Inflation is on everyone’s mind
Retailers who show customers they care with customer-centric assortments, pricing, and promotions will emerge winners.Shoppers will begin shopping early to beat higher retail inflation and will seek value. For retailers, it will be a tough market with aggressive deals even as they struggle to navigate the pressure from cost of goods inflation. While sales are expected to increase, the units per basket will be lower. Retailers who ease the pain of consumers’ financial concerns and build trust in their brands by offering the best value for money will emerge winners. Winning this holiday season will be about capturing the market early, being nimble on pricing, having simplified assortments, and offering best value on Christmas items.
Simplify assortments for higher availability
A balanced and curated assortment, right inventory, and a principled purchasing behavior will ensure profitability.Typically, the holiday season assortment strategy is developed a year in advance for fashion and six months for food and grocery, based on insights on influencing factors like food and fashion trends, seasonality of stock keeping units (SKUs), demand transferability, product affinity, and competitive assortment.
With consumers across all income levels being more price conscious, brand leaders will want to be more affordable so that shoppers see them as an up-trading option in a season that’s special for their families. They will have to be more innovative in how they offer their products, whether it is private label, product innovation, pack size, or freebies. With supply chain challenges likely to continue, retailers should embrace range simplification to ensure higher availability across stores and online, for both seasonal items and everyday essentials such as toilet papers, with optimized types and pack sizes. Offering a balanced and curated assortment, getting inventory right, and taking a principled purchasing behavior will be key for profitability.
Customers will remember brands for how they showed up for them in challenging times and enabled a memorable holiday with friends and family.
Deliver value with customer-centric pricing
The onus is on retailers to prove they can help customers find value and support them in stretching their spending power through strong promotions and good base prices.
As always, over the Christmas period, strong ‘beacon’ promotions that show great value in key categories (seasonal, confectionary, gifts, alcohol) will be key to drive traffic and capture spend. Retailers who can manage the inflationary pressures of their cost base while selectively investing in base prices and delivering great promotions (with support from suppliers) will stand a strong chance of delivering what customers seek. Retailers will need to understand their competitors, and the wider market as customers will hunt for value. The ability to react to competitor prices while ensuring the value proposition is not compromised will be critical. Seasonal market-leading key value items (KVIs), removing poor promotions, a simple trade plan, and well-communicated value messages will need to be carefully crafted and executed to ensure a successful end to the year.
Remodel space quickly to trade harder
A holistic approach towards store space planning is crucial for experimenting with store remodels quickly and optimizing space.Historical patterns cannot be leveraged as grocery retailers can no longer promote HFSS products in front of stores, end of aisles, and checkouts, and can only promote them in secondary space; using premium store space will legislatively be impossible. Distribution is likely to be impacted because floor space can no longer be used as an unofficial warehouse. Those that can experiment with store remodels and optimize space quickly will win.
Gift your customers a holiday season to remember
Retailers will fire up all engines to show customers that they offer the best value for money compared to the competition.
Strategy, affordability, and risk will define how they will deliver value. There are many levers that retailers can pull depending on their market strategy, affordability, and what they are willing to risk. Do they go hard on promotions, base prices, or offer personalization? They can also play on exclusivity, innovation, and service.
The totality of the investments across personalization, pricing, promotions, and assortments add up to some big numbers and retailers need to get it right so they achieve their overall margin and sales objectives as they come out of the holiday season. As they say, ‘Fortune favors the prepared’, retailers who invest in AI-powered merchandising can mitigate risks by simulating scenarios and experimenting with different merchandising strategies to assess which levers to pull. Overall, this holiday season will be marked by less loyalty from value and deal-seeking shoppers. And, as personal as it gets, customers will remember brands for how they showed up for them in such challenging times and enabled a memorable holiday with friends and family.