By Patti Murphy
Amazon Prime Day 2019 is history, schools are back in session and there's a nip in the air – all signs that fall is upon us, and it's time to start thinking about how to help merchants make the most of the year-end holiday shopping season.
"Now is the time to get with customers and prospects to talk" about the upcoming holidays and what they need to compete better for share of wallet, said Laura Demke-Calixte, president and CEO of EPNA LLC, an ISO headquartered just north of Chicago in Evanston, Ill. She added this means things like staffing requirements, stocking up and marketing campaigns. "You need to get them moving in that direction," she said. "You really want to be seen as their advocate."
Christmas, Hanukah and other year-end holidays represent a huge selling opportunity for retail businesses. From shopping aisles to online shopping carts, strong consumer spending makes for abundant holiday cheer for retailers large and small. According to Mastercard's SpendingPulse report, which charts retail spending trends across all payment types (including cash and checks), retail 2018 holiday sales topped $850 billion, a 5.1 percent increase over 2017.
Two categories that charted the most significant increases were apparel sales (which rose 7.9 percent over the previous year) and home improvement spending (up 9 percent), Mastercard reported.
By all accounts, online stores were big winners last year, with holiday shoppers increasing their online spend by more than 11.5 percent over the year before, to total $146.8 billion, according to the National Retail Federation. But most retail sales were at brick-and-mortar establishments, the NRF reported. Overall holiday retail sales grew just under 3 percent over 2017 to total $707.5 billion last year.
NRF President and CEO Matthew R. Shay said slower than expected growth (NRF had projected an overall growth rate of 4.3 percent that would push spending to just under $721 billion) likely was tied to consumer concerns over a trade war. It is possible those same concerns could dampen spending this holiday season, despite a decision by President Trump to delay tariffs on an estimated $300 billion worth of Chinese imports from Sept. 1 to Dec. 15. 2019.
Those tariffs would tack on 5 percent to the cost of items like smartphones, laptops, household appliances, toys and clothing. This follows a 15 percent tariff imposed on $125 billion of items that include smart watches, Bluetooth headphones, flat panel televisions and footwear.
Six in 10 shoppers recently surveyed by Coresight Research said they're concerned tariffs on goods from China will cause spikes in holiday gift prices this year. Yet Coresight found most aren't planning to boost holiday shopping budgets to account for these price hikes.
Retailers also face a shorter shopping season this year, as Black Friday, the traditional start of the season, falls on Nov. 29, making the official shopping season just 26 days.
Tariffs and a short holiday sales season aside, consumer spending remains strong in the United States, rising 4.7 percent between April and June, and continuing that trend through July, according to U.S. Commerce Department reports. Jobless claims also remain at historic lows, and the official unemployment rate was just 3.7 percent in September.
eMarketer, which analyzes data on digital businesses, paints a brighter picture of the 2018 holiday shopping season than the NRF. Sales at brick-and-mortar stores rose 3.9 percent to $874.42 billion during the 2018 holiday season, while ecommerce sales soared 16.7 percent to $123.90 billion. The biggest burst of online spending came on Cyber Monday, with a reported $7.87 billion in sales, followed by Black Friday, when ecommerce sales totaled $6.22 billion, eMarketer said. This year, eMarketer expects holiday spending across all channels to grow 3.7 percent to reach $1.035 trillion.
"We really have a big push on, getting [merchants] to do ecommerce," said Demke-Calixte. Even if they're only selling a few items online, they need an online presence, she added.
ISOs and merchant level salespeople are well positioned to help merchants grow both online and offline sales. Providing access to working capital is one example. Darren Schulman, president of 6th Avenue Capital, which offers merchant cash advances (MCAs) and other funding solutions to small businesses, said his firm receives numerous inquiries from retailers between September and December, as they staff up, buy more inventory and dress up stores.
"Merchants are doing a lot of things to increase sales [this time of year], and sometimes they need money to do that," Schulman said. In addition to general retailers, restaurants and salons often need additional working capital to prepare for the holidays, he stated.
"A good merchant cash advance company will examine seasonality [at a prospect's business] by looking at prior year sales," Schulman said. "People should always learn from past experiences."
MCAs offer many benefits when compared to traditional bank loans. There are no credit check or collateral requirements, for example, but Schulman added these are not open spigots of cash. MCAs also are less time consuming than traditional bank loans, with some companies making funds available to merchants in as little as 24 hours. Plus repayment plans are more flexible, and can be made weekly, twice weekly or daily from incoming card receivables.
"We want to make things easier for merchants, to not put them in a bad position," Schulman explained. This includes not advancing more funds than a merchant can readily repay from future credit and debit card receivables. "We actually spend time [getting to know] every merchant we make an offer of funds to," Schulman noted.
