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Suzy Davidkhanian:

Hello, listeners. Today is Wednesday, September 10th. Welcome to EMARKETER's weekly retail show, Reimagining Retail, an EMARKETER podcast. This show is where we talk about how retail collides with every part of our lives. I'm your guest host, Suzy Davidkhanian. And on today's episode, we're going to talk about the holidays and what retailers can do to win. But before we do that, let's meet today's guests. Joining me for today's episode, we have retail analyst, Zak Stambor, joining us from Chicago. Hey, Zak.

Zak Stambor:

Hey, Suzy.

Suzy Davidkhanian:

I'm so glad you could be here.

Zak Stambor:

Yeah, I'm happy to be here talking about the holidays, my favorite topic.

Suzy Davidkhanian:

One of mine too. And we also have principal analyst on the retail desk. Sky Canaves joining us from Texas. Hey, Sky.

Sky Canaves:

Hey, Suzy. I'm also really happy to be here to talk about the holidays.

Suzy Davidkhanian:

It's a season I personally love, not just because we get gifts and there's lots of really fun traditions, but really it is the Super Bowl of retail. It's the biggest dollar volume period of the year, and now we know that shoppers aren't just buying for friends and family, they're also treating themselves. So over the years, we've seen how the holidays have morphed into something a little bit more complicated. And here I'm not just talking about the calendar and how shopping is starting earlier and earlier every year. There's also this tension that's happening between a value story. We know in some of the latest research that over half of shoppers say discounts and coupons drive their choices. But on the other hand, we also know that the holidays is really about creating an emotional connection and brand love. So I'm thinking about one of those oldies but goodies.

Do you guys remember that Folgers commercial when the soldier comes home for Christmas and everyone's surprised? Or there's those John Lewis iconic spots, which many US department stores were trying to replicate here with their own iconic ads. But this year it's even trickier because according to our forecast, overall sales are only expected to grow about a percent, and that's going to be the slowest since 2009. So retailers really need to adjust their playbooks. They need to be thinking about mobile in a different way, perhaps. They need to be thinking about AI and how those tools can really help alleviate some of the stress out of gift giving. There's really a lot going on. So I'm hoping that today we can dig into that and see what can retailers do to deliver both on value and emotion and to find those pockets of growth.

So with that, my first question to you both is there's definitely going to be muted growth, but Sky, you just did the report on holiday. You saw that there were some pockets of growth and some promise. Can you tell us a little bit more about what retailers should focus on?

Sky Canaves:

Sure. A lot of the growth that we will see will be in some of the categories that are holiday mainstays, and that's toys, fashion, and consumer electronics. Those tend to be smaller ticket splurges, smaller ticket items. The big retail categories, like the biggest one that we'll actually see a sales decline is auto and parts, because those sales are decreasing as the year progresses. And so brands and retailers have to be prepared for a season where instead of the typical bump that we see across retail during the holidays where sales growth accelerates towards the end of the year, this year we'll likely to see this rare deceleration of sales growth with some growth in some categories. But overall, it's both the economic concerns that are mounting with consumers as well as a lot of the behavior that has shifted more purchasing earlier into the year. So there will be less demand later in the year.

Suzy Davidkhanian:

Well, that teases up well to this idea around the calendar shift. Cyber Five is still important, right, you guys? It's still about 20% of sales. I know it's less and less important, and that's because Amazon and others potentially are doing things earlier in October. We had a lot of discussion around Amazon's October Prime Days, many days. We'll see what happens. Tell me more about how that's going to impact the calendar and what should retailers be thinking about, Zak?

Zak Stambor:

Yeah, so Amazon a few years ago pulled the holiday season forward into October by launching what was originally Prime Day, it morphed into Prime Big Deals Day. But it really set the stage for consumers diving right into the holidays and expecting discounts right away. I think we'll continue to see that behavior. But also, in October a lot of people just buy the sort of stuff that they are going to buy for themselves anyway.

Suzy Davidkhanian:

Absolutely. Just this idea around the calendars moving forward, Amazon's playing a role in that.

