A weekly podcast with the latest e-commerce news and events. Episode 241 is a preview of the 2020 holiday season, with eMarketer principal analyst for retail and e-commerce, Andrew Lipsman. Includes an exclusive preview of eMarketer’s holiday forecast.
Andrew Lipsman (@alipsman) is the Principal Analyst for retail and e-commerce for eMarketer. In this episode, Andrew gives listeners an advanced preview of eMarketer’s holiday forecast, and we do a deep dive into all the factors that will play into this holiday season. This holiday season may have more uncertainty for brands and retailers than any other holiday season in our lifetime, so it’s well worth the listen.
This is an exclusive preview of one of the most anticipated holiday forecasts in the industry.
- Vectors that influence holiday forecasts
- The forecast
- Can retailers pull holiday in early?
- How will the cyber-5 play out
- Category winners and losers
- Retail winners and losers
- How to follow the season
eMarketer Holiday 2020 Forecast
- Total retail +0.9% to $1.013 trillion
- Ecommerce +35.8% growth to $190B (+ $50B in ecommerce sales vs. last year)
- Brick-and-mortar -4.7% to $823B
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Episode 241 of the Jason & Scot show was recorded live on Tuesday, October 21, 2020.
[0:24] Welcome to the Jason and Scott show this is episode 241 being recorded on Tuesday October 20th 2020 that’s a lot of 20s,
I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.
[0:40] Hey Jason and welcome back Jason Scott show listeners we are 20 days into the fourth quarter and 11 a day 11 days away from Halloween,
retailers would say we’re squarely in Holiday mode consumers would say it’s not Thanksgiving yet so we’re about 30 days out.
Regardless of which side of the fence you’re on their most of you are probably on the retail side,
we want to use this episode to do a really deep dive into what we can expect this holiday 2020 we’ve already previewed some of this with our thoughts around ship And Gettin and whatnot and some of the numbers that are out there,
we’re going to go deep and go deep we thought we would bring out the king of e-commerce and Retail data Andrew lipsman,
Andrew has been at three of the top retail data companies in PD comscore and most recently he is at emarketer’s as a principal analyst.
Also we are excited to have him give us a sneak.
Exclusive to Jason Scott show listeners with the first view of this public holiday forecast from emarketer’s.
Andrew welcome to show and thanks for giving our listeners a sneak peek.
[1:51] Hey thanks for having me.
[1:53] We are thrilled to have you on the show Andrew and it’s super exciting that you’re helping keeping our audience at the very bleeding edge of insight and predictions,
but before we jump into all that we always like to start by getting to know a little bit about our guests
so you know Scott kind of mention the highlights but can you give us a little bit of detail about how you got into the the analyst world and and what you’re doing now at emarketer’s.
[2:21] Yeah so I’ve been in market research operating much my whole career
as Scott mentioned NPD working on cpg clients for a few years and then I jump to comscore in November of 2005 and actually I walked into that company
the same week that Cyber Monday became a thing so that was kind of my initiation into the world of e-commerce I really knew nothing about it
coming in and learned very quickly drinking from the fire hose over the next 12 years I led the marketing insights group at comscore had a chance to cover all things digital.
With e-commerce you know kind of being a key tentpole for me every year but all the different Digital Trends from digital video to advertising Social Mobile Etc and then,
coming up on three years now I’ve been at emarketer’s.
[3:16] That’s awesome and I heard you just started doing this new thing called for forecasting the holiday right is this going to be your first year where you forecast holiday.
[3:27] I know I’ve been at it for a while so I’ve actually been working on holiday forecasts back since 2006 my sight
in Uruguay comscore now I would say I am not the quantitative folks who are doing the heavy duty Excel work behind the forecast but I am providing qualitative input
and so in 15 years I’d say I’ve gotten pretty comfortable with
understanding the key variables that go into holiday e-commerce and many years I’d say it’s almost gotten kind of easy,
but this year I think is going to be very very different and one of the
actually will probably be the hardest to predict there’s only one other season that really Compares anywhere close to this one.
[4:14] Awesome well before we jump into the exclusive for Jason Scott show listener sneak peek of your forecast let’s start at 30,000 foot view plus I love to build the suspense
Jason’s like about the fall off his chair right now I can tell so let’s make him wait so I would love to hear as a data guy,
you know you’ve been at this a while and I’m sure you’ve refined how you come at it
I would love to kind of start there and say well what are the inputs you look at and maybe more importantly what are some of the inputs you don’t look at and maybe if you know how are you applying that to Holiday 2020.
[4:51] Yeah so in a normal year
the recipe really starts and this is for e-commerce specifically really looking closely at August data that back-to-school season ends up being very predictive for the growth rate for the holiday season so I
start with your thinking that August is kind of that the fundamentals heading into the season that’s your Baseline and then there’s just a couple of.
[5:15] Key variables that we looked at after that any shifts in key macroeconomic factors unemployment obviously if that’s changing and people
or losing jobs then,
you have to calibrate for that because that’s less disposable income consumer confidence how they feel about extending their credit into the season and then gas prices is one of those things that can just put more money in people’s pockets or take money out
pretty simple and then the key piece and one that I don’t think folks often look to very much but actually can end up making
you know percentage pointer to difference every year is just how the holiday calendar Falls so when you have those years with the really compressed holiday season
with only 27 or even 26 days between Thanksgiving and Christmas that does tend to squeeze spending people may prioritize gifts and still get all those purchases done
but they may spend a little bit less on themselves so it can dampen the growth rate sometimes you have those extended Seasons that are 32 days
and that can maybe boost it by a pointer to so those are in a normal year kind of the key factors.
