Can businesses still hope for good holiday season sales?

10 November 2020 4 min. read
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In an ordinary year, businesses all over the world would now be rolling out their sales plans for the upcoming holiday season. But 2020 is no ordinary year. It is the year of Covid-19, which is roiling markets and disrupting economies. And that reality is leaving many businesses questioning how well they might fare in the fourth quarter this year.

What's most worrisome is that there are no easy answers. In multiple major markets, the Covid-19 pandemic is getting worse at precisely the wrong time for businesses. And that’s creating even more uncertainty as the year draws to a close. To try and make sense of what's happening, here’s a look at the available data surrounding the nascent global economic recovery, and an analysis that seeks to answer the question of whether businesses can still hope for good holiday season sales.

Signs of a slowing recovery

Although the resurgence of the Covid-19 pandemic hasn't yet had its full effect on the global economy, a cursory look at the data leading up to the present time reveals a situation that should be of some concern to businesses. According to JP Morgan's Global Composite PMI, which uses a survey of supply chain managers to gauge upstream and downstream economic activity, the economic rebound since the first wave of the pandemic has already started to lose ground.

Can businesses still hope for good holiday season sales?

After regaining its pre-pandemic levels in August, the index began declining the next month, reflecting the ongoing headwinds created by the worsening pandemic. If the trend holds, the losses may push the composite PMI back toward its June levels by the year's end. That would indicate that a double-dip recession is in the offing – leaving businesses in danger of suffering a less-than-stellar holiday season.

Consumer confidence stabilising

Despite the persistent unemployment that’s now a fixture in major economies in the Eurozone, the UK, and the US, there is a bit of good news for businesses. It's that consumer confidence is showing signs of stabilising after a disastrous second quarter.

According to the Conference Board, the global consumer confidence index now stands at 101.8, which is a major improvement from August's figure of 86.3. In their measurement, anything above 100 reflects positive consumer sentiment – which is astounding given the grievous economic damage wrought by the pandemic.

It’s also something that should make consumer-facing businesses cautiously optimistic about their prospects in the coming holiday season. It seems that despite all signs pointing to a return to recessionary trends in the coming months, consumers still expect to be spending money in the near future. The only real question for businesses to answer is how much they'll spend and what they'll choose to spend it on.

Online retail has a persistent edge

For obvious reasons, there’s been huge growth for online retailers almost across the board so far this year. In some regions, it’s an access issue – with in-person retail hampered by social distancing rules and mandatory closures. And in other regions, it's been about consumers simply being unwilling to shop in person whenever they can avoid doing so.

To adapt, retail businesses are building new storefronts online, improving user experiences via omnichannel marketing, and moving in-store jobs to other divisions. According to the Harvard Business Review, the conditions have rewritten the rules for the retail sector. What’s more, they predict that consumers will cling to their pandemic-driven behaviour changes long after conditions on the ground return to normal.

This means that we’re likely to see businesses with heavy online presence do comparatively well this holiday season, while in-person retail continues to struggle. And none of this takes into account any additional restrictions that may become necessary as the pandemic surges across the world. In the UK, for example, it’s looking likely that restrictions are going to increase throughout much of the country right as peak shopping season begins.

The takeaway

The bottom line here is that businesses all around the world are still facing significant challenges that may yet derail their holiday season performance. But it’s not because consumers don't plan to keep spending money. Their fate is more closely tied to what local governments do in response to the second wave of the pandemic and how those responses impact specific economic sectors.

In general, though, it’s not unreasonable to expect that online retailers should see holiday sales performance that is either on par with previous years or that exceeds them. And in-person retail businesses will continue to suffer poor bottom-line performance at the same time. So, right about now, online businesses should start load testing their digital platforms in anticipation of a strong finish to the year. And in-person retailers better figure out how to get online – before it's too late.