail again.
This coming holiday season is the perfect opportunity to tap into the consumer demand. Deloitte projects that retail sales will increase by 7% to 9% this holiday season on top of last year’s 5.8% increase. Sales could potentially reach a whopping US$1.3 trillion. Leading retailers should use this opportunity to maximise profit for the busiest time of the year and clear out the inventory to kickstart the new year with fresh products.
Tip #1: Identify the market demand.
The Trend Performance and Competitor Benchmarking modules on the Omnilytics dashboard can help identify trending products in the market. While the holiday season is commonly known for various deals and heavy discounting, it can also be an avenue for brands to optimise full price sell-out. One way to achieve this is by focusing on on-demand styles that suit the current consumer lifestyle.
The trend performance for womenswear in the US reveals that Leggings, Joggers, and Skinny Pants are uptrending and have high performance scores. Despite seeing a recovery on the traditional work clothes and dressier outfits now that people have returned to the office, the casual styles are still going strong. This can be seen from the high trend scores recorded by Leggings and Joggers in the chart above. The dressier bottoms, represented by Skinny Pants have gained traction as many have started going out and engaging more in social activities.
For the past year, there has been a steady demand for Joggers as shown in the graph above. With office wardrobes pivoting fast towards casual styles, Joggers has proven to be a category that would outlast the pandemic. The loungewear staple can be incorporated into the work wardrobe and easily be transitioned to after-work activities like working out or socialising. Consumers are still sticking to the versatility of core colours, as black, grey and white dominate the category.
We can further validate these trends by looking at their sell-out performance in the competitor benchmarking module. Joggers performed strongly at full price, which is above the category average of 38%.
By identifying trending categories and closely monitoring their performance, retailers can take advantage of the peak holiday traffic to better optimise their assortment and maximise full price sell-out.
Tip #2: Execute the right and smart promotion strategies.
The next step is to determine which products should be discounted.
An analysis of trend performance for H&M reveals that shorts were downtrending. To validate this with the current market trend, we can analyse the US womenswear market as a whole to determine if the demand for shorts has been declining.
As demonstrated in the above chart, the trend performance indicates that Shorts have not been as popular in the market recently. With this insight, we can dive deeper into the retailer’s inventory to spot the slow-moving products using the Ageing Analysis module.
The ageing analysis module reveals that Shorts category in H&M had a lower than average sell-out, at 48.35%. The category also had a high concentration of products aged more than 120 days. By going deeper into each of the products in the high ageing brackets can help retailers identify which products to markdown.
Once the right products to discount have been determined, brands need to find the optimal discount rate to adopt without sacrificing profit margins. The data from our Competitor Benchmarking and Visual Merchandising modules can guide brands in executing their promotions this holiday season based on the lessons learned from last year.
The chart above reveals that retailers can protect their margins and are able to generate high sell-outs by offering products at a lower discount range. Despite 40-49% off being the most common discount range deployed by both Zara and H&M, lower discount ranges of 20-29% and 30-39% off generated higher sell-out rates for the brands. Boohoo learned from the past seasons as most of its products were discounted at 20-29% off.
The Visual Merchandising module can help brands monitor and provide ideas on how other leading retailers communicate and market their holiday promotions. The promotions on gifting were most common across retailers. Key offers include cart-level discounts, blanket discounting, and free shipping promotion. Closely monitoring different promotions can give brands an advantage over competition and leverage on the holiday traffic.
Tip #3: Identify the right timing to launch promotions.
While it may seem like consumers would purchase anything as long as it is on sale, there is an optimum timing to launch your holiday promotions. Monitoring close competitors’ sales campaign timeline can help brands strategise in capturing a bigger share of customer wallet.
Here, we can see that H&M started their 2020 Black Friday sale one week earlier than its competitors as a high number of products were discounted for the first time on November 18, 2020. The brand also launced its year-end sale in early December, as the chart shows that many products were discounted on December 8, 2020.
Digging deeper into the Visual Merchandising module reveals that H&M in fact launched a pre-Black Friday sale, which explains the high number of discounted products shown in the Calendar module.
Launching a pre-Black Friday sale proved to be highly effective for H&M, as it generated nearly 5x higher sell-out than the previous weeks. Knowing when competitors held their promotions can help brands strategise on their own launches during the highly competitive period.
Tip #4: Optimise omnichannel shopping experience.
The Berkeley Research Group found that 60% of customers will use a mix of online and offline shopping for the holidays, 13% plan to shop entirely in physical stores, while 24% plan to shop entirely online. If you have chosen to only sell your products in a brick-and-mortar store, then you are missing out on a good percentage of sales from customers who choose to shop online.
The rise of the pandemic has caused a drastic increase in online shopping, which should push offline retailers to start an online store, if they have not done so already.
Since a majority of customers will utilise online and physical stores, retailers should optimise both experiences to increase conversion. Customers can enjoy a seamless shopping experience through clear site navigation with a clean and structured product category page.
Brands can dive into retailers’ page layout through the Visual Merchandising module. H&M’s shopper-friendly site has clear categories and other product filters at the top banner and on the side page. This enables customers to search for their desired products quickly. Meanwhile, Forever 21 offers one-click purchase functionality, which can also boost conversion rate. Other website optimisation aspects to consider include increasing website and mobile site speed to manage the spike in traffic, as well as improving on-site search functionality and product recommendations.
Offering a safe offline fulfilment is also an important feature to capture sales during the holiday season. As seen in Forever 21’s main landing page, the retailer offers a click & collect service, where shoppers can purchase the products online and have them shipped to the store location of their choice for free. As the holiday season is known to be the busiest time for logistics, this will give the confidence in customers to receive their purchases on time, which will in turn increase the conversion rate.
Implement for Success
The success of any retailer depends on how well it can embrace change and adapt to the evolving market. The usual approach in solely clearing ageing inventories during the holiday season will not work with the increasing competition during the period. To win the customers, brands need to understand the consumer demand and behaviour by optimising their assortment with a demand-driven strategy. The right communication and marketing strategies can also help brands stand out from the crowd and boost sales conversion during the busiest sale period of the year. The success for this year’s post-lockdown holiday season is also dependent on how retailers utilise data and optimise their strategies and tactics accordingly.
