2021 Holiday Forecast: Part Two—With NRF’s Katherine Cullen

Paul Lewis:
Hello, and welcome to another episode of the Retail Rundown Podcast. I’m your host, Paul Lewis. And today we’re bringing you holiday insights straight from the National Retail Federation. Joining the show today is Katherine Cullen. Katherine is the senior director of industry and consumer insight at the NRF, where she leads the NRF’s research on consumer spending and emerging retail trends and develops new research, initiatives and partnerships.

Paul Lewis:
Prior to joining NRF, Cullen worked in customer strategy and intelligence at Macy’s Incorporated, where she developed customer-centric strategies to inform assortment marketing and distribution decisions for Macy’s women’s wear brands. Cullen also spent six years in fraud and programs analysis for the department of justice and the department of education. Thanks for joining the show today, Katherine.

Katherine Cullen:
Thanks so much for having me. It’s great to talk with you guys about one of my favorite times of the year, the holiday season.

Paul Lewis:
Yeah, absolutely. And I know that the NRF recently released its annual holiday forecast. What are some of the trends the NRF expects to see this holiday shopping season?

Katherine Cullen:
Absolutely. Yes. We just came out with our expectations for retail sales in the months of November and December, which are historically two of the biggest months of the year for holiday. This year, we are expecting that retail sales in those two months will grow somewhere between 8.5 and 10.5%, which is a pretty historic high. Last year, retail sales grew a phenomenal 8.2% over 2019. But we really haven’t seen this type of growth over those months, at least in the last decade.

Katherine Cullen:
We’re expecting a lot of that is being fueled by some pent-up demand, the current state of consumers, their interest in holidays, and this idea that this year compared to last year, we’re in a different place when it comes to the pandemic. And hopefully that stays, I don’t want to jinks this all, but hopefully, that trend with declining cases continues and we continue to have family gatherings, people getting together and celebrating in a way that they really weren’t able to last year.

Paul Lewis:
Yeah, I totally agree. I feel like there is a bit of a celebration ahead of us, right? Where the future is starting to feel a bit more normal and looking brighter. And so I think there is definitely some pent-up demand as people are excited about getting back together with their families and really diving into the holidays. So I completely agree. I did want to ask, that is a pretty big increase. What do you see retailers doing to keep up with that increased demand?

Katherine Cullen:
Absolutely. Well, we do know that the holiday season is a historically, a big time of year for retailers. So they know every year that consumers are going to be wanting to shop, that they’re going to be interested in shopping and they have been seeing strong consumer demand really through all of 2021. If we look at the first nine months of 2021, retail sales actually grew about 14.5% over the first nine months of 2020. So they’ve been dealing with really strong consumer demand throughout this time period.

Katherine Cullen:
But some of the things they have been doing particularly for this year, because I’m sure everyone has been hearing about some of these supply chain constraints and retailers have been watching that issue closely as we head into such a big shopping season. Some of the things that they have done is to move up when they try to get inventory in for the holiday season. So we’ve been talking as an association to our members, closely this entire year, but starting this summer, we really started talking about holiday inventory and we’re hearing that they were moving up those orders into the summer months to try and plan around some of the potential delays and ensure that they have that inventory in place, if not in October, in November and possibly have refreshes throughout the season. So that’s one of the big things retailers have been doing.

Katherine Cullen:
Since we’re all consumers ourselves, I think we start to notice some of this stuff, even in our own shopping and buying. But retailers have been out there already with holiday promotions. I’ve seen everything from Black Friday starts now, this is in October. To every Friday is Black Friday to, Slowvember. That was a new one that I saw. [inaudible 00:05:15] the idea that the deals will last all November, so you don’t have to just rush and buy things right away. You have time to shop, figure out what you want and that deal will still be there.

Katherine Cullen:
So those are some of the things that from a marketing standpoint, we’ve seen retailers do to tap into this idea that consumers are starting earlier and really stretching that shopping out.

Paul Lewis:
Yeah, it does seem like Black Friday. I mean, then we had Cyber Monday and all these things where people started shopping earlier and you touched on supply chain and I wanted to double click on that in just a second. But it does seem like, I’ve seen quite a few advertisements saying that the deals are starting now.

