Rundown: What retailers are saying about holidays sales

0:03Hey, everyone. Welcome to this week's Modern Retail Rundown. I'm Gabby Barcoe. I'm here with Editor-in-Chief Kale Guthrie Weissman. Hey, Gabby. How are you? Hey, Gabby. I'm doing pretty well. So this week, doing things a little bit differently, as I'm sure all of our listeners know, we have entered the Black Friday, Cyber Monday weekend. I hope you all had a great Thanksgiving and are shopping to your heart's content. Gabby and I thought we would do maybe a couple of news hits talking about Black Friday. And then later on the show, we're bringing on Digiday Media's research director, Leeloo, and they will be talking about all of the fun holiday-related research our team has done.

0:42I'm excited to talk about that. But first, Gabby, shall we go into the news? Yeah, let's do it. So this will be, as expected, a Black Friday, Cyber Monday themed episode. So first up, we are going to be looking at two major bellwethers for the retail industry when it comes to Q4 sales, which is Walmart and Target. And I thought it was interesting that they have very contrasting pictures or outlooks when it comes to the season. So we'll get into that. And then our second segment, we are going to be talking about the general threat that marketplaces like Shein and Timu are posing to retailers, including now taking away share of Black Friday sales, which is interesting.

1:29There's some data coming out about that. But yeah, let's start out by talking about Walmart versus Target, at least in the coming weeks. Yeah. So pretty much we've had some pretty big earnings. We're in the middle of earnings season, and they're coming a mile a minute at us. But we had Walmart last week and also Target last week, and one was really good and one was really bad. We talked a little bit about Target's not great earnings in the last episode, but I wanted to dive into just how these two diverge. So want to go into the numbers, Gabby? Yeah. So Walmart had sort of a blockbuster quarter.

2:05It was their third fiscal quarter, I believe, where they said that they saw you on the US sales increased by 5%. It's like 114, almost$115 billion in sales. And they're basically just hoping to ride this, quote, momentum into Black Friday weekend and beyond, you know, pretty much through the rest of the year. Their CEO, Doug McMillan, said that in the US, their in-store volumes grew and pickup from store also grew pretty quickly, as well as delivery. I said this in a statement just a few weeks ago. They're also, in particular, they're expecting their online sales to grow with pickup and delivery.

2:49I don't know what your thoughts are on that, but that seems in line with what they're really trying to push, which is digital sales. Yeah, they've been really pushing digital sales. They've been really trying to push the third-party marketplace. I know that, as you said, the e-commerce business jumped 22%. I think I read somewhere that the e-commerce business now represents 18 % of its global business overall, which is pretty big for such a huge retailer like Walmart. But clearly, it's trying to grow its digital business so that it can compete with Amazon. And the question for many years has been, when will this work?

3:25Will it work? And now we're beginning to see it work. And so it's super, super interesting to see this pay dividends now. And this is setting the stage for what we imagine will be a pretty big holiday season for Walmart. I think the company said that it's forecasting 3 % to 4 % sales growth, which isn't huge, but also is better than a lot of the competitors are doing and shows that as a retailer, it's doing something right. Yeah, so that's definitely in contrast to Target, which we'll outline next. I think you and Ana had spoken about Target's latest performance last week. So we can give a quick rundown of what they're expecting.

4:02But they pretty much think that sales are going to be flat in this coming quarter, which, you know, again, compared to Walmart is a pretty drastic difference. In their last quarter, the company reported that they grew by just 0.3%. So pretty much flat again. Do you want to talk about why this has been happening? I think, you know, this is, again, very much in line with Target's performance in the last, I would say like a year or two at this point, right? Right. Yeah. I mean, Target has been having an issue with being a little bit too expensive and being associated with being too much of a discretionary purchase.