[6:25] So you’ve qualified like four times in there a normal year so what so then you have all that and then now we’ve got this raging pandemic what have you done to kind of tweak the model based on kind of unique circumstances of the 2020 offers.
[6:40] Yeah well first off I will say that almost all of those factors have been completely overwhelmed by pandemic conditions but I’ll start by taking you back to 2008 which was the hardest
forecast that we ever had to predict if you could remember how the financial crisis happened
August wouldn’t be very predictive because things still looked okay in August of that year and then September and October
things dropped very quickly and we were starting to get readings e-commerce at the time was growing about
17 or 18 percent I think and all the sudden we were seeing that number drop into negative territory almost overnight.
That year we went out on a limb with our prediction and saying that we were expecting flat growth for the season 0% and other analysts were still predicting.
[7:32] Double digit growth you know low double digits there may be taking their initial estimates down from 17 or 18 percent to 11 or 12 but they still thought e-commerce was going to grow and,
we said 0% it ended up being negative 3 for the year I liken it to trying to catch a falling knife that year,
what was interesting about that year is that there was really only one vector,
that was changing the forecast in that was consumer demand you know e-commerce is really kind of discretionary consumer demand and it felt very quickly but that was the one thing that we needed to,
figure out this year I think is much more complex because one you have,
the consumer demand Vector but even within that it’s not just as simple as everything getting affected the same way you have unbelievable unbelievable variance,
across categories because of how the pandemic is changing consumer needs whether it’s no need for apparel or you know a lot of Need for Consumer Electronics around back to school or work from home.
The other key Vector that is of course Channel shifting and people you know continue to.
Toggle back and forth between when they’re comfortable only shopping online versus shopping in stores so trying to take those two very orthogonal vectors and make sense of it has been especially difficult.
[9:00] Orthogonal vectors that’s that’s good stuff you’re speaking my language now the it’s always good for your vectors have orthogonaility,
so I have a thousand questions I’ll try not to spend too much time on the background but I think this is helpful so it feels like somewhere in there you’re going to have to assume,
what the pandemic does right because if we’re going to have a,
terrible w-shaped situation like Jason predicts all gloom and groom and Grinchy then that’s going to have a different impact than a sharp V recovery like I predict did is there an underlying pandemic prediction inside of here.
[9:37] Yeah and I think the key thing is we expect pandemic conditions to last through the year you know our forecast back in the spring was very different in terms of what we expected by the second half and the holiday season
we’ve obviously had to change that I will say though
I kind of look at it through the lens of the bifurcated economy where you do still have a lot of struggling folks in the lower middle income segments and some of those stimulus funds now have run out so they may be running on fumes
but you know in the more affluent,
incomes I think you are sitting in a pretty good position people are confident the stock market is is up,
and and then also if you know people are not vacationing so you have all these buckets of discretionary spending or going to restaurants that’s now getting funneled into retail so I think that’s going to prop it up and overall Things Are,
healthier than I would have expected.
[10:36] Yeah and for listeners that are playing Jason and Scott Bingo you can check bifurcation off and then we also have orthogonal vectors so so that’s good your,
your ping and right through there okay last question on this so the way you’ve described as kind of like what I would call more of a bottoms-up you’re kind of saying,
all right I looked at back-to-school and all these factors that’s more of a top down,
do you do a bottoms-up where you then kind of say let me also look at a bunch of categories and it seems like you would need to for the pandemic you mentioned you know with in there you’re going to score down fashion let’s say and up,
Holman and some of the trends we’ve seen is there a bottoms-up and a top-down approach and you like triangulate or how does how does all that come together and in the final,
[11:20] Yep absolutely and then it’s not just categories that we’re doing detailed analysis and all the categories as well and top retailers so you put all those pieces together you start to get a pretty well-rounded picture.
[11:33] Who says somewhere in there you’ve got a Amazon Walmart Target kind of forecast as well.
[11:38] Yeah and you know we do a top 10 e-commerce forecast that most folks are familiar with we do a few more retailers beyond that once you account for
those retailers you’re already talking about 65 or 70 percent of the e-commerce Market.
[11:55] Yeah and then this is so that I said the last one was last one at this is really last one the so we had the,
you know the Census Data guys on and it was really interesting because it’s really hard to think about like boat this in curbside pickup right like is that e-commerce or not where do you fall on that is that
if there was a buy online pick up in store kind of situation is that going to be in your eCommerce site or is that you’re going to be on your retail side.
[12:22] That is e-commerce it counts towards those numbers I would say though is you think out about our numbers into the future
understanding that behavior you have to understand it as sort of a component of retail
because really that is symptomatic I think of a lot of temporary Channel shifting they’re certainly certainly an emerging Behavior with clicking collect a lot of that is people who want to buy it the big box retailers
but they prefer not to go into the store right now in the future they’ll go back.
[12:54] I’m surprised Andrew there’s a couple of vectors that you always hear about that you didn’t mention in a normal year tons of people publish all these stated preference surveys and they’re like to plan,
give more gifts or less gifts spend more this year West this year it sounds like you don’t use any of that kind of.
Qualitative stated preference data in your in your forecast do I have that right.
[13:19] I look really strongly at behavioral data I think those are the strongest signals you know if I see huge variance in survey data and stated preferences
that might get taken into account but in general what people say they’re going to do and what they actually do can often be very different.
[13:36] That was a total trick question because I’m super cynical about stated preference data especially around holiday I feel like there’s never been a correlation between what people say they’re going to spend on gifts and what they actually spend.
[13:48] The Perils of survey data.
