Christmas arrived at the nation's stores, and when the numbers are tallied, food, drug and mass retailers hope Santa delivered about four percent to five percent gains over last year. That's about on par with predictions from the National Retail Federation, which expects total sales to rise five percent to $457.5 billion, the lowest increase since 2002.
However, this Christmas was different as several interesting developments arose, which may herald some long-term changes.
One is that a substantial amount of business came after December 25. One reason is that consumers apparently took advantage of merchants' deep discounting to move out holiday inventory. Holiday 2006 had started out robustly for merchants with customers flocking to stores in November. In reality, many of those consumers were grabbing early deals for themselves rather than gifts! December slowed down and retailers attributed that to factors such as warmer than usual weather that dampened holiday spirits as well as economic uncertainty. The next rush came after Christmas as merchants sliced prices.
A second interesting development is the massive expansion of gift cards to an $82 billion business this holiday season. Thirty-two percent of shoppers were expected to redeem them within the first month - another factor bolstering the post-Christmas spike. Many chains offered huge racks of, not only their own gift cards, but also third-party cards. CVS, for example, had a display organized by type of card offering everything from American Express to iTunes.
A third development was a major shift this Yule to low prices of hot electronics including flat screen TVs, portable DVD players, iPod accessories and digital cameras. Lewis Drugs sold a 37-inch flat screen TV priced under $800. ShopRite featured a TV for less than $300. Eckerd Drug sold car chargers for iPods for under $20.00. Retailers who never thought electronics fit into the mix were thrilled to see shoppers have no qualms about forking out hundreds of dollars to buy TVs with tomatoes.
Electronics supplanted traditional mass-market holiday gift ideas such as fragrances and cosmetics blockbusters. Many retailers lamented any "door busters" in the fragrance category and a lack of beauty items aimed at young shoppers.
Discussion Questions: Will this Holiday season set the pattern for Christmas Future? Does the seasonal merchandising rule of cutting prices as soon as the season is over need to be revamped for Christmas? Does the major expansion of gift cards not only mean this product is here to stay, but now needs to be merchandised even more aggressively? Does the success of electronics validate the concept that virtually anything can be sold in a food or drug store?