4:40And we are kind of now seeing this now. And it's a really interesting divergence compared to Walmart, where Walmart has become sort of the necessity shopper. People buy all their things at the everything store. even though Target lowered its prices earlier this year in a way to try to woo people back in, it clearly has not been resonating. And I think the fact that Target has now warned that sales in the fourth quarter are going to be flat, especially compared to the nearly 4 % that Walmart is projecting, it does not paint a good picture, at least for this year's performance at Target. And it shows how really just the economic environment has made it so that the retailers and the platforms that are focused more on value and actually having people stretch their money, whether or not that is the case, it's more of that perception, I guess I would say.

5:28Those are the ones that are winning. And then Target, which has long had the Target appeal being a little bit nicer, appealing to more middle and higher income people, that's the area where retailers are not doing as well. Yeah, it does really seem to be coming down to perception because I feel like if you actually break down the prices side by side, it probably isn't that much of a difference. But I think that shopper going to Walmart is definitely more value focused, at least right now. And so Walmart, you know, is is winning. I mean, like we always say, they're really competing more so with Amazon than they are with Target.

6:04But these are two big box retailers that usually really lean on the holiday quarter to to make up a lot of its annual sales. But yeah, speaking of maybe we could talk about, you know, another sort of wrench that's being thrown into Q4 for some US retailers, which are, you know, Shein and Timu this year look like they are going to be having a pretty big Black Friday or just general holiday sales, which is really interesting because again, these aren't really marketplaces or retailers that I think of when I think, oh, I'm waiting for a sale because they already are, you know, selling pretty cheap things.

6:42But I think it's just that mindset that the shopper is in right now. Yeah, no, I think it's exactly that, where it's this perception of people need to stretch their dollar. And now we have this new bevy of platforms where their entire thing is that they are cheaper than everything else. And so some new stats, according to Earnest Analytics, is that pretty much these new platforms are going to be seeing major increases year over year. One of them is that Shein's sales increased 16 % in the first half of November. That's compared to the year before. Tmoos were up 18%. And TikTok shop sales have more than tripled.

7:19And it should be noted that TikTok shop has only been around a little bit over a year. So that's a lot. But it was brand new for the holidays last year and didn't really have quite a set strategy. But either way, it shows that people seem to be using these platforms probably to buy holiday goods, but also just to buy things because they're really cheap. And I would be remiss to not mention that Amazon, just a week or two ago, launched Hall, it's a competitor that looks nearly identical to Timu. So you're just seeing this big kind of race to the bottom from the retailers and platforms. And that, you know, it goes towards what we were saying a few minutes earlier, where it's the perception of being more value oriented that that seems to be winning the dollar right now.

8:01Right. I mean, also the fact that everybody's discounting really heavily right now. So I think with these two in particular, it will be the apparel and fashion retailers that are being hit the most by Shein and Timu. But yeah, it should be noted that it really, at least according to analysts, it doesn't really matter how much like Gap or Old Navy discounts. It's just you're never gonna compete with, you know, like a$3 t-shirt or something, right? It's just not that type of retailer. And so that customer will just head over to these apps and do their shopping there. So it is a race to the bottom, it seems like, if you're just constantly trying to win customers back with heavy discounts.

8:45Yeah. And I mean, discounting is a big thing. And I believe we're going to be talking about discounting in a few minutes with Lilu. But I will say that what we're seeing with these platforms right now is they are subsidizing their growth. And so I think Amazon's haul right now has some insane sale where you get like 50 % off or something like that if you spend over a certain threshold. You're seeing that with Timu, where if you join, if you spend a certain amount, they will give you an insane sale. And so they just want you to use the platform likely so they can show that they posted this insane growth over this period of time.

9:18And I think that there's an interesting contrast, which we'll get into some of the numbers in a few minutes, where I don't think everyone is discounting as heavily or is able to discount as heavily, but it's these value-based platforms that you're really seeing it. And that probably is creating a certain perception for the shopper where, you know, they love seeing price slashed, free shipping, etc. And so they're going to buy all their stocking stuffers there. Yeah. So yeah, on that note, we can wrap up with this segment at least and then we'll let Leloo take over with the next one. Hey, Leloo, how you doing?

