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        Faculty, Marketing

        Harbert faculty discuss new normal in retailing as holiday shopping season begins

        November 3, 2023 By Michael Ares

        All News


        Image of shoppers in crowded mall

        "Those quietly hoping for the return of the Ghosts of Christmases Past will likely be in for a big disappointment."

        O.C. Ferrell, James T. Pursell Sr. Eminent Scholar in Ethics

        Recent reports citing plans by Target, Walmart and other major retailers to close stores in certain locations while opening new ones in others – some barely a few miles away – raise questions as to what’s really going on in retailing as we approach the most important months of the shopping year.

        While smash and grab attacks, rising shoplifting and nagging inflation get all the headlines, research reveals that these and many other reasons retailers often give for their store closings and openings fail to paint the whole picture. Retail has changed dramatically – and we aren’t likely to return to the “good old days” of packed malls and long lines at big box stores this coming holiday season.

        That’s what O.C. Ferrell, James T. Pursell, Sr. Eminent Scholar in Ethics at Auburn University’s Harbert College of Business, and Linda Ferrell, Globe Life Professor of Marketing at Harbert, have determined following their detailed assessment of the status of the retail industry as the holidays approach.

        Question: How will the 2023 holiday shopping season compare to pre-pandemic shopping seasons?
        O.C. Ferrell

        We all know that Covid-19 changed consumer purchasing behavior over the past few years, and with Covid largely in check, some might expect a return to pre-pandemic times this holiday shopping season. We don’t think so.

        The Christmases of 2020 and before are relics of the past. While the September retail sales report from the Commerce Department showed a 0.7% increase in consumer spending – more than twice the expected rise – there are key factors that call into question whether this data signals a robust holiday shopping season that will mirror pre-pandemic times.

        • CNBC cites a recent Morning Consult Survey showing that 92% of consumers will be cutting back on spending this year due to inflation, a pending recession and other elements of economic uncertainty.
        • Parcel carriers such as UPS and FedEx are signaling a weak holiday shipping season and lowering their prices accordingly, with the US Postal Service saying they will not add a surcharge this holiday season as they have in the past.
        • According to the Wall Street Journal ocean cargo shipping rates from China are down 90% from the high during the pandemic. The volume of products coming in from China is in rapid decline.
        Linda Ferrell:

        Another key indicator is inventories, with the largest retailers in the U.S. reporting inventories well below levels reported at this same time last year. That points to an industry getting better aligned with expected demand as compared to prior overstocked years.

        Add to that the continuing reports of customers openly complaining about inflated prices, lack of product availability, supply chain disruptions and a general hesitation from both consumers and workers alike to spend time in stores due to reported instances of violence.

        And it turns out that not everyone wants to go back to in-store shopping or malls. Online sales continue to increase and support an increasingly popular lifestyle that offers 24-hour shopping from home. And, the 10,000 pound gorilla in the room is Amazon, with global sales of $514 billion in 2022.


        What role does shoplifting, employee theft and other operational losses – collectively referred to as “shrink” – play here?
        Linda Ferrell:

        Shrink is a retail industry financial metric encompassing a wide range of product loss factors experienced along literally every step of vast retail supply chains – from product sourcing and shipping to stocking, sales, shoplifting, employee theft and even product returns. According to a recent National Retail Federation report, losses from shrink totaled $112.1 billion last year, up almost 20% from the previous year.

        Theft accounted for nearly two-thirds of that shrink, which is on par with percentages from recent years. Interestingly, external theft – shoplifting, robberies and grab-and-go attacks – represented only a little more than half (~$40 billion) of overall theft compared to employee theft (~$33 billion), with process control failures and errors (~$30 billion) making up the lion’s share of the rest.

        At the same time, the rising cost of doing business in locations targeted by gangs and the impact of other forms of fraud and theft have caused retailers to carefully evaluate where they can profitably operate stores. Theft mitigation systems and tactics are costly and cumbersome to implement, with a relatively low rate of return and employee disruptions that many retailers simply can’t justify.

        O.C. Ferrell:

        There is one area where theft mitigation efforts do show promise – the use of artificial intelligence (AI) to help retailers identify shoplifters before they steal. Video footage of shoplifters from when they first enter a store generate a database of behaviors, facial expressions and other markers that can give security experts a jump on these crimes before they occur.


        With more than 55% of shrink attributable to internal factors, what role can in-store employees play in finding viable solutions here?

        O.C. Ferrell:

        Efforts to engage employees in stemming this fraud and theft haven’t gained much traction so far, and aren’t likely to. Retailers struggle along with restaurants and many other industries these days to find and keep employees. Requiring them to intervene with shoplifters only adds to that challenge. Asking employees to submit to background checks, undergo additional onboarding and training or even participate in validating the integrity of product returns appear to be non-starters for many current and prospective employees.


        What do all these trends and seemingly uncontrollable operational factors signal for brick-and-mortar stores this holiday season?

        Linda Ferrell:

        Where and how consumers are buying – not only how much they spend – will be the defining factor for retail profitability and success this holiday shopping season and for years to come.

        Take urban stores, for example. Sales at these locations will continue to suffer, as cities and high-density suburbs struggle through massive residential and workforce shifts – including the strong resistance by work-from-home employees to return to their in-town offices. Just look at the soaring level of urban retail and commercial vacancies across the country. Retailers simply don’t need as many brick and mortar stores in the center of major cities to serve a declining downtown clientele.

        O.C. Ferrell:

        In the end, retailers will need to listen to their customers and follow their buying behavior closely through a more discerning lens. Those quietly hoping for the return of the Ghosts of Christmases Past will likely be in for a big disappointment.


        O.C. Ferrell

        O.C. Ferrell

        O.C. Ferrell is the James T. Pursell, Sr. Eminent Scholar in Ethics at Auburn University’s Harbert College of Business. In addition to his teaching, research and textbooks, Ferrell is the director of the Center for Ethical Organizational Cultures. Ferrell has served as an expert witness is some high-profile ethics, legal and marketing cases. He is a former president of the Academy of Marketing Science and former president of the Academic Council of the American Marketing Association.


        Linda Ferrell

        Linda Ferrell

        Linda Ferrell is the Globe Life Professor of Marketing at Auburn University’s Harbert College of Business. She has served on a publicly traded corporate board for over 4 years. Ferrell has also served as an expert in ethics and legal disputes and has co-authored 6 textbooks. She is a former president of the Academy of Marketing Science. Ferrell also serves on the board of the Responsible Research in Business & Management.