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With six fewer days to buy everything on family and friends’ wish lists this year, shoppers don’t have a moment to spare to grab something on the fly, which could hurt retailers when they tally up the holiday season receipts.
Forecasts are bullish for sales growth this year, but that extra item tossed in the basket would be a nice bonus for retailers that are facing a competitive landscape, changing shopping habits and other headwinds.
“A shortened holiday shopping season means less opportunity for consumers to buy non-essential gifts,” said Margaret Reid, vice president and senior portfolio manager with The Private Bank at Union Bank. “We can expect to see lower than average consumer impulse buying, with mall retailers likely suffering the most in this situation.”
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Shopping mall retailers are dealing with traffic declines among other obstacles, so they certainly don’t need another challenge.
But even retail giants like Walmart Inc. WMT, -0.16% have been bracing for any fallout from the shortened shopping season.
“As we start Q4, we recognize that we have some potential hurdles including the shortened holiday selling season,” said Brett Biggs, Walmart’s chief financial officer, in prepared remarks for the third-quarter earnings report on Nov. 14.
Cowen analysts see the problem as one more specific to e-commerce companies, which need time to get online orders delivered to customers.
“This calendar squeeze could pressure emerging digitally-native companies and favor brick-and-mortar traffic, plus scale e-commerce players like Amazon,” wrote analysts.
Amazon.com Inc.’s one-day delivery for Prime members provides a way for the e-commerce retailer to overcome the time squeeze.
But with most shoppers forecast to wait until December to start their shopping, these large brick-and-mortar retailers – and Amazon AMZN, -0.31% – could actually cash in on the shorter shopping period.
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“Cowen believes this purchase procrastination could benefit scale players (i.e. Target, Walmart, Costco, Amazon) leading into the holidays given distribution and speed advantages, plus national store footprints,” analysts said.
More specifically, CFRA thinks those retailers with a pickup fulfillment option will do well.
“In our view, consumers have fixed budgets during the holidays and know they what they would like to spend on,” CFRA’s Camilla Yanushevsky wrote. “We expect, however, the tight time frame between Thanksgiving and Christmas to be a boon for retailers with buy-online-pickup-in-store [BOPIS] capabilities. With a last-minute time crunch this year, we expect sales generated from BOPIS to reach new heights.”
High inventory levels could be a risk for all retailers.
“Inventory levels across apparel retailers has been high relative to sales throughout 2019,” wrote Union Bank’s Reid. “This has been driven by a few factors, but certainly the need for retailers to add inventory before U.S. tariffs were put in place in September.”
This could create a promotional environment, which could lead to profitability issues.
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But even if some holiday retail conditions are unique to 2019, there are some things that don’t change. Reid anticipates typical “barbell” shopping behavior, with a spike during the Thanksgiving holiday weekend, then a lull in early December, before another surge in the days leading up to Christmas.
“With the shortened calendar, clearly consumers will be incentivized to shop for convenience,” said Reid. “With a plethora of fulfillment options (ship-to-home, pick-up-in-store, drive-up), consumers are likely to gravitate to those retailers who can deliver their holiday items swiftly and conveniently.”