9:51Doing great. Thanks for having me. I'm excited to talk about the holiday season. We are so excited too. We wanted to bring you on because you and your team have recently done some really great research into how brands and retailers have been preparing for the holidays. One thing I wanted to ask, and we've come out with some reports over the last few weeks, but one thing that you looked into is plans for discounting. And so do you, and I, we sort of talked about this on the platform side where you're seeing Shein and Timu and Amazon and TikTok all discount a lot. But according to your research, have you been seeing a lot of players discount or a lot of the brands that you've surveyed, are they doing major discounts this year?

10:31Yeah, that's a great question. So discounts have been interesting this year. In our recent end-of-year survey, we had asked a number of marketing respondents whether or not their discounts were going to be deeper this year compared to last year. And about 71 % of our respondents said that this year's discounts are about the same as 2023. and only about 22 % said that last year's discounts were actually deeper than this year's. Meaning overall, either the majority of brands are going to stay the same for discounts this year, or they're actually going to get lighter. Only 7 % said this year would have heavier discounts.

11:11So interesting enough, very light year on discounts. But you know, one of the things that we did see is instead of the deepening of discounts is the length of time in which these discounts were run for instead. So we're seeing longer periods of discounts rather than deeper discounts. Gabby, isn't this something that we've talked about before where this has been just a much longer holiday season, both because the time between Black Friday and Christmas is so much shorter, but also because of Amazon in general with Prime Day? Yeah, it's that, you know, adage of the holidays just keep starting earlier and earlier.

11:45I feel like we've been talking about them for months now, because there's this sort of a wide and shallow approach, I guess, instead of just focusing on this weekend right now, as we're speaking, I'm sure there are people shopping where it really did used to be where I remember like Cyber Monday clock strikes that like that's the end of your discounts, at least for the time being. And now it's it's hard to really I mean, I just did a story about this, but it's really hard to convince the customer to check out when And they know that these discounts are probably going to be around for pretty much the end of the year.

12:22And so there's little tricks that brands are using. But yeah, to answer your question, it really is sort of like an October through December strategy at this point. It's just the trick is to actually convert the customer. A lot of abandoned carts out there. Yeah. Lilu, I have another question, which is I was really happy we asked this question because I feel like there's so much conflicting data out there. about are people spending more? Are people spending less? What's going on? Do brands think they're going to lose money this year compared to years past? So what is the overall sentiment in terms of how the brands that you surveyed think holiday revenue is going to be this year?

13:01Absolutely. So in our survey, we asked some of the questions to discounts where this year compared to the previous year, what is your expectation of holiday season revenue? The majority of respondents said that overall that they're expecting holiday revenue to go up this year. In fact, over 50 % expect some kind of increase, either that's 1 % all the way to above 30%. While the majority of those respondents that said an increase are expecting somewhere between 11 to 30 % of an increase of holiday season revenue compared to 2023. So overall, it's a very optimistic viewpoint from a lot of the marketing respondents.

13:40Interesting. I was sort of surprised by that, though. I guess every company wants is expecting to post growth. It's just sort of the volume of their growth. Right. What have you been hearing, Gabby, from the brands that you're talking to? Yeah, I think cautiously optimistic seems to be the go to. But isn't that sort of the usual sentiment from marketers? Right. You want to go in with some optimism. But I think that there's a lot more taming of expectation. I feel like I started feeling that last year. And this year feels pretty similar, at least to the companies that I've spoken to. Got it. Another question I had, which is something that Gabby and I have talked about a lot over the years, which is the rise of social commerce.

14:21Lilu, is this the year that social commerce is actually going to be a thing for the holidays? Or is it just going to be another headline where maybe it's next year? You know, I wish I had a crystal ball to officially give you an answer. But, you know, based on kind of what we're hearing, what we saw in our survey, social commerce is definitely given its time in the limelight right now. So one thing that we asked our marketing respondents was in terms of, you know, sales channels, which of the followings grow in importance? And we asked a number of different channels, you know, owned e-commerce, social commerce, Amazon, retailers other than Amazon, physical retail, and so on.

