Retail pundits are already calling the holiday selling season the best one in years. They would be wise to be measured in their rejoicing.
While early indicators suggest nice brick-and-mortar and online sales gains, the industry won’t know just how retailers actually performed until they report earnings for the make-or-break winter shopping blitz. That’s when we’ll see how their bottom lines fared amid the season's heavy discounting and the rise of notoriously profit-draining digital orders.
Along with the (premature) celebrating, some are sounding a note of caution.
While U.S. retailers might have enjoyed the best holiday season in years, “profitability is still being challenged,” said Steve Osburn, managing director at Kurt Salmon, part of Accenture Strategy, in a statement. “Retailers have got consumers used to a behavior where they now expect heavy discounting around Black Friday and Cyber Monday which puts pressure on margins and competitiveness.”
Mastercard: The 'Strongest' Retail (Sales) Season In Six Years
According to Mastercard SpendingPulse, which tracks overall retail spending trends across payment types, including cash and check, holiday sales rose 5.1% to more than $850 billion this year – the strongest growth in the last six years. Online shopping also posted gains of 19.1% versus to 2017. MasterCard’s figures reflect holiday shopping from November 1 through December 24.
Apparel And Home Shine, Electronics And Appliance Sales Fizzle
On a product-category basis, apparel logged a 7.9% growth rate compared to 2017, generating the best growth rate since 2010, Mastercard found.
By contrast, department stores ended the season with a 1.3% decline from 2017, while electronics and appliances were down 0.7%.
If sales are any indication, home is where shoppers’ hearts were this holiday season. Home improvement purchases continued its robust streak, with spending during the holiday period up 9%, just as the home furniture and furnishings category grew 2.3%.
The Night Before Christmas: Fewer Creatures Stirring Online
Online shopping traffic on December 24, Christmas Eve, plunged 54.4% from the year-ago period, according to Verizon’s Holiday Retail Index. But that doesn’t necessarily foretell lower online sales this season overall, Michele Dupré, group vice president of retail, hospitality and distribution for Verizon Enterprise Solutions, told me.
"Traffic volume was still very strong this year, however we just saw a larger spike last year compared to this year. In part, this could be attributed to being a longer holiday season in 2018," she said. What's more, "we saw increases in volumes for Black Friday and Cyber Monday this year, so consumers were more tuned to sales early in the season."
At the end of the holiday shopping marathon, Dec, 22 and Dec. 23 were also the last days to ship in time for Christmas-day arrival, "so shoppers looking for last-minute gifts had to buy in-store or have it arrive after Christmas," Dupre said. "Stores that didn't offer same day pickup on web orders, lost on that traffic."
Retailers Deliver 93% Of Holiday Orders Accurately (Amid Lowered Expectations)
According to the 2018 Holiday Shipping study from Kurt Salmon, part of Accenture Strategy, retailers should be patting themselves on the back for keeping their shipping commitments to shoppers this holiday season, as 93% successfully processed and accurately delivered orders to customers on their last guaranteed shipping date before Christmas.
But they shouldn’t pat themselves too robustly. That on-time delivery success rate went hand in hand with fewer shipping guarantees to consumers. Indeed, 33% of retailers nixed their “last order promise date,” as Christmas neared to avoid disappointing customers — the highest percentage Accenture has tracked compared to previous years.
Instead, many retailers opted to promote their buy online, pick up in store perks and in-store specials to fuel last-minute sales and reduce the risk of broken shipping promises, the consultancy said.
These retailers ranked as top performers in delivering standard shipping orders to their customers that were placed before Christmas, on or after December 20, include Amazon Prime, ordered on Dec. 22; Under Armour, Lululemon, MM.LaFleur, Coach, L.L.Bean, Nordstrom and Zappos, ordered on Dec. 21; and Dillard’s, Macy’s, Timberland, Sephora, Saks Fifth Avenue and Best Buy, ordered on Dec. 20, the study found.
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