[13:50] Yeah but another one that comes up that I’m on I’ll confess I’m also cynical on is in a normal year a big Vector everyone always talks about is the weather.
[13:59] So I love knocking down a lot of these things so I think the whole weather thing,
is while it can have an impact on an individual day or an individual geography that is totally overstated it really I think comes from retail CEOs liking to have the act of God excuse,
stand there’s also a very strong media bias whenever there’s a snowstorm in New York right this becomes an excuse for what’s going to happen to e-commerce,
it just it never falls out that way we’ve actually tried to test this over the years and the most we could ever find in some of the biggest storms were like the smallest smallest differences.
[14:38] Yeah I I tend to feel like it’s also self normalizing like if you have a really harsh winter.
You sell a lot more winter apparel and you sell a lot more heavy coats and things like that.
If it’s a mild winter somewhere like people are out and about more and go to stores more often so it’s almost like.
A little self normalizing to the extent that it does have any impact and then.
This is obviously an extraordinary year new mentioned a lot of the vectors that are difficult to predict this year I’m assuming a lot of them or also contradictory right like I think of for example I’ve seen some data,
they like savings rates are uncharacteristically high and yet consumer confidence is understandably pretty low right so you got to kind of.
Figure out how all those things play against each other.
[15:27] Exactly there’s a much more predictable amount of disposable income that people will spend in a normal year if people have a stable job,
and they’re all of a sudden not spending huge portions of their discretionary budget,
how much of that ends up then going back into retail spending.
I don’t know there’s a lot more variance around that number you know from consumer to Consumer so that’s where I think a lot of the variance comes in this season.
[15:56] Awesome well given all of that uncertainty let’s jump into it what is going to happen this holiday.
[16:03] So I’ll begin with the total retail number we are surprisingly expecting growth of 0.9% so very marginal growth
to just over one trillion dollars for the season it would be the second straight season Breaking that trillion dollar threshold for November and December.
[16:25] If you had asked me back in April or even met if we would see positive growth in the holiday season I would have said no way,
so to me that’s kind of a silver lining even though it’s obviously a bit lower than we’ve seen the last few years I think the big headline is that e-commerce is projected to grow 35.8%.
290 billion that’s an incremental fifty billion dollars in spending on e-commerce versus last year’s holiday season.
And then brick and mortar is going to decline 4.7 percent to eight hundred and twenty-three billion so basically this brigant brick-and-mortar hole is going to be completely filled and then some by e-commerce.
[17:10] I’m going to call that good news and a couple of sort of qualifying questions they’re like so e-commerce growth of 35 percent versus last holiday or 35.8 what is a typical year of e-commerce growth like what was last year.
you can go back a lot of years and it’s kind of 15% plus or minus a few percentage points is e-commerce has started to mature we’ve seen that number may be in the 13 percent range the last few years so that’s pretty typical so.
[17:40] Yeah so so we’re talking more than double the typical e-commerce growth rate.
[17:45] Easily more than double yeah.
[17:46] Yeah and then brick and mortar or maybe even so total retail I know there’s some more variance here but like a typical year is like three and a half or four percent growth.
[17:57] That’s right yeah when that when the economy is fairly healthy yep.
[18:00] Yeah and so we’re looking at just under 1% versus 4% so definitely well not a negative year a down year and then one last question.
Is I know you are super aware everyone has a different definition of retail so what is in that number is does that include,
automobile doesn’t include grocery Does it include restaurant what.
[18:24] It’s not restaurants But it includes gas and auto so that’s a key part of it that inflates the number,
overall now it’s also why our e-commerce penetration definition,
is lower on average so we’re expecting this holiday season to reach 18.8% e-commerce penetration
by that definition that includes gas and auto so it’s actually a really high number that that number is typically and you know low double digits.
That said if you take out gas not oh you’re talking about a number that’s about six percentage points higher so essentially 25% of e-commerce will or of retail this holiday season will happen online.
[19:09] Wow and it’s funny I tease one of your former employees comscore because they use a really narrow definition I mean they they stayed all of them but they use a really narrow definition of retail like they pull,
grocery out they they pull like Health Services out and so they always report a very high percentage penetration.
[19:29] And I was part of that decision back in the day and I will say that at the time in which that decision was made,
grocery online was so negligible
that I think it could be justified at this point and we’ve had these discussions at emarketer’s,
online and even higher if you expand the definition Beyond food and beverage so it just doesn’t make sense at this point to exclude that from the denominator.
[20:01] No and I think that is the funny thing right is there there was a time when if you were talking about e-commerce you’d say well those categories aren’t eligible for e-commerce no one’s buying bananas or cars online.
Like arguably now all of it is right like certainly grocery got a huge kiss from covid but so did automobile surprise you know I should maybe not say surprisingly.
[20:27] Exactly tons of dealers are now selling cars are like so the manufacturer in most cases can’t sell direct but but a ton of dealers even small dealers are now doing a significant volume of automobile e-commerce so it’s interesting,
but I digress so 18.8% penetration and.
Free covid what like what would like by that definition of retail what would you what was typical penetration.
[20:56] Well it’s always a bit higher in the holiday season so I think are in our prior forecast pre covid we are expecting it to be somewhere in the Fourteen percent range for the holiday season so a pretty big boost.
[21:09] And then a super common talking point is covid propelled SX years in the future in five minutes so pre covid you remember like what year you would have predicted in nineteen percent penetration.
[21:23] So some of our forecasting analysts have calculated this and they said it’s basically pushed us two to three years into the future.
[21:31] Yeah and I would argue like overall that makes that that seems totally viable and it’s wide variance based on categories right like there were categories that were already heavily digitally penetrated and they may be.
