A Retailer’s Review of Holiday 2016

Shelley E. Kohan
Shelley E. Kohan
Vice President of Retail Consulting

The holiday season is the most important season of the calendar for most retailing brands, and the recently completed 2016 holiday season proved no exception, with retailing winners, losers and more than a few surprises.

The RetailNext Performance Pulse has been issued and the holiday results are in for physical retail performance. In reviewing the results for brick-and-mortar stores, keep in mind it only tells part of the complete story. The digital side of the business is not included in these results, which includes both online and mobile sales.

Overall all for the month of December, store traffic was down 13.4 percent, with corresponding
decline in sales of 10.7 percent. Conversion for the month was also down by slightly less than half a point. For its part, sales were actually helped with strong performance in the selling metrics of shopper yield – up 3 percent – and average transaction value – up 5.6 percent.

In December, the Northeast and West regions showed overall better performance than the Midwest and South, and the top traffic day for the entire holiday shopping season proved to be Friday, December 23, unseating Black Friday, November 25, which was the second highest traffic day, for the title.

The Thanksgiving weekend has now morphed into a month-long event starting as early as Halloween, and resulted in Black Friday losing its first place traffic ranking in 2016 (as previously forecasted in October). December 17 and 10 – both Saturdays – took the third and fourth spots in the rankings for store traffic. On the sales side, the top days were December 23, again, as forecasted, followed by Thursday, December 22, which was not forecasted and came as quite the surprise for me. Black Friday itself place third in sales, while this year’s “Super Saturday,” December 17, ranked just fourth.

A slow start

Both November and December started slowly, but for very different reasons. November’s early stall was a result of the elections earlier in the month, whereas December had a few different factors which impacted early shopping trips to physical stores. Weather in the first few weeks of December was unseasonably warm, the effect of the holiday calendar with Christmas on a Sunday gave shoppers the full week leading up to the holiday to purchase gifts and the current shopper trend of waiting closer to events to make a purchase all weighed into December’s slow start.

As forecasted, week four of December was the strongest week in terms of traffic, sales and shopper metrics including shopper yield (conversion and average transaction value combined), all up over the previous year. The biggest difference in November and December was in the average unit retail measurement, where November’s AUR was down from a year ago with heavier promoting throughout the month and a surprisingly improved AUR in December as compared to 2015.

Retail formats varied greatly with discount stores and off-price showing more positive results, while department stores remained challenged with both traffic and sales. Specialty stores had a wide range of winners and laggards. The winning brands had three common characteristics: 1) a shared experience between physical and digital touchpoints, 2 strong brand loyalty and engagement, and 3) consistent messaging and actions holding true to the brand ethos.

Big Surprises:  Mobile, IoT and Post-Holiday

Surprises for the holiday season be summed up in just three words: mobile, IoT and post-holiday. For starters, the big surprise developing on the digital side of the busienss was the accelerated and widely accepted mobile purchasing that was completed this season in comparison to last year. While final numbers have not been posted, my quick back of the envelope analysis tells me mobile purchasing far surpassed that of yesteryear. The shopper comfort level grew substantially in Holiday 2016, making the shopping journey and friction-free, without the hassle of lines, parking and other pain points. Mobile purchasing, stole the show from online and brick-and-mortar traffic, and it very much matters to physical retailers as the convenience and ease of mobile purchasing not only derails traffic to the stores, but also creates an expectation of frustration-free shopping. Retailers and brands on the store side will need to invest time, energy and funds to remove the pain points of the shopping experience and optimize the journey to surpass shoppers’ newly formed expectations. Physical retailers who are showing a mastery of friction free shopping include Apple and Starbucks, and while it’s too soon to tell related to Amazon Go, early indications are strongly positive.

IoT devices won big this holiday and will keep on giving throughout the year, albeit more of “me-buying” as compared to gift buying. Brands who sell IoT devices are training the customer on how to shop more efficiently. In fact, Amazon clearly marketed this with its “skip the trip” messaging. In addition to the previously mentioned strategies to remove shopper pain points, brick-and-mortar retailers need to create compelling reasons to draw shoppers into the store. This can be accomplished through store experiences, differentiated products and assortments, and associates who foster engaging interactions with shoppers. Physical retailers who are showing an early mastery of that trifecta include Lululemon, REI and L’Occitane.

The third surprise this holiday was the significant drop in traffic (and interest) post-holiday on December 27 & 28. Typically, December 26 and 27 foster high store traffic figures. However, this year, while December 26 was the sixth-most trafficked day at stores, December 27 was just the 17th-busiest day. This probably had more to do with the holiday calendar and many people being on holiday vacation on the 26th. Luckily, we do not need to deal with this again until 2022!

As the holiday is behind us and we wait to see the results come out from retailers and brands on their fourth quarter performances, the strategies for 2017 are already being executed upon. I will be pulling together my retail trends for 2017-18 in next month, but rest assured they will include mobile, collaborations with unexpected partners, portfolio strengthening and an emphasis on in-store analytics and optimization.

See you at the NRF Big Show –  be sure to check out my Show Guide for what not to miss – and until then, Happy New Year!

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