As Retailers Gear Up for Tariffs, Here’s What They Need to Get Right This Holiday Season

As the apparel industry buckles up for what’s expected to be a bumpy holiday season, brands and retailers with a solid grasp on their inventory levels are expected to be this year’s biggest winners.

Consumers spent $850 billion between Thanksgiving and Christmas last year, according to Mastercard SpendingPulse, a figure that was up 5% vs. 2017. Apparel had its strongest year since 2010, growing nearly 8% vs. the prior year. Outdoor apparel experienced an especially favorable season last year, Eric Fisch, national sector head of retail and apparel for HSBC Corporate Banking, told Sourcing Journal, spurred by some well-timed cold weather.

But things aren’t expected to be quite as cheery this year as sellers contend with a short Thanksgiving-to-Christmas window and fears of tariff-prompted price increases — or, at the very least, consumer restraint.

“This holiday season in the U.S. is looking a bit more uncertain, as the trade war with China continues to escalate, and with that, more and more costs [are] being passed down to the consumer,” said Elizabeth Shobert, VP of marketing and digital strategy at StyleSage, a provider of retail analytics and automation. “And even if that doesn’t result in higher costs specifically for apparel, if people are having to pay more for other categories, that is going to eat into spending that would’ve been earmarked for the holiday season.”

As is par for the course in these omnichannel days, inventory management will once again hold a starring role in holiday challenges. Those that are too aggressive on inventory take the risk of conditioning their consumers to expect constant discounting when they’re forced to mark down, while recurring out-of-stocks can be the death knell for sellers, especially younger brands still trying to make inroads with fickle consumers, said Fisch.

In fact, one contributing factor to last year’s success was better management of inventory in the months leading up to holiday, especially the back-to-school season, said Shobert. Doing so prevented sellers from starting the holiday season at a deficit.

“Not having to mark down seasonal merchandise too soon or too much, and as well, making sure their assortments are localized and responsive to market trends, will be key,” she noted. “To the extent that retailers made the right decisions and investments in being flexible and responsive throughout the year will dictate how they do during the holiday season.”

“If you’re not getting it right the rest of the year, holiday isn’t likely to be any better,” Shobert added.

That early inventory alignment is key for holiday success, agreed JB Kuppe, SVP marketing at digital-ledger tech provider Boardwalktech. When determining the right product assortment for the holiday season, companies start as far as six months out, he said, and must often put in buffers around their product builds. Anticipating and managing changes to these inventory levels can then get messy because they’re often completed across spreadsheets and via email, eliminating the benefit of collaboration and pulling in contextual time-based data.

“Especially around the holidays, the necessity of having agility in the way you communicate with your extended value chain is essential, and our argument is that a digital ledger gives you that,” said Kuppe.

Despite these ominous clouds brewing, growth opportunities remain out there for the taking. Even with all the macroeconomic noise, consumers continue to spend money, said HSBC’s Fisch, and the underlying economic indicators remain stable. “It’s really about positioning and product mix and the content,” he said. “We saw through all economic cycles there are apparel and retail brands that will grow regardless of the macroeconomic environment. It’s really about honing in that consumer and finding a reason they need to come and experience your brand.”

Shobert agreed that the holiday front-runners will look beyond products. “Winners will be attuned to the details beyond simply having a great product at the best price — they’ll be focused on delivering a seamless and super convenient experience for shoppers. That comes when they focus on quick and reliable shipping, BOPIS options, great customer service, and painless and flexible return policies.”

Given that online is the channel in which sellers can expect to see the most growth, McKinsey & Company published a litany of advice for holiday sellers that started with becoming laser-focused on their digital execution. Among the recommendations: preview sales in November, place a heavy focus on Black Friday and offer fast shipping. Brick-and-mortar, meanwhile, should take advantage of the five-day window before Christmas in which “Amazon is weak,” it said.

The research and consultancy firm’s last bit of counsel? Perfect execution. Q4 is no time for glitchy websites or out-of-stock doorbusters. “Retailers should invest in their digital customer experiences and fulfillment capabilities throughout 2019 in order to improve execution well before the holiday season starts,” it said.

Editor’s Note: This story was reported by FN sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.

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