[21:44] We’re a little more linear where there are categories that weren’t very digitally penetrated and they’re probably more.
[21:49] Grocery you could be four or five years into the future absolutely now one of the interesting points I’ve started to get some pushback on,
is that you know as we get out into 20 21.
There’s I think there’s this assumption out there that once we reach this new penetration level that that is The New Normal,
I don’t think that’s entirely the case I think we’re going to have to kind of give back some of those gains as some behaviors normalize its you know it’s driven both by the,
numerator of e-commerce and the denominator which is largely driven by Brick and Mortar so as brick and mortar recovers and expands that numbers going to sort of calm down all else equal,
e-commerce will still continue to grow faster but I think people should sort of reset their expectations that we’re not going to continue to see this kind of exponential trajectory and that thing’s kind of have to flatten out for a year or two so the growth can catch up with itself.
[22:45] Yeah so let’s dive into that just a little bit more so the in my mind there are categories where the.
The the transition to digital is likely to be more permanent like if,
if Walmart had 25 million mobile app users on their grocery app before covid and now they have 50 million one can presume they’ll continue to use that mobile app for some of the time right so so that.
Digital transition could be more sticky if they’re simply not going to the store for safety reasons and they’re in they’re eager to go back to Restoration Hardware as soon as they can then that transition to online furniture probably.
Isn’t as sticky the the thing that I have heard a lot of interesting speculation around is.
[23:39] There’s a ton of variance in data but a lot of people are saying that traffic in general foot traffic in stores is down about 25% and so then a couple magic questions come up.
Is that traffic ever going to come back and I’ve actually heard people speculate that it’s not and at the moment.
Common behavior is consolidation of trip so I traffic’s way down at Walmart like.
Revenue is actually up because people are making fewer trips but they’re spending a lot more in the trips they do make like are you thinking at all about any of those Trends and you have a position about like which of those might be.
Permanent Trends versus tertiary.
[24:21] Yeah so I think,
for most established behaviors they will kind of regress towards the trajectory that they were on before in the direction.
Grocery is a category that I think is permanently changed and the reason is you have a lot of
new first-time online grocer users who were compelled to do this and otherwise wouldn’t have done it people like my parents you also have people maybe like me who was a,
a couple times a year online grocery Shopper usually just when I wanted the convenience because I was coming back from vacation to an empty fridge beyond that I didn’t do it if I go from
two times a year to maybe six or eight times a year in the future which is totally feasible you know I have some sort of habit formation around it that’s a big difference,
in Behavior so I think that has permanently shifted if I think about a category like apparel.
[25:18] People were already mixing between online and.
Brick and mortar and they had different times or different use cases and when they wanted to go into the store and touch and feel and all those things that you go to Brick and Mortar for,
and other times where e-commerce just provided convenience.
So I don’t see I see that category kind of normalizing over time I think most categories will probably normalize but we will see some patterns that get baked in a bit more to your question about consolidating trips,
I do think to the extent that we are doing a lot more pre-shopping and trip planning some of that will probably,
get pulled into the future so while I don’t think you’re going to continue to see Walmart’s you know average basket size Jump by 27% as I think it did last quarter I wouldn’t be surprised to see it
you know increase a bit more than it otherwise would have.
[26:14] Yeah to me that’s going to be one of them I have no idea what’s really going to happen but it’s going to be one of the most interesting things right I give there were a bunch of retailers that one in this trip consolidation,
and they tended to be ones with bigger assortments,
it’s going to be really interesting to see if those retailers can hang on to those customers or if the specialty retailers get those visits back the.
Sort of pivoting a little bit.
Do you have a perspective about how Prime day being in October impacts holiday like is are they is that successfully gonna,
pull holiday earlier I know you had a prime day forecast and I do want to talk to you a little bit about that but in general do you think.
We’re going to see more holiday sales in October and therefore the the turkey five could be a little lighter than usual or how do you see that playing out.
[27:11] Well I’m going to say yes and no and I’ll tell you what I mean here so first off another one of my favorite narratives when you cover retail every year you hear the same narratives that you know.
Retailers try and pull holiday shopping earlier and earlier and I think a lot of the Genesis of that is that you see the.
The holiday promotions in stores beginning in October.
I don’t know how responsive consumers are to that Jason you would know better than I do at Brick and Mortar but certainly an e-commerce that’s never been the case consumers really tend to start their shopping around the Cyber 5. At least in earnest.
But the reason that happens is because there’s coordination on behalf of both retailers and their promotions and consumers,
wanting to kick off their shopping at that point,
to me why shopping actually will get pulled forward this year is because Prime day has created a new tent pole close enough to the season that you have this coordination among consumers and retailers,
so and more importantly I think it’s gotten consumers thinking about these purchases earlier in the season so now they’re really primed.
[28:18] For the next six weeks I think before the Cyber 5.
That they’re going to be much more open and receptive to messages even if there’s probably going to be something of a lull here before activity starts to really pick up again we also by the way have you know
an important presidential election will probably provide a bit of a early November distraction.
[28:42] Yeah yeah
it’s interesting because in a normal year I mean retailers all he’s want to pull in sales early right like that’s not a new phenomenon mostly because they want to
get to that consumers wallet before that consumer has a chance to spend that wallet anywhere else,
this year I do we generally think I could tell you I have a ton of clients,
that are really concerned about a bunch of factors later and holiday ship again in being one and inventory levels being another,
and so that they very legitimately,
are urging customers to shop early but the irony is they have a complete credibility gap right so they’re they’re all putting messages in Market about how you should shop early and we’re not going to have better deals later in the season,
but of course I don’t think consumers are buying it at all I think if they see a deal now they’re going to expect to see a bigger deal on Black Friday.
