Welcome back to all our American members. I hope you had a good Thanksgiving and avoided the traditional arguments regarding politics and Bitcoin. We don’t celebrate Thanksgiving on this side of the pond but every Christmas I do get some family friend or distant relative sidling up to me to inquire how he might get a 100x return over the next 12 months with little-to-no risk. Sigh!
From a business standpoint, Thanksgiving does occupy a place in our thoughts, however, due to the exuberant displays of consumer capitalism that follow immediately after. While Black Friday promised to be a more subdued affair than in previous years — what with a deadly virus roaming the shopping malls — it still presents some signals as to what businesses are going to have a good holiday season.
Let’s first take a look at one of the larger consumer reports that was published in October — Deloitte’s annual holiday retail survey.
In terms of the key findings, there are not many surprises. Households anticipate that they will spend less this year due to anxiety related to COVID-19 — but not much less. The average spend of $1,387 per household is only down about 7% from the previous year. Continuing on from a trend we’ve seen all year, travel and experience are going to take a big cut (-37%) with that money being redirected into the home (+12%). Consumers are wary about shopping in-store (51%), with 73% planning to have items delivered versus 62% a year earlier. Demand for curbside pickup and BOSIP (Buy Online, Pickup in Store) has rocketed from 11% in 2019 to 27% this year.
The big winner, of course, will be Amazon. From Scott Galloway’s new book, ‘Post Corona’:
The obvious beneficiary from the lockdown (the closure of retail and a fear of leaving the house) is—surprise!—the company that’s in the business of bringing retail to your house. And though it gets less general media attention, Amazon is also a huge beneficiary of people spending more time online, thanks to Amazon’s $40 billion Amazon Web Services division. Indeed, the federal government’s $1,200 stimulus check program should have been called the Amazon Shareholder Support Act (ASSa). Not in their wildest dreams could Amazon shareholders devise this scenario: the government closes down the competition, restricts everyone to their homes, and then sends consumers trillions in cash. How do they not come out of this with so much momentum that competitors never catch up? Investors will ask themselves, why shouldn’t I just buy Amazon?
However, other winners will emerge. The increase in home spending, partnered with demand for curbside pickup, points directly to Home Depot, who were already seeing double-digit growth across all but one category (no one wants to redecorate their kitchen when they can’t leave the house). I would also expect to see strong results from major retailers that offer online shopping with curbside delivery, like Best Buy and Target. You get all the immediacy of in-store without the potential danger and added delivery fees. Target, for its part, has essentially repurposed its 1,900 stores into fulfillment centers dealing with 80% of its online sales.
Speaking of delivery fees, the Deloitte survey showed that 85% of consumers still value free shipping over fast shipping. This should bode well for Etsy, who made a big push to move sellers towards free shipping starting last year, and for Wayfair (who can ride the free-shipping/home-spending trend).
Finally, direct-to-consumer brands should be in for a good holiday season. Shopify CEO Tobias Lutke tweeted this over the weekend.
“We saw $2.4b of sales yesterday. The rebels have the wind at their back.”
That’s a 75% increase in sales for the Shopify platform just for Black Friday — we haven’t even got into Cyber Monday numbers yet, which, according to Deloitte, is now the most important shopping day across all demographics. These businesses are benefiting from a shift away from big brands towards more personalization and better products — many of which you can’t find on Amazon (because they don’t want to give away their data).
I wish there was some big reveal to end this piece on, but sadly there’s not. Things, it would seem, are going exactly as we thought they would.