Inside This Issue - Opinion
Competitive climate puts retailers to test
December 9th, 2013
by Jeffrey Woldt
The holiday selling season is under way, and early results point to a challenging environment for traditional retailers. The closely watched opening weekend, which used to begin on Black Friday but now extends to Thanksgiving, was disappointing.
Despite extensive media coverage about the frenzy among consumers at stores across the country, the National Retail Federation reports that, while the number of shoppers over the four-day period rose to 141 million from 139 million in 2012, sales fell 2.7%, to $57.4 billion. The decline is ominous in light of the extensive advertising and promotional activity that retailers engaged in and the shortened time-frame in which they have to catch up. There are six fewer days between Thanksgiving and Christmas this year than last.
Contrast that performance with Cyber Monday. Before the event, NRF expected 131 million people to participate. A subsequent report from Adobe says that online sales on that day increased 16% from the previous year to $2.29 billion, and that total e-commerce volume for the holiday weekend soared 26% to $7.4 billion. While still only a fraction the size of in-store sales, e-commerce is altering market dynamics, a change that could have serious implications in terms of the number of brick-and-mortar stores that are needed and how the stores that remain are shopped.
What’s happened thus far is only the beginning. In a new Deloitte study, "Digital Commerce in the Supermarket Aisle," consumers indicate that they expect rapid growth in the online sale of food, personal care products and household goods. They say their use of e-commerce in those categories will rise 67% in the next 12 months and 158% in three years. That shift will create new opportunities for consumer packaged goods makers, as well as retailers, to sell directly to the consumer.
"The importance of e-commerce to CPG companies has not, in most cases, translated into a fully developed strategy for capitalizing on this channel," says Pat Conroy, vice chairman and consumer products sector leader at Deloitte.
It’s only a matter of time before suppliers seize the day. When they do, retailers will have another potentially potent source of competition for shoppers’ time, attention and dollars. Technology has demonstrated its ability to change the game. For any merchants that haven’t already recognized that fact and started to adapt their business model, time is running out.