[29:34] Yeah consumers may not believe it but I think they’ll be driven by their own impulse which is to Consumers I think are actually concerned about
deliveries getting to them on time they’re concerned about product scarcity in a way that they haven’t been in other season so,
and by the way their home and doing a lot of online shopping anyway so I do think we will see a real pull forward effect this year.
[29:59] So I had mentioned Prime day forecast your forecast was around was just under 10 billion is that right was it.
[30:06] Yeah we projected forty-three percent growth 29.91 billion.
[30:11] God you and how and do you have a position on how how it played out.
[30:16] So the data so I first I’ve seen some reports that I think we’re not
great that little conspiratorial because Amazon,
didn’t tell other numbers and were just pushing the third party sales numbers I take that as you know just wanting to kind of message things in favor of smbs given everything else that’s going on.
[30:40] That’s the antitrust message.
[30:41] Yes so.
And there were some traffic data that was reported that said you know flat growth I don’t think that was a great Third Party Source for this specific data Edison Trends was the one that I looked at most closely because it’s based on actual
sales data and that’s a thirty-six percent growth which kind of felt right to me but then you know the numbers that we do know,
our Amazon said sixty percent growth and third-party sales to three-and-a-half billion so that’s real numbers.
But then we also saw Marketplace pulse report that said that two-thirds of sales that they were seeing were we’re first party,
so if you just do the quick math on that that actually gets you to the number of about 10 billion or even a little bit more than 10 billion so I think,
directionally our forecast is probably fairly well in the ballpark.
[31:36] That’s that’s just the Amazon any thoughts on knock-on effects so the Salesforce folks were out there reporting to their data that they were seeing pretty big spike sitting on Amazon retailers.
[31:49] Yeah I mean I think we seen everyone benefit Amazon you know definitely take share on these days that everyone can get into the ACT,
I think it’s increasingly important for them not to concede mindshare
damn is on especially on the cusp of the holiday season so I think they did well to run those promotions generate some a bump in sales and you know get consumers not locked in exclusively to Amazon going into the season.
[32:19] Brickell so seems like so we haven’t jumped into it one of my favorite topics is ship again do you think,
do you factor that in your forecast is there some expectation that
as we get to the Cyber 5 we’ll talk about what you think some of those days look like but you know I’m thinking Cyber Monday could just really Jim the whole system up for a couple weeks there could be so many packages
are you thinking that plays a factor or what is your thinking on ship again.
[32:48] I think it’s going to factor into thinking from consumers it I think it can hit
sales growth on the margins especially later in the season but a lot of those sales that might have gotten clipped from e-commerce in the past I’m talking about let’s say past the December 14th and when free shipping day is.
This year a lot of them are going to stay within the channel because they’re just going to migrate to click and collect purchases.
So so I think you’ll see you know that point in the season Amazon lose some relative share and that share go right into the pockets of,
The Big Box retailers for example but broadly speaking I don’t think that that’s going to have a huge impact on the overall growth rate for e-commerce.
[33:36] Got it and then how about is this holiday a shorter or longer.
[33:42] So we’re on the short end.
This holiday season last year was the shortest possible at 26 days so then it usually kind of gets one day longer every year because of the leap year we actually get two extra days
one benefit there is it gives you kind of a better cop when you had that two-day adjustment but 28 days is still kind of on the shorter end of holiday seasons.
[34:08] 20/20 it’s been so long I forgot it was a leap year feels like a decade ago.
[34:14] It’s the biggest leap you’re ever they added 5 years to this year so mixed results on pulling holiday in early when I asked you if cyber 5 was going to be maybe a little lighter I think I got a no can you talk a little bit more about that.
[34:28] Yeah I mean so the whole pie is getting so much bigger for e-commerce eCommerce this holiday season and what’s gonna end up happening is it’s just going to concentrate more around the tent poles,
every single year cyber five gets more and more important Thanksgiving Black Friday Cyber Monday every single year they grow,
at a faster rate than the Benchmark so we expect that to continue I think,
Thanksgiving is going to be especially interesting this year it’s now the third biggest e-commerce shopping day of the Season we expect it to jump forty nine and a half percent to six point one eight billion,
and the reason for the huge growth rate is so many retailers are closing their doors that day and you know this is really the first year also that,
retailers are closing their doors when mobile Commerce has been the thing so I think of Thanksgiving is the ultimate day for couch Commerce Black Friday is going to be our first ever 10 billion dollar day it’s going to jump,
just under forty percent to ten point two billion,
but then that will be quickly surpassed by Cyber Monday which will jump 38% to twelve point eight nine billion and be the heaviest spending day in history.
[35:43] Got you and,
so some of Cybermen likes our Cyber Monday was originally structural right like you had your vacation and you went home you had way better internet at home you may not even have a computer at home,
and so obviously you stole all your bosses infrastructure to shop on Monday that’s of course not true anymore everybody’s digital everyone has access,
but now people aren’t even going to work on Monday right so I assume the main reason that Monday is still such a big pillar is because it’s now a habit and it and in general.
Digital tends to be more promotional on that day is that do I have that right.
[36:23] It’s expectations and the coordination between retailer and consumer so in the same way that you know we saw this sort of.
Growth rate on Prime Day this year although we don’t know for certain let’s assume that that Edison forecast is or.
Report is in the ballpark yet so that points you to these growth rates you know well into the 30s maybe 40% range so I see no reason not to expect that that will happen for Cyber Monday this year.
