Will we experience a second wave of coronavirus – or an extended first wave – that will stall economic revival through the fall? How do consumer technology retailers and vendors plan for the holiday season with so many unknowns?
Consumer technology retailers and vendors have no choice but to put on a happy face about the prospects for Q4 sales. “To be a retailer is always to be an optimist,” quips Stephen Baker, VP and industry advisor for technology & mobile for the NPD Group. “I think that most retailers are thinking optimistically about their Q4 volume.”
So is NPD, which projects a 5-7% growth for the year on the optimistic side, flat on the pessimistic, Baker ceding that “given how fast conditions on the ground are changing, this viewpoint will absolutely change again.”
Considering the unprecedented number of unknowns about the nation’s physical, economic, social and emotional health, how do retailers and vendors plot any kind of sane manufacturing, merchandising and inventory strategy for the key holiday shopping season? The obvious answer: carefully.
“The answer is unclear and the basis is complex,” observes Robert Heiblim, co-founder of Bluesalve Partners consultants. “Most will be conservative, and that alone puts a cap on holiday. Who will take risks for things like doorbusters? Big promotions? It will all be muted in any case. So, if there is no spike or second wave then recovery is likely by October, let’s say, and holiday may be okay. However, many consumers are financially impacted so the overall forecast must be conservative. On the other hand, if we see more spikes or another wave, then holiday can be greatly impacted and we will not see recovery until next year.”
Retailer planning, such as it can be, may be based on size. Larger retailers and chains are better able to plot a strategy, such as increasing warehouse space and become more fulfillment-centric to meet the growing trend of “webrooming,” aka BOPIS, that allow consumers to shop locally from home. Smaller retailers, Heiblim notes, often can make no reasonable plans and just have to react to circumstances. “If they can only support one approach, make that one so you can survive, even if you miss some market.”
Vendors face an even higher degree of difficulty for Q4 planning. Not only do manufacturers have to face the same consumer demand puzzles to determine what to build and in what quantities, but also have to deal with local supply chain and uncertain shipping and distribution logistics.
“Manufacturers are looking more and more to the large dealers to make their bets on demand to confirm build and supply,” says Dave Workman, CEO and president of the ProSource buying group. “We started off with an extremely risk adverse environment in April and it is slowly getting back to a much more positive tone, but we are still dealing with cost cuts, travel restrictions and other impediments to being business as usual. Better outlook but still cautious is how I would describe it now.”
Hot Q4 Products
While broad planning may be difficult, vendors and retailers can probably count on a few specific hot products and categories. If consumers and business continue to shelter-in-place out of habit, fear or mandate, hot products in the first half such as 4K TVs, work-from-home tech such as PCs, webcams for Zooming, PC monitors and gaming, and replacement appliances are likely to remain steady sellers.
But Q4 usually brings its own new products, such as Apple’s annual new iPhone. This year, the iPhone 12 will likely bring 5G to the fore, which will likely translate into higher sales of iPhone accessories and 5G-associated accessories. In addition, both the Sony PlayStation 5 and a new Xbox are due this fall.
“Smart home will continue to grow with continued growth in lighting and shades along with the traditional categories of security, control, multi room audio and networking,” Workman forecasts. “Once we get sports back and new releases coming from Hollywood, premium TV growth should accelerate as consumers get larger TVs and better TVs to maximize their in home experience. In general, people aren’t traveling, going to concerts, going to sporting events. If you want this entertainment, it is going to be in your house this year.”
What Happens To Black Friday?
“As you get closer to that Black Friday period, retailers are going to have to figure out new ways of serving the customer that is not jamming a store full of people,” opines John Riddle, president and CEO of the SoCal Howard’s chain. “I think we have to figure out as retailers going into Q4 what are we going to do to serve the consumer, but in a different fashion than having, you know, a really full store the day after Thanksgiving.”
Adding to brick & mortar retailer headaches, “Amazon has pushed back Prime Day to October,” reports Sucharita Kodali, retail analyst for Forrester. “They usually sell lots of electronics on that date and Amazon is sure to squeeze out many retailers as Amazon will make a land grab for as many shoppers as it can on the eve of the holidays.”
Refining necessity-is-the-mother-of-invention retail in-store sales strategies such as BOPIS, enhanced chat, video/virtual shopping, timed appointments developed over the last few months will help retailers deal with Q4 uncertainty, especially as a continued decrease of in-store traffic changes.
“Many of us are finding creative ways to do business,” agrees Robert Cole, founder-CEO of Philadelphia’s World Wide Stereo. “Retail is going to be changing for all time and will be more polarized. The attraction of the big box stores providing selection and ‘getting it now’ is becoming less relevant with e-commerce providing same day and next day delivery. Online does a better job than big box at presenting product. All this leaves a big opening for the smaller retailers who can provide a more authentic and personalized experience demonstrating product.
“But,” Cole adds ominously, “if we are totally locked down again, all bets are off.”