There are less than two weeks until Christmas, and the retail industry, as per usual in 2020, finds itself in uncharted territory. The season has been pulled forward, leaving these final 10 days up in the air. Shipping delays are threatening the digital-first economy. And just weeks after they could open for limited business, malls and department stores are threatened with another nonessential retail shutdown as the virus surge rages on.
It’s a difficult hand to play, but both online and offline retailers are finding a way forward. Department stores, in particular, are taking an uncertain future and applying innovation to their strategies as a make-or-break fourth quarter trudges on. Luxury department store retailers in particular are counting on revenge shopping and a fertile gifting season to put a bow on 2020, but the strategy stands on shaky ground.
Saks President and CEO Marc Metrick is among those who have expressed optimism. “Fragrance is booming. Jewelry is going to be big. It gives people a sense that even if they can’t get dressed up for going out, they can put it on at home and it makes them feel a little bit more normal,” he told Vogue Business during the recent Long View webinar on U.S. recovery. “We expect to see a lot more self-purchasing. The way we look at luxury fashion is that it’s the comfort food of product. It’s the splurge, and people want to treat themselves.”
Can revenge shopping, or pent-up demand, drive department store and luxury sales? Metrick certainly thinks so. But other developments show that the luxury sector cannot depend on the revenge dynamic until possibly Q2 of 2021. In the meantime, luxury department stores are trying some new tactics.
For example, Selfridge’s in London has launched a “Rewiring Space” at its Oxford Street location, which gives valuable floor space to independent designers for up to 70 percent off. Neiman Marcus has made virtual and appointment shopping part of its routine, adding a decidedly upscale touch with Santa delivering at curbside with champagne for big spenders.
During the week of Black Friday, Neiman Marcus saw less traffic in stores, but “good conversion and a high value of spend online,” David Goubert, president and chief customer officer of Neiman Marcus, told Vogue Business. Goubert called out NM Connect, which is a tool that enables employees to deliver online customer service that was rolled out back in March to 5,000 store associates, and is now operational with 90 percent of its sales personnel. In September, Neiman invested in over 100 positions in client development, which included bringing on experts “to train associates to become digitally-savvy,” noted Goubert. “Going into Christmas, the idea was absolutely not to lose this way of virtual selling, but to continue building on the tools we give our associates to connect with clients remotely,” he added, attributing over $100 million in sales to NM Connect.
The reality is that while pent-up demand and revenge shopping may add a touch of success to the holiday season, it most likely won’t be a major retail factor until 2021, and even that will depend on the efficacy of vaccines and their deployment. But when it does hit, some economists are predicting a major consumer spending rebound.
For example, a new scenario-based study from the USC Center for Risk and Economic Analysis of Terrorism Events (CREATE) predicts an increase in pent-up demand, as consumers are currently blocked from travel, restaurants, hotels, merchandise, fitness, sporting events and concerts during recent lockdowns. The economic losses from closures, caused by what the USC team calls “avoidance behavior,” could be partly offset by increased consumer spending after reopenings.
“Pent-up demand is one of the most influential factors for the economy in this pandemic. While the mandatory closures and partial reopenings drive most of the economic decline, the extent to which pent-up demand leads to an increase in consumption after reopening can be crucial to the economic recovery,” said Terrie Walmsley, a USC CREATE research fellow and an adjunct assistant professor of practice in economics at the USC Dornsife College of Letters, Arts and Sciences.
Another study, this one from UCLA, predicts that pent-up demand will center on the experiences that have been unavailable during the pandemic that do not have an online component.
“So, think about haircuts, travel, leisure and hospitality — more so than the goods we’ve all been able to consume now during this period of time where we can order goods online and for delivery,” said Leila Bengali, an economist with the UCLA Anderson Forecast. “So once the vaccine becomes widely available and consumers feel more willing and able to resume life closer to normal, we’re expecting some pretty substantial growth.”