[36:53] Dude I’m curious of you been watching digital at all for the weekend weekday Trent so I can interesting thing in brick-and-mortar ordinarily.
The brick-and-mortar does much better on the weekend.
Particularly grocery people don’t have time to shop for groceries during the week so Saturday and Sunday are the biggest days one of the impacts of the pandemic is,
that the sales have leveled out across all the days because people can shop on a Tuesday just as easily as they can shop on a Sunday.
I’m curious if you’ve seen any any change in the digital behavior in terms of the weekly Cadence at all.
[37:30] Yeah I think there’s some of that effect what’s interesting though is that the weekends in recent years pre-pandemic we’re actually growing at a much faster rate so already there is some normalization and leveling out there was,
it’s kind of organically happening is people started their shopping online so I don’t think the effects are going to be quite as pronounced but you’ll certainly see some of that.
[37:56] Yeah and then another super funny friend in e-commerce is I have a bunch of clients that see a spike at 2 a.m. on weekends like after people get home from the bars and I’m I’m curious what’s going to happen this year when people aren’t allowed to go to the bars.
[38:11] I don’t think people have stopped drinking at home so I think you know.
[38:14] Yeah but I just just like the weekend weekday thing they’re drinking all the time now right there spreading it out a lot more.
[38:20] But they’re drinking a lot more and with access to a computer so there’s much more potential for drunk shopping.
[38:26] That could be worth the Five Points were of what we’re already seeing yeah.
[38:31] It does Bode poorly for returns by the way but yeah.
[38:34] Let’s run a panel with a breathalyzer duck mixed with them let’s dig into some categories what are you what are some winners and losers that you’re thinking for Holiday 2020.
[38:46] Yeah so I start with consumer electronics huge category
that you know in the last couple of years I’ve been impressed with just the diversification the category there are so many interesting new smart home electronics it all sorts of different price points so you’ve got that as a Baseline.
But then you have the gaming console Wars coming in this year,
and then an iPhone super cycle there’s just so much there that I think will drive that category to be the biggest winner of the season.
[39:18] So you’re a believer that we’re in an iPhone super cycle.
[39:22] I think so even if it doesn’t live up to expectations it just it seems like people are ready for the next one.
[39:29] Cool we need to like a audio clip Jason like super cycle or something like that next time.
[39:36] I’ll look into getting that added.
[39:38] Okay have the audio team work on it.
[39:46] Okay sorry I interrupted you keep going with other categories or exciting.
[39:51] So toys and hobbies and in that we actually include fitness equipment so there’s a lot of the digital Fitness Trend and then obviously toys I think have just been,
generally elevated throughout the pandemic so that we should do well home decor I was actually surprised about this category because I always think of this as the second most discretionary category after apparel.
And I initially thought with the recessionary had winds is category would not do well and it’s done very well so in especially,
with the winter coming people are just going to be nesting I Thinkin.
[40:29] You know a significant way so that category should do well food and beverage you know this is sort of an extension of the grocery Trend but we’ll just leaned more into Specialty Foods and alcohol things of that nature,
as far as struggling categories really the only one that I can Spotlight is being in a tough spot as apparel So Many Factors there.
Obviously no demand for Workwear event where at the moment you know athleisure that pocket will do fine obviously,
but then you know I think margins also can really get hit this season,
and there are almost competing with themselves in a way because they’re going to have to unload a lot of inventory at discounts and so even their higher-margin goods you know might be competing with.
Their own good so I just think those margins are really going to be compressed I wouldn’t be surprised by the way if you had stronger sales just because there’s so much stuff at a great price but I can’t see where the prophets really come from.
[41:34] You have any thoughts on what the hot toys going to be.
[41:38] I wish I knew that I’ve got young kids I should know this stuff better but I really don’t know what the hot toy for the season is actually I just got my Amazon catalog and I just started leafing through in the mail but I did not look did you get a peek.
[41:53] I did yeah I got the Amazon catalog the I can’t find any prices in it though it’s so confusing.
[41:59] It’s your supposed to use the augmented reality on the Amazon app or scan the QR code Scott.
[42:04] I don’t believe in QR codes that’s a.
[42:07] One has Dynamic pricing so they can’t print a catalog with pricing because they change it all the time.
[42:12] I know I’m just teasing you up for your your QR code.
I don’t know I’m gonna go Mandalorian baby Yoda so that also helps with the bingo so they can check the Star Wars square off of the bingo card.
[42:30] Yeah I have a feeling Star Wars merchandise will do well for sure but you know what’s one the last couple holidays and I feel like there’s a bunch of new versions of it are all these watery toys like these surprise toys.
Where you you buy it and have to open it to discover what you got.
[42:47] Yeah the law and all that kind of stuff.
[42:49] Yeah so that was last year’s big and I’m not sure it’ll be the same one this year but they’re everyone’s leaning into that Trend so there are these like Mattel has a bunch of dolls that.
The attributes of the doll our office skated in paint and you have to dip it in water to reveal.
Like what color hair you got and stuff like that so I have a feeling,
some of these surprise toys will be high on the list but we’ll see Andrew you reminded me and one thing I wanted to slightly Backtrack on a factor we didn’t talk about that I suspect May contribute in some way,
to the growth this year is there are several significant categories of spending that are down and the revenue from those categories is likely to move into retail right so you mentioned.
Home is looking like it’s going to be really big this year partly that is likely because people aren’t going to be traveling as much so instead of a vacation you improve your.
Your home and for sure you know restaurants used to get forty percent of your calories and restaurants aren’t getting that right now and so Grocery and specialty food is,
getting all those dollars that weren’t in your old definition of retail but are in in your definition of retail so it kind of grows the whole pie if you will.
