Last week, I announced my annual holiday forecast for the retail industry, and in case you missed it, below are the high-level points:
- Overall, retail sales will see a 3.2 percent increase year-over-year (YoY) in the United States – excluding automobiles and petroleum – for the November through December holiday season
- Digital sales will increase 14.9 percent YoY, and will grow from 14.4 percent of total retail sales to 16 percent
- Top seasonal performers will come from women’s fashion, which may have one of the stronger performances we’ve seen in many years, and jewelry, which will look to rebound from a tough holiday last year. Electronics, including television, is showing a glimmer of hope, and it will be interesting to see if “wearable technologies” sales venture into the clothing and accessory categories or stay within electronics. Regardless, wearables will account for significant holiday spending.
- General merchandise and specialty stores will show slower growth at a 1.9 percent
- Brick-and-mortar store traffic is projected to decline 11 percent in November and 5 percent in December as compared to 2015 levels; however, selling metrics will minimize sales losses, with Conversion increasing 0.5 percent and Sales per Shopper (SpS) up 6.5 percent
Heading into the holiday season, we’ve seen several positive trends emerge, including overall retail sales increases of 2.9 percent, with several specific categories of outperforming the average – specialty (women’s clothes, shoes, jewelry) and warehouse clubs/super stores being notable performers. On the flip side, department stores and discount stores are trending down year-to-date through June according to the U.S. Census Bureau.
Women fueling a fashion comeback?
I think women’s fashion may have one of the stronger performances we have seen in many years, along with the complementary segment of jewelry, which tended to struggle mightily last holiday. The retail “buzz” seems to indicate that women are finally interested in buying fashion apparel again.
The electronics category has an opportunity to shine this holiday season, and there is no question that wearable technologies will be a considerable subject of both media- an brand storytelling as well as holiday shopping spend. One interesting tact I’ll be following is whether wearables morph out of its traditional electronics category and moves into other categories like clothing or accessories. The momentum is there for a move, and with the holiday season push, it might just make that transition and change the way the industry looks at the technology products.
Furniture is still a strong category, but it may slip from last year’s level with a trending consumer shift from hard to soft goods for this holiday season. Typically, furniture will have about 17 percent of its annual sales in November/December as compared to about 18 percent for total retail. Clothing and electronics reap more sales in November/December as well, ranging from 22-25 percent of total annual sales, and jewelry typically leads the way at over 27 percent of annual sales during the holidays.
Store traffic trends for fiscal year-to-date range from declines of 6.6 to 8.2 percent. The projection for November and December is a traffic drop in early November leading into a strong Thanksgiving weekend, then continuing with a strong holiday season turnout. Total traffic in November will decline 11 percent, and while it will rebound considerably, December store traffic will decline five percent year-over-year. On the plus side, strong shopper engagement initiatives will improve selling metrics, and with conversion expected to be up 0.5 percent in December, I fully expect an increase in Sales per Shopper of 6.5 percent for the month.
But, wait a minute – what about the impact of Election 2016?
Historically, Presidential elections have had little statistical impact on retail, and there are many more pertinent factors relevant to consumers’ shopping behaviors heading into holiday, including broad economic indicators like oil prices, unemployment rates (under 5 percent since 2008), interest rates and inflation. With those economic metrics in mind, Holiday 2016 is shaping up to be relatively positive, and I don’t think the election will derail it much, if at all.
There may be a slight degree of variability in early November due to the distraction of the elections. However, it should be offset by the positive trends heading into the second half of the fiscal year – economic indicators are good, there are two extra shopping days between Thanksgiving and Christmas as compared to last year’s holiday season, and any residual angst of the elections will be well over by Thanksgiving, still the beginning of holiday shopping season.
Retailers are helping themselves too, finally converging more of their digital and physical platforms, creating more engaging shopping environments, investing in differentiated product assortments and responding more readily to shopper demands.
Learning from last year
For some, “Thanksgiving” can start as early as late October, and shoppers are open to receiving offers early. Strategies should include a month-long event culminating on Thanksgiving weekend. Planned frequency of visits would be ideal to maximize the total dollar spend by each shopper for the month. Many will be distracted early November with voting and watching the polls, but retailers should be proactive in their approach around this political event. Best days for the Thanksgiving weekend will be Friday and Sunday, which leaves Saturday as an opportunity to capture.
4 keys to maximizing Holiday 2016 performance
- Reimagine Thanksgiving – it’s moved well beyond Black Friday through Cyber Monday. Last year, it was essentially a week-long event. This year, expect many – stores and shoppers alike – to stretch it from November 1 through Cyber Monday (November 28).
- Be agile in applying lessons learned from the digital channels early in the season to the brick-and-mortar channel later in the season. Shoppers are increasingly starting their shopping journeys online, and digital will be able to highlight the way for physical.
- Arm store associates with the enabling technologies to empower them to be “super heroes” on the front lines. Close the knowledge deficiency gap, where shoppers enter the store knowing more about the brand and its products and services than sales associates do.
- Make price matching and price transparency super easy for your shoppers. They want to know, and they won’t trust you if they can’t figure it out.
Quick calendar hits
- 2 extra shopping days this year between Thanksgiving and Christmas
- Hanukkah and Christmas overlap
- With Christmas on a Sunday, prepare for massive shopping day starting immediately after
- Christmas Eve, Saturday, December 24, will be a challenge – the much bigger shopping days will be the weekend before – so have a plan built ahead of time
- Overall, the strongest weeks of December for traffic and sales at brick-and-mortar stores will be weeks 4 and 5
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