Shops may have missed early holiday demand, says Rakuten

Kristen Gall, president of Rakuten Rewards, talks how supply chain issues, low inventory and inflation are just a few of the many factors hitting holiday shopping.

Video Transcript

SEANA SMITH: Supply chain issues is having a big impact on holiday shopping. We've been talking about it all afternoon. It's prompting some people to buy earlier even with the anticipation that their stuff is still going to get delayed. But let's talk about where things stand, how many people are shopping online.

And for that, we want to bring in Kristen Gall, President of Rakuten Rewards. And Kristen, it's good to see you. Full disclosure, I love Rakuten. I use it all the time. But you clearly have your pulse on the consumer, because people can use you in order to get rewards when they choose to do their shopping online. What are some of the trends that you're seeing this holiday season so far?

KRISTEN GALL: So we've seen a number of interesting trends. The first is, we actually didn't see consumers or shoppers activate as early as retailers wanted them to activate. We heard this drumbeat, "shop early, shop early, shop early," from every retailer really starting in September. And I don't know that they were as successful as they wanted to be in sort of capturing that early demand.

So what that means right now is that there is this weird world of matchmaking that retailers are trying to do with the inventory they have versus what consumers and shoppers actually want to buy. And trend-wise, that means two things. The first is on really hot items. There will be a very low level of discounting. Those sort of hot consoles, electronics, and all of the things that are super in demand and there's not a lot of inventory.

Conversely, there is a lot of inventory out there that is less in demand. And there's going to be a significant level of discounting on things that retailers have that they need to move to make room for all this inventory that will come in later because of supply chain issues and delays in shipping.

- You just hit upon what we've had analysts tell us. There's going to be a huge inventory build as we get into next year. It seems to me the message is, I should hold off. I know I don't want to be the Grinch who ruins the holidays. But hold off on buying because, wow, the deals will be really incredible as they have to clear out warehouse to make room for the stuff they weren't able to get this year that they need now and they're going to get.

KRISTEN GALL: That will be a very real risk for retailers this year, and that's definitely something that we at Rakuten are going to try to help our retailers with come December and January. I think the moral of the story to consumers and shoppers is, if you have a specific item in mind that you need to buy that someone is counting on, buy it now.

But if you have discretionary income to spend come December and January, there is going to be a playground of opportunity to really capitalize on a lot of these deals, because retailer inventory will come in late. They'll have about too much less time to sell it, and then their spring inventory is coming in hot on the heels. So they're going to need to move this stuff out really quickly, which means really great deals on seasonal apparel, coats, accessories, all of the things that retailers really hoped to sell in September or October.

- So how steep are the discounts that we're going to see right now? Because will they hold off? Because we still have supply chain issues and low inventory.

KRISTEN GALL: So what we're seeing is kind of two things. We are seeing some retailers that don't have a lot of inventory actively wanting to sort of pull back on traffic and demand, because they simply don't have things to sell. Conversely, we're seeing a lot of retailers, even those with supply chain issues, who do still have inventory, potentially not in the categories that they want to sell, but they're going to have to move that at very steep discounts.

So you will see retailers play very, very hard over Black Friday and Cyber Monday. I'm actually going to place the emphasis on Black Friday this year, because that's the year that we think will be sort of the big activation, we've seen actually a 40% increase in participation on Rakuten of retailers offering double digit cash back on Black Friday. So it's a massive opportunity for consumers to save.

But what it means is that they're discounting what they have to discount that may or may not be what you want to buy. So that's where the mismatch comes in. So there will still be great deals to be had. It just may not be on the hot inventory that shoppers want to purchase.

SEANA SMITH: Kristen, I guess, overall, how do you think this year is going to stack up to prior years?

KRISTEN GALL: What we're seeing right now, honestly, is that it's going quite well, and that matchmaking that retailers are trying to do with consumers has been relatively successful thus far. We're forecasting a significant increase to last year, and that's what we've seen really over the course of this year is-- This shift to e-commerce is still really happening and people haven't really trickled back into stores necessarily, I think, in the way that we thought that they would. So what we're forecasting right now is that the increases and the spending, and quite frankly, the average order value and the spend that shoppers-- what shoppers are.