One on One With AlixPartners' David Bassuk

Bassuk: Like many of the trends right now, there were trends that were unfolding. Retail has been an industry that is typically not fast to act or be at the forefront of change. Some of these trends will be what I would call slow-moving. Now they've been rapidly advanced. That's one example, the shift to the holiday season being expanded across a wider set of dates. That was happening pre-COVID for sure. A number of different things have pulled sales earlier, you saw Black Friday shifting with Cyber Monday changing and then stores opening for Thanksgiving. There was a lot of movement happening. That's been blown up. Now, the concept of holiday spending as you saw in our study is irrelevant. There's a number of big shifts happening, that's one of them. Nearly half of the respondents of our survey said they're going to do their shopping before Halloween, that's a huge increase from last year. So we see the real advancement in the catalyst of a much bigger shift. That links back to the theory of major disruption happening in retailer and retailers needing to advance their thinking on how to approach this.

Consulting: How will this affect brick-and-mortar retailers as opposed to e-commerce?

Bassuk: Clearly brick-and-mortar traffic is going to be way down, the use of stores is going to be dramatically different. That's another big theme, only 50% of people plan to visit a store this holiday season, down to 50% from 76% last year, that's a huge shift. It's true brick-and-mortar needs to do a lot. On the flip side, you've got to capture those sales online, which is a harder avenue. It's much more analytically challenged, it's more challenged on the profit side, selling to consumers online is harder, with more challenging delivery times and much more challenging profitability. I don't want to say working on the shifting brick-and-mortar side is the big heavy lift, it's really pretty equally split across both sides.

Consulting: How big of a chunk of retailers' annual profits come from the holiday season?

Bassuk: It varies by category and by sector. A lot of the categories are much more focused on holiday giving. That's another big shift happening right now, those brands or retailers that focus on more holiday-centric categories are really having to rethink their strategies. This is a tough situation. Spending is shifting a lot, not only timing, but categories. Twenty three percent of consumers are going to spend less this year than last year, so it's going to be really tricky. We're seeing a number of categories where we're seeing consumers say they're going to spend more than last year; apparel, toys, footwear, electronics, video games. These are traditional holiday categories. While people are going to spend less in general, they may spend more in those categories. That said, it's going to be spread over a different timeline and through different channels, so it's a puzzle to put together for retailers, and it's not an easy one this year.

Consulting: Will this represent a revenue hit for retailers or will it just be more evenly spread throughout the year?

Bassuk: Our prediction is there will be an overall increase, 1-2.6% increase in holiday spending. That said, it's spread over a broader period of time, so that's going to be tougher to navigate. There's going to be a much bigger separation between the winners and the losers. We've seen more retail bankruptcies this year than in the past, and we're seeing a lot more shifts of how people are competing in this space. Volume will be up a little bit but in a very different place. It's the retailers who are actively and strategically planning for that that will find their way, but profits are harder to come by with more coming online, that's a profit-eroding market for many retailers.

Consulting: What will differentiate the winners from the losers?

Bassuk: There's a handful of strategies here. There isn't one playbook, each retailer has specific nuances about their business and how they're going to compete. But in general there's a handful of strategies people are really looking at. Number one is rethinking pickup options for consumers. Whether that's in-store, curbside, or delivery, but really strategically planning and thinking about pickup options. Number two is rethinking the store labor model. Using stores differently, realizing consumers are going to shop the store differently, realizing that while there might be less traffic you can deploy labor for other activities. Number three, really leveraging e-commerce to improve overall decision making and understanding of the trend of being agile and responding rapidly. E-commerce, no surprise, every retailer realizes the strategic importance, but many are not as advanced in really using it. Those are a handful of ideas or strategies that I would say are big-picture across the whole landscape. But then each retailer and each category needs to think about them differently based on their category, it's going to be a lot different for a grocer or apparel retailer versus an electronics retailer.