Zak Stambor:

So I think we'll certainly see more of that this year. I think we'll certainly see Target, we'll certainly see Walmart, and a host of others piggyback on Amazon sale. Amazon sale might be two days, it might be four days, like the extended Prime Day, we'll see. But like you said, the Cyber Five remain crucially important because we have a very tight timeframe between Thanksgiving Day and Christmas Day, which it's only one day longer than last year, which I think last year was the shortest possible period. So this is the second shortest period.

Sky Canaves:

Yeah. And what that ends up doing is bringing up more of that promotional activity even into that week before Thanksgiving. So like last year Amazon kind of made it official with its Turkey 12 and its sales launching the week before Black Friday. So I think we can expect that to happen again. So it means retailers and brands have to be really careful around their planning because they have to extend their budgets across so many more promotional days and there are a lot more important days starting in October. We might even see some promotions starting in late September because I expect Amazon will hold its Prime member event earlier in October this year, around the week of October 6th. And then they have to prepare for that as well as the earlier November sales leading up to Black Friday and Cyber Five weekend. And of course, that weekend will be very important and then into the late rush of the season and right into Christmas. So it's a bit of a marathon. It's a bit of a slog.

Zak Stambor:

Yeah, I think that gets to the heart of what we can expect to this holiday season, though. With consumers pinching pennies, it's going to be all about discounts and deals. That's going to be the key lever that retailers keep pulling to drive consumers to spend. Because even though consumers intend to pull back, they still end up buying a whole bunch of stuff at all times of the year. But particularly during the holidays when you kind of feel the need to spend and give gifts.

Suzy Davidkhanian:

One of the things I think we forget though is that those five days are about 20% of sales for the season. And so, as retailers think about pulling sales forward, what should they be thinking about to make sure that they do capitalize on that five-day sale period that everybody sort of associates to holiday deals?

Sky Canaves:

So I think they have to focus on making sure that they can convey the value to consumers during those days because that's what they will be looking for above and beyond everything else is the discount and the promotion. But I think there are other ways to get consumers to spend that can promote value. One tactic I heard of that this children's wear brand primary did last year that seemed really appealing to me. Consumers who shop during their Black Friday sale event then were eligible for free shipping without a threshold for the rest of the year or until the next year. So I think that would really be a great incentive.

Suzy Davidkhanian:

For the whole year?

Sky Canaves:

Yeah. So the discounts didn't have to be that deep because there was another incentive that would then not only give a great value to the consumer, but would drive repeat purchases.

Suzy Davidkhanian:

That's amazing. That's the other thing. We talk a lot about this, but I think it's worth mentioning again, the value means different things to different people and it's not just about a coupon. So that's a great example. What other ways should retailers be thinking about driving this idea of value during this time period?

Zak Stambor:

Yeah, I think they can lean on their loyalty programs and do that in a whole lot of different ways that go beyond just a discount. It might be an early access to a sale, it might be bonus points or point multipliers. It could be member-only discounts. There's a whole lot of different ways that you can turn to your loyalty program to drive your best customers to spend and to spend more.

Sky Canaves:

And then also looking at those earlier sales events, particularly the ones that revolve around marketplaces like Amazon more as a customer acquisition tool and a brand awareness tool. A lot of brands will sell limited assortment of SKUs or their hero products on a marketplace. And then they can try to use that to drive customers to their direct channels and into their loyalty programs further on in the season.

Suzy Davidkhanian:

So what I'm hearing is doorbusters work, online doorbusters also work.

Zak Stambor:

Oh, for sure. And there's also the opportunity to have exclusive products, which is something Walmart does a lot with their sales events, is have these products that aren't wildly different than things that you can find elsewhere, but they are unique to Walmart. And if it's the only place you can get it, it does drive somebody to spend.

Sky Canaves:

Especially this season. I think there will be a lot of concerns around inventory availability and out of stocks for things like the hot toys because I think retailers and brands are being a lot more cautious about their ordering in light of tariffs. They don't want to end up with too much inventory. They don't want to pay higher tariffs on goods that are not necessarily going to sell or may not sell, because then they'll have to take a steeper mark down on them later.

Suzy Davidkhanian:

That's a great point. And that leads us into the next question, which I'm always thinking about around how do you stand out when the marketplace is very crowded? Is it really truly about value messaging or are there other things that retailers should be thinking about beyond that in terms of standing out and creating this awareness at the beginning of the customer journey?

