Holiday cheer — mostly

It’s that time of the year again — specifically, time for the holiday forecasts to start pouring in.

Let’s start with the good news. Early reports are calling for a solid season, with Deloitte predicting a 3.6% to 4% increase in total retail sales over last year.

As for the upcoming presidential election, it may be a temporary distraction in the early part of the holiday shopping season, but it’s not expected to have a negative impact on total sales. In fact, if past years are any indication, retailers may even benefit from a pickup in postelection consumer spending.

It will also be, no surprise here, a digital holiday. Deloitte forecasts digital interactions will influence 67% of in-store sales. Actual holiday online sales are expected to reach $96 to $98 billion, up about 17% over last year’s season. Total holiday sales should exceed $1 trillion dollars.

But the news isn’t all good for the nation’s retail chains who, Deloitte warned, are in for some major disruption — and not from the usual suspect.

“We anticipate that marketplace fragmentation — more than e-commerce — will be the major disruptor this holiday season,” said Rod Sides, vice chairman, Deloitte LLP and U.S. retail and distribution sector leader.

Retail competition will not only come from the big box down the street or major e-commerce players, according to Sides, but also from the small and midsized retailers that focus on niche products and experiences.

“This group has been collectively taking share from large, traditional retailers to the tune of $200 billion in annual sales over the last five years,” he said.

Retailers that compete on differentiated products and experiences, Sides added, should be well positioned to outperform other competitors during the holiday season. And that’s an opportunity and challenge that no retailer — regardless of its size — should ignore. Savvy merchants, even those of the medium and bigger box variety, are already doing this.

Consider Sephora. In recent years, the beauty giant has evolved from a retailer that sells beauty products to one that is more about a beauty experience. Product, in fact, almost seems secondary in its sleek new Chicago outpost (see page 12).

Foot Locker is also upping its game. It transformed its Manhattan’s Herald Square flagship into a vibrant space that pulses with energy. It’s also easier to shop thanks to a layout that breaks with tradition by merchandising product by brand and not category. The store even has an experimental area that will host product launches and other events.

And then there is PetSmart. The retailer recently debuted a new store concept, PetSmart Pet Spa, that is all about the experience. It’s a much smaller footprint than the typical PetSmart but it offers wide range of differentiated services and products, from a self-service dog wash to a bakery full of doggie treats.

It’s not easy competing with smaller, upstart niche players. Their scale can work to their advantage, allowing them to be nimble and fast moving in a way that eludes most larger organizations. But that certainly doesn’t mean more traditional retailers are out of the game. Not by a long shot.

Marianne Wilson

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