With the way this year has gone, we would be foolish to make a hard and fast prediction for the 2020 holiday shopping season. What we can do though, is look at the past to create a predictive analysis of the future which is why we’ve put together three possible scenarios for marketers to consider ahead of this year’s holiday shopping season.

Using 38 macroeconomic factors and personal income and expenditure patterns going back to 1992, we’ve created a series of models to forecast the most probable economic situations and what they mean for US holiday shopping this year.

What does the scenario look like?

In the worst-case scenario, a second wave of COVID hits mid-November/December. With no commercially available vaccine, a combination of state and nationwide lockdown orders and protective measures will cause the widespread closure of stores.

GDP will contract by 5-8% compared to last year and unemployment rates will be 12% or higher, with the biggest hits to manufacturing and hospitality. Average hourly wages will contract by 5-7%, with the largest drops in labor-intensive sectors.

Interest rates/discount rates will remain at 0.25% with minimal federal assistance, and so consumer spending on a per-household basis will drop around 18-24%.

What does this mean for holiday shopping?

In this scenario retail sales may decline 14-18% in Q4, compared to 2019, with the most drastic declines in non-essential goods. Consumer electronics and clothing retailers will likely be the most impacted.

A second elongated period of lockdowns and closures could be devastating for brick-and-mortar stores. Around 30% of consumers are wary of offline shopping already, and a second wave could further push people away. Luxury retailers, with a strong dependence on offline sales and non-essential, goods would be hardest hit by this.

Predicted variations in retail trade over time / worst case scenario

What does this mean? In this scenario, we'd expect a 14-18 % decline in the overall retail sales in the US compared to 2019.

Shopping interest around Christmas is likely to be more severely impacted compared to Thanksgiving week (including Black Friday and Cyber Monday) as consumers are less likely to make unplanned/impulse purchases. Interest around consumer electronics and big-ticket electronics during Cyber Monday may decline 25% year-over-year, even though entertainment and gaming interest/spending may increase.

How do consumers plan to shop this holiday season?

What does this mean? 49% holiday shoppers are more interested in shopping online this year compared to last year.

How marketers can plan for this situation?

In this situation, marketers need to focus on showing value and identifying consumers who are in the research process. Staying top-of-mind will also be key as competitors look for ways to slow or reduce spending, reducing clutter in key channels and softening demand on valuable inventory.

What does the scenario look like?

Things may stay roughly as they are, with partial lockdowns and some closures/social distancing in place. The Q4 GDP will contract by 2-3% compared to last year, while unemployment rates will hover between 8-10% with a similar percentage decline in the personal consumption expenditure index. Wages across different categories stay roughly the same and federal banks continue to provide relief in the form of low interest rates.

In this scenario, we’d expect retail sales to drop by 11-14% compared to 2019.

Predicted variations in retail trade over time / status quo

What does this mean? If the current situation was to persist going into November, we’d expect retail sales to drop by 11-14% compared to 2019.

What does this mean for holiday shopping?

Brands hoping to break through during the holiday shopping season will face considerable headwinds, though consumers will likely still have higher consideration for new brands.

Even where stores have opened and returned to ‘normal’, there will still likely be around a 38% drop in foot traffic, and retailers can generally expect their clientele to be younger overall. Product availability may become a significant issue as supply chains continue to be affected while demand grows, so making sure ads take product availability into account will be crucial.

YoY changes predicted for 2020, by retail categories / broad

What does this mean? While the retail spending on essential commodities is likely to remain flat compared to last year, the non-essential retail spend will witness a contraction of 18%.

Many people will still be stuck at home with limited mobility, so spending across essential categories may remain similar to last year. But spending on non-essential categories will likely decline between 16-18% YOY, with luxury retail and consumer electronics seeing the largest hits. Clothing and accessories spending may decline around 7-8% (though brands with a strong online presence may see growth continue to and become a buoying factor). The home entertainment category, particularly video games, can expect a strong season off the back of record sales of consoles in the first half of 2020.

How can marketers plan for this situation?

The economic picture still won’t be great, so online research will continue to be an important part of the buying process. Brands won’t just be competing on price but also availability - you need to make sure consumers aren’t seeing ads for products they can’t buy. Making curbside pickups available may also be worth consideration as an online/offline hybrid.

