The impact of the holiday season for most retailers isn’t entirely clear yet and won’t be until after the New Year. However, based on what is available so far, I’d say it’s looking pretty good for most. :)
From overall retail spend to post-Christmas opportunities, the most successful retailers are pushing through the end of an incredibly disruptive year to reach the bright light at the end of the tunnel. Here’s what we learned from the holiday season until now:
Retail Overall Spending Increase: Digitally and Physically
Mastercard compiled data from both online and offline stores (using every type of payment) and, in comparison to last year, overall retail sales from November 1 through Christmas Eve were up 4.9%.
That's the highest rate of growth since 2011! Online sales helped significantly, which were up 18.1% over the season (last year, online sales grew 18.9%).
While online is still becoming increasingly important, in the grand scheme of total shopping it’s just a small piece of the pie. Mastercard’s Sarah Quinlan, Senior VP of Market Insights, reveals that online will only account for about 10 percent — maybe 11 percent — of total shopping. The rest defaults to the physical store, which in terms of overall spend, consumers still love to shop at.
"This year was a big win for retail, […], The strong US economy was a contributing factor, but we also have to recognize that retailers who tried new strategies to engage holiday shoppers were the beneficiaries of this sales increase." - Sarah Quinlan, Senior Vice President of Market Insights at Mastercard
Overall, retailers are seeing strong sales come through for the holiday season.
Retail Sectors #Winning
A slew of sectors saw a jump in sales, including electronics and appliances. It’s been the largest increase in electronic sales in a decade and was fueled primarily by smart home products like the Amazon Echo and Google Home.
Here’s the breakdown of Mastercard’s SpendingPulse Data (from Nov. 1 to Dec. 24):
- Electronics and appliances: 7.5% increase in sales
- Home furnishings and home improvement: 5.1% increase in sales.
- Apparel: 2.7% increase in sales (women's clothing sales were flat)
- Jewelry: 5.9% increase in sales
I guess you could say jewelry was a safe bet for last-minute gift ideas, as sales in this sector spiked significantly right before Christmas. Less than a month ago, jewelry sales were in the negatives!
Not only were these jumps an indicator of the most popular product categories this holiday season, but also show how physical retailers are finally getting the hang of the new retail environment. Mostly in respect to understanding what modern-day commerce looks like for consumers, who are still online “searching, comparing, [and] contrasting” for every single purchase:
“Retailers did a better job [...] since they know 82 percent of people are using an online device while shopping — and even when you have them in your store, they are searching all the time. […] retailers this year made a better effort reaching out and using that channel to their advantage. This was the first year […] omnichannel had a meaning.” - PYMNTS
A unified commerce shopping experience is finally catching on.
The final stretch of the year is here.
Pressures for retailer’s success during November’s extended Black Friday weekend garnered most of the media’s attention, however, there is one more crucial shopping week left before the end of the quarter: December 26 to December 31.
While Black Friday and “Super Saturday” (the Saturday right before Christmas) were huge spending days this season, the week after Christmas will provide retailers one last opportunity to close off the year strong. In fact, many consider it to be the “second-busiest week of the entire year, both online and offline.”
Most people will still be off work, allowing for some spare time to peruse stores and take advantage of post-holiday promotions on seasonal items. December 26 was expected to be the busiest shopping day post-Christmas, in addition to the fourth busiest shopping day of the YEAR.
In addition, the Saturday AFTER Christmas (which falls on December 30 this year) is also supposed to be a big shopping day. This wasn’t the case last year because it fell on New Year’s Eve, however, it’ll be the perfect time for shoppers to use gift cards, take advantage of post-holiday sales, and make gift exchanges or returns.
Another factor driving post-Christmas spending? A little self-love. :)
“The week after Christmas is almost entirely about personal shopping. Propelled by billions of dollars of gift cards, lured by great deals and seduced by the opportunity to purchase what they didn't get as a gift — and maybe the desire to take a break from visiting relatives — millions will hit the stores and the web to buy for themselves.” - Forbes
Regardless of what’s driving consumers to visit stores or e-commerce sites after the Christmas holiday, retailers (especially seasonal apparel) must carefully account for demand during this shopping period in order accurately mark down slower-turning inventory:
“Seasonal apparel is the most markdown-sensitive merchandise for most retailers, and savvy retailers know that getting products with slow sell-through to the right discount (good enough to sell at volume, not so low that gross margin gets killed) while "the ducks are flying" can make a big difference in maximizing sales, optimizing markdown dollars and getting inventory levels to appropriate levels for the balance of the season.” - Forbes
As with most things in life, it’s all about balance.
The holiday season is coming to a close and the final quarterly performance for retail is fast-approaching. It’s a critical week for retailers to optimize markdowns and inventory, and those who fail to accurately execute on this front will reap the consequences of missed opportunities.