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