[44:15] Exactly and you also have people canceling their gym memberships and that’s
going right into fitness equipment and the new Peloton if you can’t take your family on vacation you may see more jewelry gifting is you want to
treat your spouse so there’s all sorts of these little pockets of consumer spending that are just getting redirected.
[44:40] Yeah the one thing I think the jury people are worried about is if guys aren’t out and about and misbehaving is much they’re not going to have as many reasons to buy more jewelry.
But welcome that maybe a specialty one will see so what about you so you kind of hit on some of the categories,
let’s talk about like other particular retailers that you think are going to be winners or losers and who should we be investing in.
[45:06] I don’t give investment advice but Amazon’s are pretty safe bad I think they’re going to have really they’ve had you know and
epic second quarter and I think the fourth quarter is going to be historic both the prime day and everything it’s situated very nicely for them for
the holiday season then I look at the high performers from The Big Box retailers Walmart Target Best Buy Home Depot all them have been growing their e-commerce business at you know
a hundred percent in some cases or at least north of 70%,
and there are also well-positioned for clicking collect they will win those less frequent trips
to Brick and Mortar so extremely well positioned so basically the rich are going to get richer and then you know I look at some other brands that have just performed I think exceptionally well
in the pandemic Peloton I think that’s obvious and they’ve expanded their product line considerably and for lower price points so I think that should open them up
to a much broader consumer base
Lululemon and Nike have made the transition to DDC so strong I think that’s a much more profitable.
[46:18] Way to take their business and they’ve done surprisingly well it brick and mortar too so I call it that whole segment,
and then one other one that I think it could do really well as Etsy
and what’s interesting here is everybody kind of flooded onto Etsy for $5 masks and they got this big mask bump in the second quarter,
but I think it introduced the platform to a lot of new.
Consumers and you know it’s always done particularly well in the holiday season or its kind of best oriented to holiday gift-giving so I’m very curious to see what happens when you mix those two things together I think they could have a really strong Q4.
[47:00] That’s that’s totally interesting,
I hadn’t thought about that like I was worried as he was going to struggle to comp against their Mass quarter but you’re right like they on-boarded a bunch of new customers and people stored payment and,
yeah that that makes total sense that’s a good Insight in your,
written report you picked one other winner that I was somewhat surprised by you know I’m talking about.
[47:26] Which was that.
[47:28] Someone in the travel industry yeah in my mind like they could be the.
Relatively good performer but it just seems like luggage has to be a category that’s getting creamed right now.
[47:41] But is so this is relative so given that they got dealt maybe the worst hand of the pandemic or among the worst hands of the pandemic.
[47:49] Yeah right behind.
[47:51] Right I’m you know I think they’re doing some interesting things and they’re expanding their product line and and they’re generating some excitement so with a lot of these d2c Brands I think,
to prove themselves my question for them is what’s your next ACT I think away is finding its way into its next ACT and they’ve,
had some kind of innovative products at lower price points that have worked well I’ll be curious to see what their marketing messaging is because what I would start to do is Mark it to 2021 right like when we’re out of this pandemic,
you’re going to want to take those vacations you’re going to want to go to those events whatever the case may be I think there’s an opportunity to start marketing a bit to the Future so while I think they still have,
a tough hand to play this season I think you’ll see some bright spots from them.
[48:41] What not one fun fact I watch this daily we’re recording this on the 20th on the 18th we surpassed a million Travelers for the first time since the pandemic and through airports.
That’s down from 2.6 million year prior but that’s the highest level we’ve seen since like March tenth or something like that.
[49:01] Yeah you’ll have to decide who you think has is more prescient and and has a less of a.
A bias reason but so the CEO of United came out very strongly the zoom totally sucks and business travel is for sure going to return to a hundred percent of its pre-pandemic level and then Bill Gates came out and said.
There’s no way business travel is ever coming back.
And so maybe they both have self-serving reasons it just occurred to me because Microsoft assume he still has a lot of Microsoft stock teams is a big player in the.
In the virtual meeting so who knows who do you think are going to be the losers in the pandemic from a retail standpoint.
[49:41] So I think it’s really just it’s the stores that have the most Mall exposure so that really begins with department stores.
And obviously this is a secular decline that’s been happening but so driven by apparel
it’s not as easy for them to do click and collect I just think they’re in you know a tougher than normal spot and then one other retailer.
I said in past years you know I thought was struggling with competition was Victoria’s Secret.
You know they had kind of the rise of the d2c brands obviously some self-inflicted wounds with their own brand.
But then this season you know one other thing that stacked against down aside from having hi Mal exposure is that they have a high dependence on their d2c business but low aovs,
average order value so.
What ends up happening is that you know that just totally eats away at whatever margin you had so I think they’re just feeling it from from every direction this season.
[50:50] Yeah no I that certainly makes sense I have a.
Hypothesis that depend emic more so than creating new trends that never exist in the world it’s dramatically accelerating a lot of Trends we were already seeing and this is a perfect example of peril,
in department stores already had had winds and those got accelerated Victoria Secret had,
more headwinds than most in apparel and those it feels like also probably got exacerbated but one question I get asked a lot and I don’t I don’t have a super insightful answer so I’m seeing if I can steal one from you.
Is there of the department stores I get that the whole category is not looking awesome is there a department store that you think outperforms the rest of the market like whose best position of the department stores.
[51:35] Nordstrom consistently I’m always impressed with the store experience I feel,
good when I go into Nordstrom I think they did a really nice job so even with so many factors stacked against them I think they find a way to sort of keep their head above water
I don’t think this is going to be an easy season for them but I would expect them to outperform their competitors.