Zak Stambor:

I think value is front of mind for most consumers right now. But also retailers can use what they know about the customer to reach them in different ways. So personalization works really well, particularly if it's a customer who has bought from you repeatedly and you know their interests.

Sky Canaves:

Yeah. And I think brands also have to work at creating moments for the holiday season that will resonate with consumers. Well, this year we expect store sales growth during the holiday period to be pretty flat. I think those in-person experiences are still critical in different ways. It's not about the doorbusters on Black Friday morning or at midnight. It's more about pop-ups or experiences that add value to the customer's entire holiday experience, things that translate well onto social media. They might not drive sales right away on site, but they can drive sales later and just create more brand awareness well beyond that single experience.

Suzy Davidkhanian:

And then, I would imagine that the mobile and the apps play a role in that?

Sky Canaves:

Yeah, so we see mobile commerce really picks up during periods of heightened shopping activity. We saw this year during the Prime Day sales in July, that mobile was well over 50% of the sales according to Adobe. And we expect a similar trajectory during the holidays when people are just a lot more active in shopping. They will turn to their phones more. They shop at home while watching TV, while spending time with family. While they're in stores, they're looking up prices, they're comparing prices, they're looking for products that they can order and have sent to their homes. And I think it's also important to understand that buy online, pick up in store opportunity. Because we see more and more customers making purchases when they go to pick up their online orders. So ensuring that there are opportunities to add on purchases at that time is really important as well.

Suzy Davidkhanian:

So value messaging, mobile, and a third pillar things people should be worried about thinking about doing?

Zak Stambor:

I think the other thing is convenience. That's the thing that Amazon and Walmart nail time and time again is that when you order from Amazon or Walmart, if you order online, you know it's going to arrive at your door really quickly. And you feel rest assured that it will be in stock. And so every retailer can find ways to make their shopping experience more convenient, whether that's ensuring that their inventory online matches what's in the store or using the mobile device as a real bridge between the digital and the physical environment.

Suzy Davidkhanian:

I love that. I'm going to leave it with that, but I am going to ask you one of my favorite questions, which is crystal ball time. Can you each give me one retailer that you think is really going to outshine this holiday season? I'm going to start with you, Sky.

Sky Canaves:

My pick for the standout retailer of this holiday season is actually going to be a comeback from Temu. Now we've seen a big drop in their traffic that corresponded to their advertising pullback in the US over the spring because of the tariff policy changes. Now the playing field has been kind of leveled, so they're facing the same tariff impacts as other retailers. I think they're still able to really squeeze the margins from their sellers and they've been coming back to the US. They've started advertising again. One interesting thing we've seen recently is that Amazon has pulled its Google shopping ads and Temu and Shein are coming back and taking up more advertising and their site traffic is back up. So I think in this environment where shoppers are going to be so budget-conscious and looking to save where they can. The deals, and discounts, and very low prices that it offers on a wide assortment of goods, including the kinds of that people typically buy for holiday decor and small stocking stuffers will really benefit them.

Suzy Davidkhanian:

Cool. You heard it here first, big comeback. What about you, Zak? Who do you have as an outshining everybody else?

Zak Stambor:

Lego. So Lego has been doing well and I think it's going to do even better this holiday season. So while 80% of toys sold in the US are made in China, Lego is far less vulnerable to that. Because its bricks are made in Europe, and Mexico, and to some extent I believe in the US. So they're far less vulnerable to the price hikes and the just availability that is challenging many toy manufacturers. So that's one thing. But it also stands to win because of pricing flexibility. They offer sets at every level. So even if this year, because you're watching your wallet, you're not going to buy the $200 Lego set, you might trade down to the $100 Lego set. And then the other reason I think they're just going to continue doing well is because they hit the notes that people are looking for. They appeal to kid adults and they've got a whole lot of IP-driven merchandise. And that's what's driving toy sales right now and Lego just nails that. So I think Lego is just poised to have a very strong holiday season.

Suzy Davidkhanian:

I love that, kid adult. I wonder if I fit into that.

Zak Stambor:

Do you do Legos?