15:00Of that list, the one channel that grew the most important during the holiday season was social commerce at 76 % of responding and saying that this channel for sales grows in importance and we're really focusing in on it. You know, we talked to a number of also like executives at different companies that manage the holiday strategy. And one of the things they did focus on was social commerce saying that, you know, this is a space that is growing a lot. It's changing rapidly, especially with younger generations. They're really adopting it, and they're more likely to use it than previous generations in the past.

15:39And along with that, when we looked at the year-over-year data for this, social commerce in particular grew much more in importance than previous channels did. So for instance, owned e-commerce actually was less highlighted this year by our respondents than social commerce was previously. I mean, this makes sense to me. I'd love to hear your opinion on this, Gabby, but I think that this is specifically TikTok's fault. Yeah, I was gonna ask, is this specifically speaking to TikTok? Are they talking about all social commerce, which I guess there's a few other apps that they're using, right? Right.

16:15Yeah. In our survey, we only asked social commerce in general. But, you know, through anecdotally with a lot of the interviews, many of the executives basically equated social commerce to TikTok shop. They did not really talk about some of the other platforms such as like Instagram or even Facebook on Meta. Yeah, I mean, I guess that just gives me a sense of another. There's a through line of also another channel that's being subsidized currently, you know, TikTok shop. So a lot of just incentives to shop on there, but obviously it's helping it grow. I know brands are trying to at least take advantage of it while they can to build out those stores.

16:56And I think we're seeing TikTok shop really try and bring more brands in specifically for holiday shopping. And I know that TikTok has been really pushing live streams and like long live streams with brands. And so I think the fact that brands are telling us that social commerce is going to be more important alongside TikTok shop being like, we really want you to do more social commerce content on the platform makes sense. And so I'm just really excited to see what the actual effect is come December and January. Like, will they say that this worked? will people have changed the way that they buy things?

17:32Or will it just be another time when us as journalists and researchers, we're constantly like, this might be the time social commerce really takes hold and people actually do it, like live stream shopping will actually happen. Maybe this is the inflection point. I don't know. Right. Well, I guess like maybe I'm a little bit cynical, but I feel like if it didn't happen during lockdowns, I don't know, will it happen now? But maybe sometimes, you know, sometimes things take a while, in this case, four years. Yeah. Lilu, kind of running out of time, but I guess what are some of the things that most surprised you about this report?

18:05And also, what will you be looking at once the final numbers are tallied? What are sort of the key metrics that you're going to be focused on to see what's happening this holiday season? Yeah, absolutely. I mean, at the end of the day, I think the main key metric is probably going to be revenue and how brands actually perform during this holiday time period. In terms of things that did surprise me during the report was some of the marketing channels that really grew this year, particularly, you know, physical catalogs and direct mail really grew this year. We saw TV ads grow in importance as well.

18:40You know, these spaces where I feel like a lot of marketers were less focused on in more recent years, they seem to be bouncing back to a lot of these more traditional channels because the digital ones are really just full and there's so many competitors in that space. That's what we're hearing too right now. Direct mail, more print, more out of home. Yeah, no, direct mail. I mean, I feel like it's very sinusoidal for lack of a better word or cyclical where direct mail is really interesting and then it falls off and now we're back where it's like back on the rise. And I think it's because people's inboxes are so full and brands are trying to find a way to target people correctly.

19:21And allegedly, I've heard that direct mail is actually very good at targeting customers. So yeah, it makes sense. And it's until our mailboxes get so full with catalogs that then maybe they'll fall off the wayside. Yeah, exactly. Yeah, I'm working on a story actually about that currently. So we'll get some more data and feedback on how that's working for brands. Well, thank you so much, Leeloo. That was super fascinating. Where might our listeners and readers be able to find all of your research? Yeah, absolutely. So the research and the full report on holiday sales in e-commerce is available on modernretail.co for members exclusively.

20:02And you can become a Modern Retail Plus subscriber at modernretail.co slash plus. And that's where all of our member exclusive reports and briefings and all that jazz is available. all right well on that note we could wrap up uh this special edition of the modern retail rundown hope everyone's having a great and safe weekend and we will see you back next week