The holiday shopping wars have begun extra early this year, and major retailers are upping the ante. From promoting big discounts to opening their doors on Thanksgiving Day, large retailers appear to be pulling out all the stops this year.
It’s easy to see why: Retail analysts predict that consumers won’t be very merry with their spending this holiday season. A recent report from Morgan Stanley predicts that same-store sales will climb just 1.6 percent this year, which would make it the worst shopping season since 2008. Stores are working harder than ever to attract those frugal shoppers. And November and December are the most important months of the year for many retailers. The National Retail Federation says the holiday season can account for 20 to 40 percent of retailers' annual sales.
But what can small and independent retailers do to win over shoppers in this year’s hyper-competitive, perhaps downright dismal shopping environment? According to Candace Corlett, president of WSL Strategic Retail, a New York City-based retail consulting firm, "The smartest thing independents can do is say, 'We’re not going to compete directly with the Targets of the world.'"
So if you shouldn't go head to head with the big box stores, what should you do? Corlett recommends that independent retailers focus on their strengths—things they can do better than major retailers—and find creative ways to lure shoppers into their stores and convince them to buy.
Here’s a look at three ways big retailers plan to attract shoppers this holiday season and how independents can fight back:
Major Retailer Strategy #1: Stay open longer—even on Thanksgiving Day. Several major retailers, including Macy’s, Kohl’s, JCPenney, Toys R Us and Best Buy, plan to open on Thanksgiving Day or in the evening hours before Black Friday. Their hope is to entice shoppers into their stores earlier by offering attractive “doorbusters,” whether that's low-priced TVs or a free snow globe, and other limited-time deals that will lure them and their gift budgets away from competitors before Black Friday’s shopping frenzy even begins.
Retailers are also starting early because it's a short shopping season with only 26 days between Thanksgiving to Christmas. Hanukkah also starts early this year—the day before Thanksgiving—meaning retailers need to get a head start to attract Hanukkah shoppers.
How to fight back: Independent retailers shouldn’t try to compete on Thanksgiving Day, says Jan Kniffen, a New York City-based retail analyst. But they can hold their own extended-hour shopping events for customers on other days between Thanksgiving and Christmas. “I think extended hours work for independents, just not on Thanksgiving and Black Friday,” Kniffen says. "The major retailers really steal the show that day."
Given that shoppers are being drawn to stores earlier this year, hosting events earlier in the shopping season—such as late November or early December—may be better than holding off until mid- or late-December. Cocktail parties, book readings and other holiday-themed events can entice shoppers into the stores.
Another effective strategy: playing up the holiday spirit. Many big retailers don’t decorate as much for the holidays as they used to, Corlett says. Independent stores can deck themselves out for the holidays and become a holiday destination. "What independents have going for them around the holidays is that people like to go to the stores to get the holiday spirit,” Corlett says. “There’s nothing like a mall to squash that spirit.”
Major Retailer Strategy #2: Price-slashing. The big box stores have already started rolling out early sales and discounts to entice shoppers, a strategy that will likely continue or even ramp up as Christmas approaches. A holiday shopping survey by Accenture found that 62 percent of shoppers say they'd need a 30 percent discount in order to be convinced to buy something this holiday season. Even retailers like Nordstrom, Macy's, REI and Bloomingdale's that have traditionally been reluctant to drop prices and offer sales around the holidays are already promoting huge discounts of 40 percent off or more.
How to fight back: Most independent retailers can’t afford to slash their prices or match large retailers’ discounts—nor should they try, experts say. Instead, smaller businesses should focus on providing customers with extra perks that draw shoppers into their stores and make it worth spending a little extra.
Corlett suggests that smaller retailers try to do a better job of helping their customers figure out what gifts to buy. “Be a shopping buddy—don’t just be a store,” Corlett advises. That might include setting up a display with the top five hottest gift items for the season, she suggests. “Make it the top five fashion items, the top five things for women or the top five things for babies. Just make sure you have enough of it in stock.”
Stores should also think about bundling items that could be bought together as a gift. For instance, a store that sells bathrobes might put bubble bath, candles or mugs with chamomile tea nearby to suggest as complementary purchases. A store could then offer a discount to shoppers who buy several items as a bundled gift. “Companion products increase the value of the gifts," Corlett says, "and increase the value of the transactions.”
Major Retailer Strategy #3: Online shopping and “showrooming.” Online holiday shopping is predicted to grow 15.1 percent in 2013, according to eMarketer, and many major retailers have bolstered their online presence and are offering free shipping and quick delivery to make online shopping even easier, more rewarding and compete with the convenience of shopping on sites like Amazon.com. For example, Nordstrom is offering free delivery on all orders, while Macy's has focused on improving its inventory management and getting products to shoppers faster.
One disturbing trend for smaller brick-and-mortar retailers is the habit of “showrooming”—the idea that shoppers will visit their stores to browse and check out products but then actually make their purchases on Amazon or some other retailers’ website where they can find the product at a lower price.
How to fight back: Independent retailers should make sure that a portion of their gift items are unique products that can't easily be purchased for less online. If a business can’t offer a unique selection of gifts because, say, they sell cameras or refrigerators, they should offer a better level of service that online retailers can. For instance, a smaller retailer might be able to provide fast delivery times, offering to deliver the product to a customer's home the following evening and set it up for them.
Loyalty reward programs can also be an effective way for independent retailers to win. Giving loyal customers exclusive discounts, free gifts and special treatment, such as their own shopping events, can help prevent them from shopping online. As Kniffen says, “If you’re an independent, making people feel special is the best weapon you’ve got."
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