Consumers to Shop In-Store This Holiday, But Will Retailers Be Ready?

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consumer spending survey holiday season

Footfall may be down in general at retail but this holiday store traffic is expected to hold its own. The question is, will retailers have the inventory to satisfy them?

In a survey of 1,000 U.S. consumers, business advisory firm AlixPartners found that 71 percent of consumers plan to do half or more of their holiday shopping in stores. That’s equal to 2016. When asked how many plan to visit stores during the critical shopping season, 88 percent said they would.

This report comes after projections from both AlixPartners and Deloitte that estimate sales will be up anywhere from 3.5% to 4.4% this year. And in this survey, 84 percent of those polled said they will spend the same or more than they did last year.

KPMG, too, expects a brisk holiday. “Consumption is up and the economy is doing well and people need something good to happen this fall, and people harken back to the good old days and that often translates into additional gift giving,” said Mark Belford, managing director of corporate finance for KPMG. “They’ll be buying into the romantic idea of what the holidays represent.”

With shoppers in a buying mood and more than 5,300 fewer doors, some retailers could experience a bump in traffic. AlixPartners found that 24 percent of respondents have had a store they visited frequently close in the last year. Only 6 percent of those affect said the closure would make them skip the purchase altogether. And 36 percent of consumers said they’re ready to shop competitors to find their items, putting stores on notice that they’ll have to work harder to retain sales if they’ve closed doors.

“The retailers that will likely win this holiday will provide customers with truly integrated omnichannel strategies and will ramp up efforts to drive customers into stores by offering exclusive merchandise, engaging experiences, and knowledgeable and helpful sales associates,” said Roshan Varma, vice president in AlixPartners’ retail practice.

The effort to drive traffic to stores will be wasted, however if retailers can’t capitalize on the opportunity.

With the relatively short window to make holiday sales, the period puts stores’ overall inventory and logistics health to the test. For those who fail, the results are often too much unappealing product—that demands deep discounts—and not enough of the season’s hot items.

[Read more about how retailers are preparing for Q4: Retailers are Working to Ensure a Happy Holiday—But Will it be Enough?]

Nikki Baird, managing partner at RSR Research, said last year stores did a good job in this arena, with a few memorable exceptions.

“If there was any mistake from 2016, it was retailer’s expectations for how to handle things like Hatchimals and the NES Classic that were so scarce,” she said. “There’s a big question for retailers around [having] a game plan for the items that suddenly blow up and become hugely popular and there’s no way you’ll be able to meet the demand. It’s a missed opportunity to just let those people just walk out the door.”

Baird said in her shopping trips, she noted how many retailers failed to convert the traffic hot items brought in. In particular, on one trip to Walmart, the Hatchimals shelf was bare with no way for shoppers to get rain checks or signage suggesting alternatives, she said.

She’s anticipating that the stores’ that have focused on developing a true omnichannel approach to their supply chains will manage product flow better this year.

“Retailers have been investing a lot more into inventory visibility and more around locating items in store for e-commerce purchases,” Baird said. “It gives them more flexibility and takes the pressure off because they don’t have to do as well at making the right guesses about how to allocate stock. They just need to be able to find it and grab it.”

Retail executives have been touting their efforts to align supply closer to demand, delivering what consumers want when they want it. Macy’s, in particular, promises shoppers will see a “marked difference” this year versus last, according to CEO Jeff Gennette.

Despite this, the KPMG retail team is less confident that stores will have majorly transformed their assortments by year’s end. They said the Q3 financial reports will be an indicator of the type of inventory position stores are likely to find themselves in for the holidays. Thus far though, the team hasn’t seen evidence that efforts have translated into vast inventory improvements.

Matthew Hamory, consumer and retail strategy co-lead and principal at KPMG, said he doesn’t expect to see the evidence of inventory control mechanisms during the fourth quarter for one reason: “You just don’t experiment with inventory during the holiday,” he said.

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