Suzy Davidkhanian:

I do games. Not Legos yet, but games for sure. I love these. And now I'm going to ask you for one more each. It could be another retailer or another shining moment. It could be a what, a channel, a category. I'm going to start with you, Zak. Tell me one more crystal ball moment. What should we be keeping an eye out for?

Zak Stambor:

Yeah, I also think Costco is going to do really well this season. Costco has, again, this is another retailer that has been doing pretty well because they have a very strong value proposition and consumers turn to Costco for a good deal. And as consumers are in the store buying up their essentials, they're just going to start throwing some toys, some electronics, some other gifts into their cart as a one-stop shop where they know they're going to get a good deal on their holiday items.

Suzy Davidkhanian:

And it is so treasure hunty, right? In that middle area.

Zak Stambor:

For sure.

Suzy Davidkhanian:

I love that.

Zak Stambor:

It's fun. Yeah.

Sky Canaves:

I went to Costco yesterday and I'm just shocked at how much I spent. It was still less than my husband's estimate, so I think I won. If it was Price is Right, I would've won.

Suzy Davidkhanian:

Well, it does add up.

Zak Stambor:

But that's the thing.

Sky Canaves:

Yeah, you think you're buying inexpensive products, but a lot of their goods are splurgy and aimed towards a more affluent consumer. I mean, some of the meats and drinks that we bought were not inexpensive.

Suzy Davidkhanian:

Right? And I haven't been to a Costco in a long time in the US, but when I was at one in Canada recently, there's Banana Republic sweaters. It's not just private label or opening price point. There are some nice giftables now too.

Sky Canaves:

Oh yeah, I saw Hunter Boots. They were almost $100.

Suzy Davidkhanian:

Wow. I need to replace mine. I need to find someone with a card.

Zak Stambor:

You can justify it though because you feel as though you're getting a good deal.

Suzy Davidkhanian:

Absolutely. Absolutely. Sky, what about you? What do you have on your list?

Sky Canaves:

Okay, my pick is not going to be a retailer, but I think the tech that everybody will have their eyes on is generative AI. And I'm going to specifically call out ChatGPT. I think they're going to introduce that checkout feature in their app similar to what Perplexity has for its Pro users. And ChatGPT may also limit it to paying customers because I think this can be expensive to operate. But I think since ChatGPT is so much bigger than Perplexity, it'll bring that agentic AI shopping experience more into the mainstream this holiday season. And of course, I think we'll see a huge surge in AI-powered product recommendations in searching for gift ideas and gift guides from other retailers as well, like Amazon and Walmart with their in-app shopping assistance. But I think the big standout will be what ChatGPT comes up with for the holidays.

Suzy Davidkhanian:

So your crystal ball is predicting that you'll actually check out in ChatGPT?

Sky Canaves:

Yeah. So I've done it in Perplexity because I signed up for the Pro. I've experimented with it. I've bought some stuff. They paid for shipping, which could help more-

Suzy Davidkhanian:

A margin drain for them.

Sky Canaves:

... people. Yeah, a big margin drain, but they did pay for pretty fast shipping, which was surprising. And so if ChatGPT did something similar and word got out, I'm sure people would sign up for that just for the holiday shipping.

Suzy Davidkhanian:

That's true.

Sky Canaves:

What do you think, Zak?

Zak Stambor:

Yeah, I totally agree. I think the majority of AI-driven purchases this holiday season is going to be the Rufus and those sorts of chat bots on Amazon, or on Williams Sonoma, or whatnot. But I certainly think people are going to want to play around with ChatGPT and see how it works and whether it can save them some money.

Suzy Davidkhanian:

Money and anxiety, right? The idea of finding the perfect gift, I think for me, I'm sold. Free shipping and perfect gift that will not be returned. Every retailer should be sold. With that, that's all the time we have for today. Thank you, Sky.

Sky Canaves:

Thanks, Suzy.

Suzy Davidkhanian:

Thank you, Zak.

Zak Stambor:

Yeah, thanks for having me.

Suzy Davidkhanian:

And thank you listeners. And to our team that edits the podcast. Please leave a rating or review and remember to subscribe to Behind the Numbers Podcast. We'll be back next Wednesday with another episode of Reimagining Retail. And on Friday, join Marcus for another episode of Behind the Numbers, an EMARKETER podcast.