It’s possible that some areas of the US may resemble the status quo scenario while others resemble the worst-case, so segmenting your audience and developing different messaging based on location and how local stores are responding will produce the best results.

What does the scenario look like?

In this scenario, a vaccine is made commercially available by September/October and can be administered quickly. Some form of normalcy is restored going into Q4 this year and consumers are generally able to leave their homes. The economy starts to pick up and grows 3-4% faster than the current rate, with Q4 GDP contracting by only 2% or compared to last year.

The unemployment rate drops considerably to around 7%, with a rise in employment across the manufacturing and production sectors, and continued growth in the hospitality and retail industries. Widespread federal assistance, a reduction in interest rates, and additional stimulus funds help several industries get up to speed, and consumer spending increases at the same time.

(We’ll be honest, this is not a scenario we’d hang our hat on.)

Predicted variations in retail trade over time / situation improves

What does this mean? If the situation was to improve going into Q4, we’d expect retail sales to drop by 4%-7% compared to the sales in 2019.

What does this mean for holiday shopping?

In this best-case scenario, overall retail spending during Q4 only declines by 4-7% from 2019. Spending across essential goods is on-par with or slightly up from last year, while sales of non-essential goods declines by 12-14%.

YoY changes predicted for 2020, by retail categories / situation improves

What does this mean? In this scenario, the retail spending on essential commodities would grow marginally by 2% while the spending on non-essential goods would in all probability witness a decline of about 14%.

With an affordable vaccine widely available, significant foot traffic at offline retail outlets is much more likely, though it will likely still be down from 2019. Ecommerce should make up for these declines, thanks to changing trends and increased discretionary spending.

But despite this general optimism, non-essential and luxury retail spending will still likely see a lower turnout. Large investments such as big ticket electronics, cars, and travel are still likely to be significantly down year-over-year, though fashion and beauty categories may see a considerable upswing.

How can marketers plan for this situation ?

The most prudent way to plan for this scenario is to plan for the status quo or worst-case scenarios and have a plan to flex into increased spending or offline sales pushes if things turn out better than expected.

Using these predictions

  • Hope for the best, plan for the worst. Generally, marketers will be better-served planning for social distancing measures and economic challenges to continue through the holiday season. That means having a plan to target consumers geographically and based on their region/state's response to the pandemic and the number of reported cases in that area. Have a plan to tailor both your brand's targeting and messaging to the way people and retail locations are responding to the situation locally.
  • Have a plan to reach consumers doing their research early and often. Additional economic pressures are likely to extend the holiday shopping season this year as consumers start their research earlier and put in the legwork to find the best possible deals. Have a plan to identify which consumers are likely to be doing this research based on geography and socioeconomic status and reach them while they are most susceptible to messaging around price, deals, and key features.
  • Understand how younger and older consumers' behavior may vary and plan accordingly. Behavioral data and surveys conducted throughout the pandemic continually point to key differences between older and younger consumers when it comes to visiting physical store locations and holiday shopping. The challenges and messaging required to drive consumers to stores will vary based on consumer age, digital purchase habits, and geography, and come November we may see much younger faces shopping in physical stores as older consumers do more shopping online.

About us

"We’re MiQ, a programmatic media partner for marketers and agencies. We connect data from multiple sources to do interesting, exciting, business-problem-solving things for our clients. We’re experts in data science, analytics and programmatic trading, and we’re always ready to react and solve challenges quickly, to make sure you’re always spending your media investments on the right things in the right places.”

“Headquartered in London, MiQ has offices across North America, Europe and Asia Pacific. We work with the world’s leading brands and media agencies such as Marriott, Dell, Mercedes, Microsoft, GroupM, Dentsu Aegis and IPG. We were named 4th in The Sunday Times International Track 200 for 2019, the Fastest Growing Tech Company of the Year at the 2017 Stevie Awards and awarded Most Effective Use of Data at The Drum's Digital Trading Awards USA 2017. MiQ operates globally from 18 offices located in North America, Europe and APAC. You can find out more here: wearemiq.com

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