Learning from the Hiccups of Holiday 2015
This past holiday season, the American consumer could have been called anything from finicky to punctually challenged. But at the end of the day, they quit their procrastinating and spent well, to the tune of a 7.9 percent gain over last year, according to MasterCard SpendingPulse. That number exceeded pre-holiday predictions of between 3.5.-to-5 percent increases, leaving retailers to consider what went well (mobile shopping) and what needed work (in-store pickup), and how to better counter Mother Nature next year.
"There's also been some research showing Millennials are more engaged and they might come out to shop as a social thing...Certainly, retailers are using their social media departments to connect with consumers. So going in-store for social events could be a source of traffic if it's seen as an interactive experience."
Founder & President, Retail Metrics
Overall, Retail Metrics’ Ken Perkins, founder and president, said early reports were encouraging.
“For example, the numbers from Francesca’s were solid,” Perkins said. The retailer last week raised fourth-quarter guidance, which included an expected high-single digit increase in comp-store sales, versus an earlier prediction of mid-single digit increases. “L Brands was up 8 percent, Children’s Place comps increased 7 percent. Even JC Penney saw a 3.9 percent gain. The one fly in the ointment was Macy’s.”
Macy’s last week announced plans to cut 4,500 jobs, mostly store employee positions, due to a 4.7 percent decline in holiday sales. Terry Lundgren, CEO, said four-fifths of the sales declines were related to a drop in demand for winter coats, sweaters and boots, and accessories like hats and gloves.
Record-high temperatures, especially along the East Coast, caused specialty apparel retailers to lose $500 million in sales between November 1 and December 26, according to consulting firm Planalytics.
Before the season kicked off, 14 percent of consumers planned to start their holiday shopping in October, 28 percent expected to start in November, while almost a fifth (17 percent) planned to begin in December, according to Cotton Incorporated’s Lifestyle Monitor™Survey.
More and more, consumers are using Black Friday weekend to shop for electronics or items for themselves. And they’re waiting for Super Saturday — the last Saturday before Christmas — for some of the biggest deals for gifts. The National Retail Federation says as much as 40 percent of the season’s sales occur in the final 10 days before Christmas. And this year, the NPD Group found almost 60 percent hadn’t completed half or more of the shopping midway through December.
“Shoppers aren’t as concerned with Black Friday as they used to be because deals are offered all season,” Perkins says. “Stores were out early right after Halloween with pre-Black Friday sales. What we’re seeing is a holiday shopping season that’s morphed into a big turnout over Black Friday weekend, then there’s a long lull until Super Saturday right before Christmas. Then we have a pickup with last-minute shoppers leading up to Christmas, followed by post-holiday gift card redemptions.”
Going forward, this could mean retailers will time their mobile, online, and in-store promotions differently, depending on the month, week, or even the day during the season.
Before Holiday 2015 kicked off, 44 percent of shoppers planned to buy gifts in-store on Black Friday, while 47 percent said they would shop online, according to the Monitor™ data. Consumers expected their next biggest days for shopping in-store would be Small Business Saturday (16 percent), after Christmas (16 percent — down significantly from 25 percent in 2013 and 2012), and on Thanksgiving Day (13 percent).
Meanwhile, nearly half of all shoppers planned to buy online during Cyber Monday, along with 23 percent who planned to take advantage of national free shipping days, 17 percent who planned to buy on Thanksgiving Day, and 15 percent who planned to shop online after Christmas.
Really, the dramatic rise in mobile shopping was the biggest change of the 2015 holiday season. Mobile accounted for 18 percent of total holiday spend, up from 14 percent in 2014. But since two-thirds of U.S. adults own a smartphone, according to Pew Research Center, consumers have become more comfortable with the idea and process of m-commerce. According to Monitor™ data, the majority of online holiday shoppers (58%) said they planned on taking advantage of ship to store options.
“Retailers are building their mobile platforms with strong customer engagement strategies in mind, allowing their shoppers to easily ‘click and buy’ or research in-store availability,” says the NRF’s Vicki Cantrell, senior vice president and Shop.org’s executive director, in an announcement about m-commerce. Smartphone sales grew 53 percent in 2015, accounting for 17 percent of total online sales for the year, versus 14 percent for tablets. “For today’s consumer, this is all just a part of modern-day shopping; though for retailers, it’s a constant balance of where and how much to invest into the mobile experience and infrastructure.”
Besides the weather, retailers had to deal with issues related to items bought online for in-store pickup. The Washington Post reported 60 percent of click-and-collect orders placed on Cyber Monday ran into problems, ranging from wrong items to cancelled orders.
Perkins says if retailers continue to improve their omnichannel investments in that area, there will be fewer issues going forward.
“Problems rose because stores were promoting buying online and picking up in-store, but then they hit inventory snags and needed to work out the pickup areas. We also saw volume was very high in some stores, resulting in long lines and out-of-stocks that need to be rectified,” he says, adding that there’s a learning curve with the click-and-collect process. “If it’s done right and everything is merchandised well, once you have customers in the store, there’s a good chance they’ll walk out with more.”
Of course, all the online buying meant in-store traffic was lighter. RetailNext reported a significant 8.3 percent drop in foot traffic since last year. Perkins expects flat or slightly lower traffic to continue next holiday unless a bigger push is made to attract shoppers to malls and shopping centers — especially at the end of the holiday cycle when consumers are concerned online orders might not arrive on time.
“There’s also been some research showing Millennials are more engaged and they might come out to shop as a social thing,” Perkins remarks. “Certainly, retailers are using their social media departments to connect with consumers. So going in-store for social events could be a source of traffic if it’s seen as an interactive experience.”