One Key Takeaway About the Upcoming Retail Holiday Season
The most common question I get from brands is: "What is the consumer doing right now, and how should it affect my decision-making?" A few articles (WSJ,NYT) have recently been released about the outlook for the year's second half based on retail earnings and other data points.
I thought I would capture the sentiment from analysts and other data out there:
What Are the Key Trends in Consumer Behavior for This Holiday Season?
Continuing a trend seen in the past 1.5 years, consumers are still being careful about how they spend. Great value or perceived importance (i.e. non-discretionary) is at the forefront of consumers minds. If items like apparel, fashion, electronics are not deemed important or if there is a cheaper alternative, consumers are still trading down.
How Is the Home Improvement Category Affected by Consumer Trends?
Demand is weakening for do-it-yourself customers in the home improvement categories, reflecting increasing consumer worry. Big ticket items in particular, are under pressure. Even off-price outlets are noticing reduced ticket sizes, although traffic remains strong there.
You know it's bad when even off-price retail is struggling to maintain average order values (AOVs).
Why Are Credit Card Delinquencies a Concern This Year?
Credit card delinquencies are at a level not seen in 10 years (since 2012) according to St. Louis Fed Data. That is a significant data point, and there seems to be no signs of this slowing down. Last year, consumers were in a mode of worrying about the future. This year, the worries are about the present.
What's the Key Takeaway for Brands and Retailers This Holiday Season?
Watch your opening price points, and prepare for more discount hunters.
Consumers are expecting significant values this season, and especially in a gifting time of the year, your replacement alternatives are not your typical competition -- they can be in any other category. If a consumer can spend $150 and get gifts for 4 people instead of 2, they are going to do it.
What Action Item Should Brands Implement?
Ensure that you have a best gift value section of your site this season, and keep refreshing it. Ensure that you have higher margin items featured alongside these lower price point items so that you can try and make up for any discounting you are doing at the same time.
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