Paul Lewis:
Halloween has passed, it’s November. Everybody’s hearing about these supply chain issues. Both, there’s a high demand and then there’s a need to shop early to make sure you get the things that you want. And let’s talk about that. What have you seen in terms of supply chain and how that might structure deals and specials and availability for both consumers and retailers in the season?

Katherine Cullen:
Certainly. Before I get into the specifics of this year, I do just want to note that this earlier start to the season, it’s not new this year. So this is something that we have been seeing grow over time. As you mentioned, Black Friday and Cyber Monday used to be the kickoff to a holiday season. And now they’re definitely more of a midpoint.

Katherine Cullen:
We see things like Black November sales were starting before the pandemic. And it seemed that consumers liked starting to shop early. We know from some of our consumer studies that people planned to spend about $1,000 on average during the holiday season for gifts and decor and things like that. And that’s a lot of money for a lot of consumers. And so they like to spread out that budget so it’s not all coming out of a single paycheck, and they like to avoid some of the stress of last-minute shopping.

Katherine Cullen:
I will note that even when people start early, it’s inevitable, almost everyone is still shopping for a last minute gift in the weeks leading up to December 25th. So people do stretch it out though. This year, of course, that interest in starting early is even more heightened. So we’re seeing about half of consumers said they were starting to shop before November 1st. For context, a decade ago, that was 39%.

Katherine Cullen:
So quite a lot of growth over the last 10 years. And certainly up from last year. Going back to the supply chain issue, that of course is top of mind, for consumers and for retailers. I don’t think in an average year holiday shoppers, I can certainly speak for myself, that we’re really worrying about the supply chain, but there’s been a lot of focus on it. Retailers have been coming out and actually telling people in their emails or on their websites that, products might be delayed, that it might take a little longer, be patient, start shopping early and really being transparent with consumers. I think that’s been a big focus both during the pandemic when there were shortages and issues with how people should be shopping. But of course this year with the supply chain, it’s definitely become much more of an open conversation with consumers about what they need to be prepared for.

Katherine Cullen:
One of the others is the focus on moving sales up, I think, as we talked about, that’s certainly been a trend this year. What we’ve heard from retailers, is that they’re also thinking about things like more targeted promotions. So maybe more of a deal of the week or a deal of the day and keeping those holiday strategies really fresh and changing throughout the season so that people don’t get bored, that they still feel that there’s a little bit of that fun from hunting for a product, or finding something new a little later in the season.

Katherine Cullen:
From a more technical standpoint we’ve seen a lot of retailers in addition to those, open communications about potential supply chain challenges, really telling people through their mobile apps or on their websites, how many people are shopping the same thing that you’re looking at. How many are left in stock, is it available in-store if it might not be online? And so really putting tools in the hand of shoppers so that they can make the right decisions for themselves and going ahead and buy items if it’s a must-have for them this season.

Paul Lewis:
Yeah. Boy, I have a couple of thoughts on the different things you’ve said.

Katherine Cullen:
I know I just uploaded a lot…

Paul Lewis:
No, it’s great. It’s really great information. One of the things, when I have guests on the show, I always think about myself personally and say, “Does that align with my own personal behavior?” And I found that everything you said just rang so true. I have some concerns about supply chain and being able to get the things that I want. I have noticed deals that are coming into my, whether it’s my inbox or my Google feed or my Facebook feed, I guess, I can’t say Facebook anymore, my Meta feed-

Katherine Cullen:
Still getting used to that.

Paul Lewis:
Yeah. I’m seeing things and both concerns and opportunity are spurring me to shop earlier. And then I would say in the years that I have been more prepared, I actually buy more, right? Because then I’m done. And as I get into December I’m like, “Oh, that’s a good deal.” I’ll pick that up for my cousin or someone that I maybe wouldn’t normally shop for every year.

Paul Lewis:
And so I think that’s true, that we’ll see a lot more preparation and that will probably result in higher spending. And then, as we talk about retailers getting prepared, keeping it vibrant, changing their strategy over the coming months to keep things fresh. I think that’s so important because there is the danger of a little bit of burnout of people shutting down. And so I think that just continues to open up opportunities. And, at least until my Google or Meta feeds can look at all of my friends and recommend the perfect gift, I still want to explore and engage.