Gift card programs can help merchants bolster available cash, while also driving sales and greater loyalty. "Loyalty and gift card programs can certainly help a business run better," said Demke-Calixte.
Data indicates consumers on both sides of the gifting equation prefer gift cards to traditional gifts. Among those surveyed by First Data Corp. for its 2018 Prepaid Consumer Insights Study, givers dedicate more than half their gift spending (55 percent) to cards, and spend on average 33 percent more on gift cards than they would on a traditional gift.
On the receiving side, 47 percent of surveyed consumers said they'd prefer a physical gift card over any other gift. Perhaps more importantly, for every gift card purchased last year recipients spent a whopping $59 more than the original value of the card, a $21 increase from 2017.
"Gift cards are an amazing customer acquisition and brand awareness tool – and incredible revenue generators," said Theresa McEndree, vice president, marketing at Blackhawk Network. Among the most popular gift card categories this time of year, based on Blackhawk's sales data, are dining (movie and a meal), movies, sporting goods, beauty supplies, and specialty home goods.
And while most consumers prefer plastic, egift cards are gaining in popularity. Blackhawk reported four categories of egift cards gained significant traction last year: office supplies, groceries, general entertainment and travel.
"This is the time of year when gift card programs, loyalty reward programs and data collection will stand out the most," said James Shepherd, president of CCSales Pro and co-host of the Merchant Sales Podcast.
Shepherd said data collection is an often overlooked tool that benefits MLSs and merchants alike. The lead up to the year-end holidays is an excellent time to pitch merchants on the value of collecting good data on customers, he noted.
"Small business owners realize that they should be collecting customer data at the point of sale," Shepherd said. "This includes email and mobile phone numbers. They know that they could be leveraging this data for marketing down the road."
The trick is to offer integrated POS systems that allow them to collect this data and easily leverage it. "When a prospective merchant tries to put you off until after the holidays, remind them that by installing your integrated technology solution they will collect more data from customers, and that after the holidays you will return to show them how to leverage this data with a loyalty program," Shepherd advised.
Several technology solutions help on this count, Shepherd noted. "It's time to brush up on the various email and text marketing apps that your POS solution has to offer," he said.
Demke-Calixte agreed. "To compete with the big players you really need to do something unique," she said. She recommends clients use gift cards as a way to reward loyal customers, and to win back those who may be dissatisfied. "If someone is upset about a product or service, [the merchant can] give them a gift card to get them back in," she noted, adding that financially, it's better than simply returning cash or reversing a card transaction.
The lead up to the holidays is also a good time for ISOs and MLSs to emphasize price. "For those agents pitching savings, they should remind the merchant that the potential for savings during the holiday season is dramatically higher than it is at any other time of the year," Shepherd said. "If you're offering 20 percent savings, that 20 percent is twice as valuable if revenue will be doubled for a given period of time."
Shepherd also counseled to not be disappointed if a prospect takes a pass, but not to give up either. "Once you decide on a path that will increase urgency to help you close more deals over the holidays, remember there are many business owners who will not buy," he said. "They are simply not going to engage you in a conversation, regardless of the value proposition."
Shepherd recommended offering specials after the holiday season as a way to get another shot at selling to these business. "When I was an agent, I would always create a one-day or even one-week special around January 15, and when I wasn't able to sell a merchant during the holidays I'd tell them about my yearly special offer and explain that I would return at that time," he said.
As for existing customers, this is a good time of year to promote networking among different clients, said Demke-Calixte. She added that EPNA always tries to connect clients in complementary business lines and offered printers and restaurants as an example.
While it's easy to look at data detailing double-digit growth in ecommerce sales and retailer store closings and think brick-and-mortar stores are going the way of dinosaurs, Mark Matthews, vice president for research development and analysis at the NRF, said this is far from the case.
He pointed to a report by IHL Group revealing that retailers are opening more stores than they are closing, and that ecommerce represents just 19 percent of all retail sales.
A total of 1,065 retail chains opened new stores in the first six months of 2019, representing a 56 percent increase over 2018, IHL reported. Just 206 chains closed stores, a 66 percent drop from 2018.
Total retail sales were up 3.1 percent for the first six months of this year, according to IHL, to total $82.7 billion. The biggest gainers so far this year have been restaurants (up 4.2 percent) and drug stores (4.2 percent).
"The retail landscape 10 years from now will likely be one where stores still play a vital role in the shopping experience," Matthews said. 
Patti Murphy is senior editor at The Green Sheet and president of ProScribes Inc. Follow her on Twitter Patti Murphy is senior editor at The Green Sheet and president of ProScribes Inc. Follow her on Twitter @GS_PayMaven.
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