Middle market retail’s challenge to navigate uncertainty
As the eve of peak holiday shopping is upon us, retailers are adjusting to meet consumer needs and wishes, anticipating demands, stocking up, paring down, pricing right, offering discounts, checking it twice … and readying for an uncertain shopping climate, all amid a world-wide pandemic and a volatile economy. This “next normal” holiday season poses challenges never seen before for middle market retailers, but those who truly understand their customers can quickly respond to marketplace shifts and leverage smart digital strategies could capture much-needed sales during the holiday shopping season.
CONSUMERS WANT WHAT THEY WANT AND THEY WANT IT NOW
The pandemic has changed the consumer, for certain. People are now more comfortable than ever with online shopping, delivery and pickup. Positive experiences for those who have not previously used these alternate channels most likely mean that these new consumer habits will survive the pandemic. According to Coresight Research, 60% of consumers indicated they will maintain their changed buying behaviors and expectations post-COVID-19. Seamless online shopping, fast delivery, curbside pickup, easy returns and more have all become the norm and will likely continue that way.
“It’s about ease, convenience and safety for consumers,” said John Nicolopoulos, retail and restaurant practice lead for RSM. “People this holiday season will either order online or they will want to get in and get out of stores quickly. In addition, consumers will want what they want and in many cases won’t wait for discounts for fear that many items will sell out fast and not be available later,” he said, adding, “The challenge for retailers will be to maximize margins on short supply/high demand items while discounting sluggish categories to maximize sell through and clear out slower moving inventory. This isn’t a new concept, but heightened variability brought on by the pandemic magnifies the situation and makes it even more important to be able to pivot quickly.”
According to Chris Shaker, senior consumer products industry analyst for RSM, a digital presence is paramount for middle market retailers this holiday season, not only to reach the consumer, but to understand them as well.
“A digital strategy can obviously provide a platform to engage and transact with customers and also help forge a relationship between consumer and brand,” he said. Beyond that, added Shaker, digital engagement and data analytics allow retailers to further understand the preferences and behaviors of their customers; this in turn can help retailers create convenience, maximize basket and predict future needs to guide promotions, discounts and more.
Shaker also said it’s important for retailers to be nimble this holiday season, and having a digital strategy can help with that as well.
“Everything is accelerated due to the pandemic and the situation can change quickly. Will there be a surge in virus cases, will the recovery stall out? It’s important to think through the various scenarios and be ready,” said Shaker, adding digital intelligence can help predict some of these scenarios for smarter supply chain and inventory management, for instance.
And this nimble factor could play in middle market retailers’ favor, said Shaker, given their smaller organizational size and more streamlined decision-making structures. These sometimes more flexible environments can allow changes to happen faster than in larger organizations, and quick pivots will be essential for this challenging and hard-to-predict holiday season.
IS SANTA CANCELLED?
“Another uncertainty is what holiday celebrations will look like this year for families across the country?” said Nicolopoulos. “Will gatherings be smaller or virtual? With decreased travel, will there be more disposable income for increased gift buying? And, how will children visit Santa? Will Santa be cancelled this year?” he mused, adding that the incongruity of it all just demonstrates the major shifts in norms and traditions we’ll be seeing this holiday season.
While it’s certainly not business as usual this holiday season, Nicolopoulos reiterated that those middle market retailers who listen and deeply evaluate the needs of their customers, adjust quickly to the marketplace climate, and use digital to analyze and connect with their customers may have a merrier season than their competitors this year. And as for Santa, he’ll likely find his “next normal” too this year.
John Nicolopoulos is a partner in RSM’s assurance practice and serves as the national industry audit leader and the national leader of the retail and restaurant sectors with RSM’s consumer products practice. He has over 25 years of experience providing assurance and business advisory services to a diverse client base with focus on the retail and restaurant industries.
Christopher Shaker is partner in RSM’s Boston office. He is also a member of the firm’s national consumer products and national retail sector teams. In this role as a senior analyst, he seeks to understand, forecast and communicate economic, business and technology trends impacting the consumer sector. He uses these skills to advise clients on conditions impacting middle market leaders.
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