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The concept of a traditional Black Friday is dead: Kearney Head of Retail

Greg Portell, Partner & Head of Global Consumer Industries & Retail Practice at Kearney, joins The Final Round to discuss the latest earnings out of the retail sector, Amazon Prime Day, and his expectations for Black Friday 2020.

Video Transcript

JEN ROGERS: Welcome back to "The Final Round." We learned a lot about the retail space this week. Of course, it is an incredibly important part of our economy. It tells us a lot about the consumer, their ability to spend, demand out there.

I want to bring in Greg Portell. He's partner and head of global consumer industries and retail practice at Kearney. So hey, what was your most important earnings look that you think we got this week? Because I felt like-- I was really into what Target had to say, but I also think the home improvement names were interesting. Was there one company that stood out to you and really gave us a roadmap for what's happening right now?

GREG PORTELL: Well, I think it was the consistency of results among those companies that have really invested in the multi-channel capabilities. We've seen companies like Walmart, Target invest in these channels for a while now, and they've never really been put under pressure like they have been in the past couple of weeks. And in both cases, those companies came through with flying colors. So they have a maturity in some of these emerging channels that really speaks well to their capabilities going forward.

RICK NEWMAN: Hey, Greg, Rick Newman here. So these earnings results and sales results we've seen lately tell us that shoppers are buying a lot of what they need. That leaves a lot of questions about the stuff they don't need, stuff they might only want, discretionary stuff. What's your read on what's happening with discretionary purchases? Are they going to come back, or are they just going to flatline for some time?

GREG PORTELL: Well, for the past couple weeks, most consumers were still trying to just figure out how things worked, whether they were learning new channels, whether they were learning new retailers to work with. So the pause in consumer spending over the past couple of weeks is really not something that we would say is an indicator going forward. However, having said that, we do expect that there's going to be a bifurcation of demand. That middle part of retail is really going to be under pressure where you have something where the consumers either don't quite see the value or retailers that can't match their value to cost.

RICK NEWMAN: Which retailers are you thinking of?

GREG PORTELL: Well, if you're going to be a high-end retailer, you actually have to have the combination of service, capability, product quality all to match that price point. And I think coming into the-- you know, when we come out of the COVID free where consumers are going to start going into those channels again, the more expensive retailers are really going to have to match that service. And we don't know yet. I mean, the real test is can those high end retailers reopen? I mean, why are you going to go to a physical store now unless you're going to get spectacular service?

AKIKO FUJITA: Greg, we've heard a lot of the big name retailers address the cost issue. In many cases, it's about the investment that needs to go to make sure that there is a safe shopping environment. But I'm also wondering about the wage equation to all of this. Certainly hazard pay, but there's a lot of talk of whether companies are going to start to withdraw that as well. It seems like there would be added pressure on some of these companies to pay more for what we now consider really essential workers. How much of that becomes a risk, in terms of an investment side of things?

GREG PORTELL: Well, we were starting to see wage pressure in the sector before the crisis because the importance of having one, continuity of supply and of workers and then also just those that could interact well with the consumers-- customer service side, the wage pressure was already there. What is becoming apparent is the cost algorithms and the HR management practices of many of these retailers have changed dramatically. Because you're talking about the need to restock shelves, to greet, to check out consumers. That's a very different labor profile than if you're carrying boxes to cars, than if you're investing in technology to self-serve. The mix of cost is really being changed by the COVID experience.

JEN ROGERS: So Greg, we got some news today. It looks like Amazon Prime Day, which is usually in July, is shifting to September, closer to another shopping holiday, which is Black Friday. What do you think is going to happen to Black Friday this year? What's it look like?

GREG PORTELL: Well, I think-- yeah, all retailers, Jen-- all retailers are going to rethink these concept of consumer choke points, whether that is the deli section of your local grocery store or large sale events. So in my mind, unless something dramatic changes between now and November, the concept of a traditional Black Friday is dead. We're just not going to see those masses of people in confined spaces for any time in the near future. Plus, if you just look at the way stores are handling social distancing, it becomes completely impractical to do that kind of sale event in today's environment or tomorrow's environment, really.

JEN ROGERS: Will it be virtual, though? Or are you saying they don't want to have choke points because they just don't want the pressure of having to be-- on their staff, in their warehouses, or is it just the people in the store, like just the shoppers?

GREG PORTELL: Well, I think the Amazon decision to delay the timing of Prime Day really does speak to the acute pressure that a lot of these retailers feel. I mean, Amazon's built their model on being able to exceed customer expectations and continue to make things quicker, no matter how much you need or when you need it. But that puts an enormous amount of pressure on the supply chain, the capability, the inventory, and that's not pressure that those retailers need right now. The question is, can they build up enough strength to handle multiple digital choke points in the holiday season? And, you know, we're going to find out over the next six months whether the retailers are able to handle that.

JEN ROGERS: Kearney's Greg Portell, thanks so much for joining us.

GREG PORTELL: Thank you.

JEN ROGERS: Nice to talk with you.

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