Retail Prepares for a Covid-Inflected Holiday Season

The coronavirus pandemic has accelerated the shift from brick-and-mortar commerce to digital transactions. It has also forced brick-and-mortars resisting the hybridization of their own businesses to adopt digital methods, turning restaurants and apparel stores alike into both brick-and-mortar establishments and online sellers.

Against that backdrop, retail’s biggest quarter will present novel challenges this year. Retailers will need to optimize for online transactions and contend with fragmented national and global landscapes where it may be safe to go to stores in New York but not in Los Angeles.

Simpli.fi CEO and co-founder Frost Prioleau got in touch with Street Fight to discuss what retailers can expect from this holiday season.

How has the Covid-19 pandemic altered the balance between brick-and-mortar commerce and e-commerce? What new e-commerce trends are you seeing?

As we all know, the pandemic has caused a quick acceleration in e-commerce, as consumers stayed home during the start of the pandemic and many brick-and-mortar retailers were closed. E-commerce had been running at about 16.2% of overall retail spending in Q1 of 2020, and during the pandemic it increased to 25%, which is a big jump closer to the Chinese benchmark where 41% of expected retail spending is through e-commerce in 2020. 

Many consumers who hadn’t done much e-commerce in the past both increased purchases from sites that they had already been buying from (e.g. Amazon), and also tried out new categories like food delivery and online car purchases. 

Many brick-and-mortar businesses also quickly pivoted to emphasize e-commerce or online food orders and curbside pick up. 

From an advertising perspective, we saw marketers being very agile and quick to change both targeting tactics and messaging to suit the needs of the situation in their local city or state.

Very soon, retailers and consumers alike will be looking forward to the holidays. How will retail’s biggest quarter differ this year?

The acceleration of e-commerce will very likely extend into the holiday season. In 2019, 14.6% of holiday retail spend was e-commerce. In February 2020, eMarketer predicted we’d see a 13.9% increase in e-commerce holiday sales. However, with the acceleration caused by the pandemic, we expect it to significantly exceed that growth. 

However, the amount of e-commerce vs. brick-and-mortar commerce will be highly dependent on each local situation. While we expect some areas to have few restrictions around in-person shopping, others very well could be highly restricted.

National advertisers who operate in many locations will need to be particularly agile to ensure that they are delivering the optimal message in each area, as well as using the appropriate targeting techniques to reach their prospects and customers.

What will the main challenges for retailers be as they seek to prepare for Black Friday and the surrounding shopping season? What opportunities does a more e-commerce-centric shopping season present?

One of the main challenges for retailers this season will be predicting how many shoppers will be shopping in person vs. online in all the various locations in which they operate. Certainly, this could be a year where the online-purchasing environment of Cyber Monday grows significantly compared to the in-person purchasing of Black Friday. Omni-channel retailers who both sell and ship product from their stores will be in a good position to serve either type of shopping. 

A shift to e-commerce is an opportunity for all retailers to reach new customers who do not happen to live near one of the retailer’s physical stores. E-commerce also gives brick-and-mortar retailers the ability to build an ongoing dialogue with their customers through channels like email and retargeting.  

Are there certain shoppers who are harder to reach in a more digital environment? Certain types of brands for which limited brick-and-mortar shopping will be particularly hard?

Historically, older demographics have been harder to reach in a more digital environment. That is changing quickly as consumption of digital media, both on websites and apps, and also on Connected TV (CTV), has strongly increased across all demographics during the pandemic. 

There has long been enough scale to target all demographics across desktop, mobile, and display advertising. Both before and during the pandemic, CTV inventory has grown tremendously and there is also now excellent scale to target all demographics using CTV advertising as well. One of the interesting things about CTV advertising is that it opens up targeted TV advertising to smaller advertisers, with many CTV campaigns spending less than $1000/month. 

What tools should retailers deploy to have a successful season? 

For retail advertisers to be successful this holiday season, they will need to ensure they are delivering the right message to each location at the right time. Also, as advertising budgets are generally expected to be tight, ensuring that they are minimizing waste by targeting their precise audiences and measuring effectiveness with robust attribution will also be important. 

Along those lines, this will be the first holiday season where CTV advertising can be delivered at scale, so many advertisers will likely shift budgets from linear TV to CTV to benefit from both the more precise targeting and the more accurate attribution that it offers.