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We are heading into the most important time of the year for retail. The fourth quarter and the holiday season can be
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literally a make orb breakak time of the year for many of them. And with some of
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the dynamics we're seeing in the economy right now, it makes us wonder just what
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we might be looking at for sales this holiday season. Pleasure to be joined today by Mina Feder, who is managing
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director of the Baker Retailing Center here at the Wharton School. Mina, great to talk to you again. How are you?
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>> Good, good. Thank you so much for having me. >> Thank you. And I think there are it
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feels like more questions about the holiday shopping season this year. When you throw in where the economy is,
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inflation, how people feel about their pockets this year. What are you hearing? >> So, I'm hearing overall that the growth
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rate, it's it's a little bit all over the map, but what I'm hearing is around
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4% is what we're expecting in terms of retail, you know, sales growth. But I'm
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not sure exactly what that means because with pricing going up, you know, to your
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point about inflation, with what's going on with tariffs and things like that,
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there's a lot of uncertainty. And I'm not really feeling that that increase is
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going to be on volume or even on profits. It's going to be much more on the fact that the prices are increasing,
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costs are increasing, and therefore prices are increasing. So I'm not sure that the margins are really going to be
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seeing that kind of growth is what we're seeing expecting to see for retail,
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>> right? And and so that makes you wonder if and I to a degree we saw earlier this
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year when we were in the time of tariffs coming on board that a lot of companies
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were bringing more material in, bringing products in earlier of whether or not they may have a lot of leftover stuff on
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their shelves because the prices are higher and people maybe aren't buying as
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many things this year as they would say in prior years. Yeah, that that definitely could be an issue, especially
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when you're talking about, you know, six months ago, people may have not known
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exactly what they were going to be purchasing um for the holidays, and so perhaps the mix isn't appropriate right
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now. I also think that people started purchasing for the holiday season. I mean, it's always it's been a trend for
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the last couple of years, but probably more pronounced even this year, which is that people are purchasing earlier with
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the anticipation that pricing was going to be increasing and with the uncertainty of everything that was
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coming on. And so, I think that um we may not see that big of an impact. I mean, I should say Black Friday is not
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only a a big time of of the year in general, but it's more tradition. I don't think that the sales and the the
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pricing that we've seen before is it's already started earlier than it has in
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prior years. And so my guess is that we're not going to be seeing that kind of pronounced increase. So people may
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have a really good idea of what holiday looks like for them already at this point.
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>> So how much discounting do you think may go on this year? I mean, we know it's a
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component of the retail segment every year, but it makes you wonder if companies are willing to do more of it
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to try and get more stuff off the shelves. I think it depends upon what their inventory position is. And it
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really depends, like I said, on categories. Like, if you think about where people are spending their money
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this year. It's going to be on value. It's going to be on apparel. It's going
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to be on health and wellness in those areas. And so, my guess is that they won't be overs supplied as much in those
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areas, but maybe in some of the other areas where they're not expecting um, you know, those kinds of increases.
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Well, you know, as we're recording this, Black Friday is coming up next week, so
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there's still lots of questions about what we're going to see at that point of
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the season as well. >> Certainly, I think that the whole ecom world has changed a bunch of, you know,
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in terms of how people think about shopping these days. But I still think there's two things that I think that are
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happening. Black Friday is still Black Friday here. It's a tradition. So people, I think, see that as an
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experience that people want and wanted and right now experience is such a big thing that I think people are still
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going to be going out on Black Friday. I mean, these stores that open at 6:00 in
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the morning or 5:00 in the morning or midnight or whatever time it is, I think those lines and all of that stuff, I
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mean, there's a fun component to that, which is the reason why people do that.
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And so, I think that will still exist. But at the same time, um, the ecom world certainly has taken, you know, some of
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those sales earlier in the time period and people are willing to buy last minute. So, I think that's going to
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happen as well. A little anecdote, I was um at the King of Prussia Mall this weekend on Saturday. There wasn't a
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parking spots to be had in the mall at all. And so, I think people are shopping. People want to be in the
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stores. And I think that that's a really good thing to see. So, are we seeing a
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recovery? And and I guess because of the pandemic, a lot of people wondered what
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the mall was going to be like in the years ahead. Are we seeing a larger recovery in the malls than maybe even we
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expected to occur? >> Yeah, I think so. I really do. I think that people are interested in going to
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the store. They're interested in meeting with with the associate to learn more
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about the products and all those things. I also think that what's happened is
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that as consumers have changed and where the experience in the stores were not so
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great you know soon after the pandemic or even before the pandemic where people were going ecom I think that you know
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retailers and brands have learned that they need to do something different in the stores and I think some of those
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things are coming forward as well so people are more interested retailers are responding more to what the consumers
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are looking for and I think that's kind of led to a rebirth of of the brick and
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mortar. So brick and mortar isn't dead as some people projected several years
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ago. So >> you you used the word experience a couple of moments ago. I remember a
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couple years ago we saw a a pattern developing of people wanting to buy experiences at the holidays more so than
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stuff. Is that still a component that's significantly in play right now? >> I do think it is. I think that um
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especially when you start taking a look at the socioeconomic classes and kind of
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where people are overall, I think that at the the very top tier, people will continue to want to do fabulous
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experiences and I think that matters a lot. Um I think though when you start talking about people who are more
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cramped who have issues right now with regards to the uncertainty of the economy with their unemploy their
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employment situation and things like that you're probably going to see much more value kind of shopping experiences
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still but it'll be on a much smaller scale and you know the necessities are going to come first and so I think you
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know you'll you'll see a bit of a a bigger dichotomy than was there before.
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So, and it's it's interesting you bring that up because I read a couple of
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articles where retail CEOs were talking about how the consumer seems to be more price savvy than ever before. And that
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kind of I think leads into exactly what you were saying right there. >> Yeah. I think that, you know, the the
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discount stores, the um the the TJX's, the Walmarts, I mean, those kinds of value um providers will really see um a
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lot of consumers coming in. >> There's also been a a growing reliance on credit as well by the consumer. Uh is
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there should we be concerned that it seems like it's so much of a reliance on
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credit to get through right now? Certainly um that is the case, but I also think that um creditors are are
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much more conservative than they've been before in terms of issuing credit. So
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I'm hoping that that will help offset some of that. But there's no doubt the
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holiday season is a time period when people are willing to take on more credit because it is, you know, the
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season of giving. So I do expect some of that to happen. But I think that the economy and where things are right now
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is is top of everybody's minds. And so from that standpoint, I think people are
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being much more cautious. And >> and again, I touched on at the top, but if you can, you know, give your own
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perspective on it, how important these three months, this fourth quarter of the year is for retailers as they head into
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the next calendar year. >> I think it's it's holiday season is always important. You know, back to
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school holiday seasons, those are probably the two big areas where retailers count on a big piece of their
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margins and and revenue to come from. And I think that that's absolutely still
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the case. and it it'll be a strong indicator of what's going to happen for
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next year as well. >> Mina, great to talk with you. Thanks very much for your time today.
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>> Thank you. Speak to you soon hopefully. Bye-bye. >> Thank you very much. Kamina Federer who
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is uh managing director of the Baker retailing center here at the Wharton School.