Paul Lewis:
I want to be inspired by my shopping and hopefully retailers are finding ways to do that both in their online experiences as well as their physical store experiences. Which is my subtle transition to a question I think is on a lot of people’s mind, physical shopping is clearly back. I see it when I go in the mall, I already have trouble finding a parking spot and that’s great. And being in this business, I’m super excited about that. But I wonder what you’re seeing and what your thoughts are on how much… Clearly eCommerce will continue to grow. It was growing before the pandemic, but how much of this is going to continue to be growth in eCommerce and where does that leave the physical stores? What do you see in their future?

Katherine Cullen:
Yes. And I love that you talked about the emotional aspect of picking out items and the browsing, because it is easy when we talk about all these numbers and this type of growth to forget about why people are shopping. The holidays, unlike another time of the year, there’s an intent and a reason behind the shopping, people are looking for that emotional connection. Just to touch on this really briefly, but we actually saw in our consumer survey that those in sort of the grandparent age bracket, they’re spending more on gifts for family this year. And I can’t help but think that maybe they’re seeing grandkids for the first time for Christmas in a little while, or for one of the other winter holidays and then that’s feeding into it.

Katherine Cullen:
But what you said about the stores. Yes, we’re seeing a lot of pent-up demand for stores, just, I mentioned at 14.5% growth in retail sales during the first nine months of the year. We’re actually seeing both online and in-stores are both growing at that same rate, which is really telling because for a long time eCommerce is a smaller percentage of sales and we’re still growing a lot faster than stores.

Katherine Cullen:
But we’re seeing that people are very interested in the store experience. We know that the holidays in particular, people like to touch and feel items, they like to see those gifts in person. I love using the example of a sweater or a fragrance. Those are very personal items. You want to see if that fabric is as cozy as you thought it was. If that fragrance actually matches the personality of the person you’re buying for. All those things are difficult to see and experience in an online forum.

Katherine Cullen:
So we do expect particularly around Thanksgiving weekend, people to sort of embrace the tradition of in-store shopping. Of course, though, there are some added conveniences that people are used to now. So a curbside, buy online, pick up in-store. We still expect that to be a really strong channel, particularly if people have already picked out what they want, or maybe they’re getting more things like food for the family table or family celebrations or they know exactly what their child wants or their loved one wants, and they can just use curbside to get it really quickly. So we are expecting that as well as sort of the more traditional in-store shopping experience.

Paul Lewis:
Yeah, I think that’s great. It’s so encouraging to hear that physical retail and eCommerce are both seeing strong gains because that’s exactly how I feel. It’s how it feels when I’m out physically shopping. And it’s what I hear and see in the eCommerce trends as well. So it’s really just good to hear this heartwarming news, because I think it’s reflective of not just for our industry, but for our country and for people all over the world that we’re beginning to really head out of this thing and there’s cause to celebrate. And so I think this has just been a really great conversation.

Paul Lewis:
And just to recap, a few of the things that you mentioned. You talked about that obviously this is a huge time of growth. Retailers need to get prepared. They need to look at their supply chain, think about what that means in terms of what products they offer. They need to make sure that that information is integrated so that shoppers can tell if you actually have something in stock at a store, or if you’re shipping, what is the delivery, the expected delivery times that is really available to them. That’ll be a big concern this holiday.

Paul Lewis:
And then, I don’t know if lastly, but one last point would be, just the experience. To not forget that we’re extending the shopping season and it’s really important for consumers to have that opportunity to experience and have their imaginations tickled and excited by the ways that information is being presented, as well as practical and efficient for people who are trying to check a lot of things off their list like me. So I just want to say, thank you so much for being on the show. It’s really been insightful.

Katherine Cullen:
Thank you so much for having me. It’s, like I said, my favorite time of year, and it’s always great to get to talk about some of these insights and especially with such a great consumer like you. You kind of embody everything we’re hoping for from shoppers this year.

Paul Lewis:
Oh, that’s great. Well, thank you very much.