[52:00] Yep that’s usually my go-to answer but in the back of my mind I’m nervous amongst other things they closed a bunch of Mainline stores and so from a comp standpoint it’s going to be tricky for them.
[52:14] Yeah they’ll be able to bounce back eventually but they’ll have to get through this cycle.
[52:19] Cool any other surprises are Tippets you want to share before we wrap up.
[52:26] No I just think this is going to be a really really interesting season as an analyst I kind of love,
pouring through all these,
variables and trying to make sense of these orthogonal vectors right it’s they’re colliding in ways that are very difficult to predict so I say very confidently that this forecast is probably going to be the most off,
any forecast that I’ve been a part of in the past and yet I still feel good about the
the logic and sort of the directionality behind my thinking so I hope that’s a listeners takeaway is to understand sort of the Y rather than expecting me to nail that number on the nose.
[53:10] You let me let me put it that just a tad so so in the second quarter we saw e-commerce grow 45% do you agree with that.
[53:20] Yes I are numbers very close to that yet.
[53:22] Yeah so then Q3 it’s until I see the Amazon numbers and I don’t think the Census Bureau has opined on all of Q3 yet it feels like a ticked down a little bit what did have you guys said what you thought Q3 was.
[53:36] I’d have to look back at that that I it’s the relative low point in percentage but I want to say it’s still low 30s.
[53:43] Low 30s right so then you’re kind of saying and we’ll kind of so now we’re down in the low to mid-30s and you’re saying holiday will go up a little bit,
what if holidays up like 45% does that would that surprise you with what’s the cone of uncertainty do you think this is a plus or minus,
two points kind of thing here or could it go up as high as 45 percent from compared to your 35% forecast.
[54:08] So 45 seems a little bit High just because.
That was what we saw in Q2 which I really do think was the peak in terms and also it’s just always harder to grow at a more aggressive rate on a bigger base in the holidays that said I definitely think we could see a number in the 40s.
Not out of the question and if that happens I think it will be due to the fact that consumers actually did pull their spending forward and they were kind of consistently spending.
During that you know middle part of November when I kind of expect that growth rate to dip for a while.
[54:46] Question for you if we have a big number like that traditionally e-commerce has much higher return rate than then brick and mortar and since we’re shifting so much sales to e-commerce do you anticipate its.
That we’re going to have a rough in of holiday in terms of returns.
[55:04] Return a get in yes I think that’s very likely.
[55:07] Returning it.
[55:09] Especially with with you know listen I think the volume of apparel sales will be strong I don’t think the prophets will be there but you will have a high volume and if what are the it’s like 5 to 10% of apparel
sales in Store return but it’s like 30 or 40 percent online so yes this can be a,
reverse Logistics nightmare come January.
[55:32] And if you if you think capacity is limited for shipping all this stuff reverse Logistics capacity is even more constrained so that’s going to be a mess.
[55:39] Yeah it’s good for calls Maybe.
[55:41] Yeah yeah last question so we have these forecasts like there’s more uncertainty this holiday season than there’s ever been before do you have any tips or tricks like what would you be watching,
as we progress through the holiday I do you look for earnings announcements from Individual retailers that are sort of Keystone’s,
you know there’s some vendors that have pretty big customer bases that report some Digital Data on their customer base has like Salesforce or adobe or people like that like is there are there any favorite things you look for to tell you whether your.
You’re over underperforming your forecast.
[56:20] Salesforce and Adobe are going to be your fastest best
Reed’s early in the season because they’ll get reporting it pretty quickly and they’ll update it those are very good temperature checks you’ll see some Divergence you know there are some large retailers that may not be in their footprint but they both had big Footprints so as long as you can
calibrate your thinking to understand you know where some of those biases might present they’re going to
be your best temperature checks to kind of follow what’s happening throughout the season.
[56:51] Cool and when Jason said his last question this is kind of not a question but where can people find you online I guess it is question.
[56:58] On Twitter I’m more of a consumer than a tweeter at a lipsman or you can find me on LinkedIn.
[57:06] Yep and then obviously emarketer’s.
[57:09] And emarketer’s.
Now part of Insider intelligence.
[57:16] Yeah and I feel rumors about morning Brew.
[57:19] Rumors are swirling I’m reading them just like everybody else and I know nothing.
[57:25] Feels like you guys are making moves though I saw some new job listings come out this week in your organization as well.
[57:31] Yes and we just brought Zia wig Darren to oversee our content team so that’s also exciting especially given her retail background from shop talk.
[57:43] Yeah side note pet peeve on that before she left shoptalk she could jeweled me into being a,
in expert in this like shoptalk meet up that’s happening as we’re recording this over the next three days and so she booked me for like 36 meetings with random people over the next three days and then she left.
[58:03] Same I’m enduring that as well.
[58:05] All of us okay I did for today I’ve got six tomorrow and I think six the next day so yeah it’s.
[58:13] She got us all yeah congratulations does he oh well played.
[58:18] Boom throw Grenade on the way up.
[58:20] That is actually going to be a great place to leave it because we have once again used up our allotted time,
as always if you enjoyed this show we sure would appreciate it if you jump on iTunes and give us that five star review if you have any questions or comments you can hit us up on Twitter or Facebook,
we will put links to some of Andrews research in the show notes the big research that he’s talking about won’t be published or slightly after this podcast so we may have to append it to the show notes later,
but Andrew really enjoyed catching up with you and really appreciate you sharing all this great Insight with our listeners.
[58:58] Thanks for having me on guys.
[59:01] Until next time happy Commercing!