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Scrambled holiday sales calendar, e-commerce boom await retailers

The holidays are nearly four months away, but it is already clear that the coronavirus is forcing retailers to plan for a holiday season ruled by e-commerce, a shifted sales timeline and more conservative spending habits among consumers.

Retailer decisions to keep stores closed on Thanksgiving, uncertainty about the timing of Amazon.com Inc.'s Prime Day and a historically wide opportunity for e-commerce sales not only stand to change how shoppers buy gifts for themselves and others, experts say — they also could scramble the traditional holiday shopping calendar, pulling some sales forward and diminishing the role of big in-store sales at the end of November that have traditionally marked the official beginning of the holiday shopping season.

That is nearly certain to happen against the backdrop of a recovering economy and consumers scaling back their spending over 2019 due to job losses and the pandemic, which is expected to last well into 2021.

Already, Walmart Inc., Target Corp. and Kohl's Corp. have said they will close their stores on Thanksgiving Day. Amazon, meanwhile, has not confirmed when it will hold Prime Day, though it has reportedly told third-party sellers to plan on an early-October date.

Moving a major shopping event like Prime Day so close to Black Friday and Cyber Monday will encourage other retailers to offer similar deals around the same time, said Stephen Rector, a former executive at Macy's Inc. and founder of Bakertown Consulting.

"From a retailer perspective, your goal is how do you do the same amount of volume but shifting the e-commerce penetration very significantly," Rector said in an interview. While retailers have spent recent months beefing up their digital strategies in response to COVID-19, filling a larger portion of holiday orders in October would be a new test, he added. "The typical consumer doesn't buy all their holiday gifts in October."

Fourth-quarter sales, which include revenue from holiday purchases, represent a disproportionately high share of annual revenue for many U.S. retailers. At Best Buy Co. Inc., Kohl's and Macy's, for instance, fourth-quarter sales accounted for about one-third of annual revenue in 2019. At off-price retailer The TJX Cos. Inc., they were just over 29% of total revenue.

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Depressed consumer spending is also likely to weigh on holiday sales, regardless of how the transactions take place, said James Thomson, a partner at consultancy Buy Box Experts who formerly led teams at Amazon focused on its third-party marketplace. "Disposable income is nowhere near where it was last year," he said. "We're not going to see much growth in sales" across the entire retail industry.

Fifty-five percent of high-income consumers plan to cut back their spending in the next three months compared with the same period in 2019, according to a July survey by 451 Research, an offering of S&P Global Market Intelligence. Just 15% said they planned to spend more, the survey found. Just over half of the 914 respondents had annual incomes of over $125,000 a year.

Not all products will be equally hurt by a pullback in consumer spending, Rector said, adding that electronics are likely to sell well even in a depressed economic environment, while categories like apparel, which are seasonal and more subject to markdowns, could fare worse.

READ MORE: Sign up for our weekly coronavirus newsletter here, and read our latest coverage on the crisis here.

While few analysts have issued estimates for all-industry holiday sales yet, estimates for individual retailers anticipate slowdowns. The mean consensus estimate for fourth-quarter same-store sales at Macy's calls for a decline of over 16%, considerably steeper than the prior-year decline of 0.6%, according to S&P Capital IQ. Expectations outside of department stores are more hopeful, with Capital IQ calling for a 2.2% increase at Best Buy. That would still be below the 3.2% that the retailer posted for its fourth quarter in 2019.

Regardless of the economy, planning for the holidays is already on retailers' minds. "I think the wildcard is going to be the traffic we get through physical stores," Nordstrom Inc. President, Director and Chief Brand Officer Peter Nordstrom said during a July 7 analyst call. While Nordstrom said the company is preparing for several different scenarios based on the pandemic, he added: "We know that there'll probably be more pressure on the online part of our business."

One likely antidote to both higher online sales and limited in-store traffic would be offering the same deals that retailers advertise for Black Friday earlier in the week online. Offering an hours-long deal on a sought-after coat, for example, could "create that same sort of frenzy online" that retailers create in-store, Rector said.

A Prime Day in October, "one of the quietest months" for stores, could force retailers to offer those promotions even earlier, Rector added. For many department stores and mall-based retailers, the key for handling holiday demand for more online purchases will be using stores to fill orders, such as the drive-up models that companies like Kohl's and Macy's expanded during the height of lockdowns this spring.

Holiday sales as early as October would also give retailers the chance for a dry run of their holiday marketing and order fulfillment strategies amid the pandemic, Deborah Weinswig, CEO and Founder at Coresight Research, said in an email. The sales would mark a "huge opportunity to pull forward demand from holiday [2020] and also test what works and what doesn't in the current environment," she said.

Retailers are already coping with one key selling season disturbed due to the coronavirus. Back-to-school shopping for grade school and college students has gotten off to a slow start, with many retailers and schools uncertain about when students will return to classrooms and lecture halls. That has led to less demand for new outfits, dorm furnishings and other products that students and their parents commonly purchase before a new semester.

"Back-to-school doesn't have a start this year," Marshal Cohen, chief industry advisor for retail at the NPD Group, said in late July during a webinar hosted by apparel conference Texworld. "Consumers are buying for the here-and-now," he said, noting that consumers with tighter budgets as a result of the pandemic will likely wait to make seasonal clothing purchases, including some holiday items, until well into November or December.

For retailers reliant on United Parcel Service Inc., FedEx Corp. and other third-party delivery services, fielding as many orders as possible before Black Friday could help avoid a crunch provided e-commerce sales are significantly above 2019, he said in an interview.

The message that retailers will likely send to consumers as fall arrives? "Shop early," Thomson said.