How Retailers Should Think Outside the Gift Box This Holiday Season

The holiday season can certainly be a demanding time for retailers. Juggling the unpredictability of supply and demand, an increased volume of shoppers, and maintaining a competitive edge are tough. Throw in a global pandemic, and it becomes a whole different "nightmare before Christmas."

This year, retailers need to be even more meticulous in their planning. Merchants looking to beat the competition and generate customer loyalty before the year ends must act now by embracing omnichannel, understanding the different types of holiday shoppers, and getting creative with their offers and tactics.

Orange is the New Black Friday

The holiday season kicked off earlier than ever this year thanks to Amazon.com's Prime Day event in mid-October, which inspired a halo effect from retailers like Macy’s, Target, Walmart, and many more. With pre-Halloween sales now rivaling those of Black Friday and Cyber Monday, retail marketers must find nontraditional ways to keep the momentum going over an extended period of time.

This is particularly important because more retailers are still “in the red” as the end of the year approaches due to anemic spending throughout the pandemic. In fact, according to Cardlytics’ insights into half of all debit and credit card swipes in the U.S., discretionary spend was still down 14 percent year-over-year (YoY) as of the week of October 7. However, merchants shouldn’t let that dampen their holiday cheer. Cardlytics also found that summer retail spend surprisingly outpaced summer spend last year as more customers turned to e-commerce — possibly an early predictor of a lucrative online holiday season.

The More (Channels) the Merrier

Appealing to customers across both physical and digital channels has been an increasingly important strategy. This trend is only expected to accelerate amidst the global pandemic, particularly since U.S. e-commerce growth surged 30 percent this year to levels not previously expected until 2022, according to eMarketer. To reduce crowds this holiday, brands will be heavily promoting online channels and apps, with some even opting to keep physical stores closed on Thanksgiving Day.

Cardlytics’ Eighth State of Spend Report, which provides insights and data to help marketers prepare for what's sure to be an unpredictable holiday season, found that traditional retailers’ online channels, or Brick&Mortar.coms, have been the fastest growing during the pandemic based on consumer spend, up 75 percent YoY. This means that traditional retailers have a major opportunity to drive online and mobile holiday sales through the end of 2020 and beyond.

While spend in online channels is on the rise, it’s important to note that consumers are becoming increasingly comfortable shopping in stores once again. This is a positive sign for retailers, given 75 percent of holiday spend happened in physical stores last year.

Comparing how consumers spent their money over last year’s holiday with how they’re spending today also helps marketers plan for this year’s marketing strategies. For instance, mass merchandisers, which earned a whopping 50 percent of 2019 holiday spend, are up only 3.7 percent during the COVID period, indicating they must up their omnichannel game now if they hope to capture significant spend throughout the remainder of the year. Apparel retailers, on the other hand, have been struggling throughout the pandemic. They’ll need to double-down on their efforts to bring consumers back and take advantage of pent-up demand for much-needed wardrobe refreshes in order to succeed.

The 4 Types of Holiday Shoppers 

In addition to knowing where shoppers are spending their holiday dollars and what they’re spending on, comparing when consumers are purchasing gifts helps retail marketers capture the largest share of wallet.

Using machine learning, Cardlytics identified four types of holiday shoppers based on when people tend to spend: early birds who shop before Black Friday, deal hunters who spend around Black Friday, procrastinators who shop after Black Friday, and steady shoppers who spend all season long.

Brands can increase the efficiency of their holiday campaigns by targeting consumers based on when they’re ready to tackle their holiday gift lists.

Think Outside of the Gift Box 

It comes as no surprise that the 2020 holiday shopping season — like 2020 as a whole — will be unpredictable. Retailers will have to get creative to stand out from the crowd, and the competition will be fierce. In fact, since mid-March, Cardlytics found that consumers have shopped with 16 percent fewer brands across 10 percent fewer categories compared to 2019, but that they’ve spent 6 percent more per purchase. This means if retailers can get consumers in the door, it will certainly be worth the effort.

However, how to do that safely is still up for debate. Some retailers are starting sales earlier to reduce in-store crowding and disperse the order volume for their e-commerce supply chain over a longer period of time. Others — such as Staples and Kohl’s — are even going so far as to accept returns from other retailers to increase foot traffic after the peak holiday rush.

Regardless of the tactic, being strategic with marketing dollars is key to helping retailers drive incremental sales throughout the extended holiday season. Knowing how, where and when consumers are planning to shop and then getting in front of them with real-time offers when they're thinking about their money will allow marketers to be better positioned for a bottom line that’s happy and healthy this holiday season.

Angie Amberg is vice president of communications at Cardlytics, a purchase-based data intelligence platform that makes all advertising better.