January 18, 2016
Photo: RetailWire
Why did holiday sales miss?
Hurt by unforeseen weather events across the country and an “extreme deflationary retail environment,” the National Retail Federation (NRF) said holiday sales in 2015 increased three percent to $626.1 billion, falling short of its target of 3.7 percent.
The figure, including online sales, covers the November-December period and compared with a gain of 4.1 percent in the same period in 2014.
“Weather, inventory challenges, advances in consumer technology and the deep discounts that started earlier in the season and that have carried into January presented stiff headwinds as retailers competed with one another and their own bottom line,” said Matthew Shay, president and CEO of NRF, in a statement. “Despite these factors, the industry rallied, consumers responded and sales still grew at a healthy rate, which is a huge testament to the resilience, knowledge and expertise of our retail leadership.”
Modest gains were widely forecast for the holiday with lower gas prices and a strengthening economy offsetting meager wage gains and higher rent and health-care costs.
Weather has already been reported as an issue in the EPS downgrades of Macy’s, Gap and others in the apparel space. Planalytics calculated that specialty apparel stores lost $572 million during the final two months due to the weather.
A lackluster line-up in consumer electronics also hurt. According to The NPD Group’s Weekly Tracking Service, revenue for the Consumer Electronics industry declined 4.8 percent during the nine weeks ended Jan. 2. Best Buy, which last Thursday reported a 0.8 percent decline in November-December domestic sales, indicated the mobile phone category was particularly below expectations.
Earlier promotions by some in October are believed to have pulled sales from the November-December period. With restaurant sales and travel spending strong, some felt more consumers were choosing experiences rather than traditional gifts.
A bright spot was online. NRF estimated that online sales jumped nine percent to $105 billion, above the association’s forecast of 6-8 percent growth.
- Retail Holiday Sales Increase 3 Percent – National Retail Federation
- Holiday sales fall short of forecasts: NRF – CNBC
- Weather and lower prices dampen U.S. holiday sales growth: NRF – Reuters
- Holiday sales disappoint: Grew a less-than-expected 3% – USA Today
- Macy’s Was Not Alone. Retailers Had A Harsh Holiday Season – Fortune
- Best Buy Reports Holiday Revenue Results – Best Buy
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Ryan Mathews
Founder, CEO, Black Monk Consulting
Recent Discussions
Discussion Questions
What do you think were the reasons for the shortfall in holiday sales? What lessons learned should retailers take from the holiday 2015?
Poll
The article says it all. Lower gas prices were offset by meager wage gains and higher rent and health care costs, and consumers chose experiences over traditional gifts. The rich are getting richer, but average consumers are still suffering from the Great Recession. Wages have not caught up and, without must-have gadgets, consumers chose to spend their holiday dollars elsewhere.
What were the reasons for the shortfall in holiday sales? Very interesting question that assumes that “sales” are purchases that take place in stores.
In the words of NRF: “online sales jumped nine percent to $105 billion, above the association’s forecast.” Could it be in fact that some of traditional holiday store sales simply moved over to online? If you are an effective omnichannel retailer that could be a reality.
There is an archaic legacy of counting store sales separately from online. In the future of retail the critical success factor is whether OVERALL sales collectively grow, not the store trends.
I think Tom’s article pinpoints it, “With restaurant sales and travel spending strong, some felt more consumers were choosing experiences rather than traditional gifts.” We wrote about this trend several weeks ago.
To repeat, when quizzing my grandchildren (ages 11, ten, seven and seven) on what were the best Christmas presents they got last year, it was not the toys, the electronics or the games — it was the experiences. For the older ones, a basketball game at the Barclay Center with the all-access ticket that gets them whatever food the want for free; for the younger ones, the superhero exhibit at the Discovery Center.
So this year it was simple, a repeat of the Barclay Center for the older ones and the Star Wars exhibit at the Discovery Center for the younger ones. For my son and son-in-law it was chocolate and spirits. For my daughter and daughter-in-law it was a day at a spa.
Assuming the liquor store does not count in the holiday measurement, over the last three years my holiday purchases have morphed from almost 100 percent things to almost 100 percent experiences.
Hey at least they grew 3 percent, as the days of double digit gains are over. Deep discounting will not go away and online deals are easy to click and order without leaving your house. It is a Brave New World. For some businesses it is wonderful and for others things are bad, which is how business has been for hundreds of years.
Consumers are hurting and need to spend wisely, as healthcare costs continue to take more of our money and the economy in most areas is not good at all. You can spin it any way you want, but 2016 doesn’t look so good either, and stores must control costs to stick around. Even Walmart is shuttering some unprofitable locations, and how many would have imagined that? The other factor was the warm weather which killed clothing sales, so add it up and be grateful you had any growth at all last year.
As I wrote in this post, Retail Sales Report From The Mall: Customer Service On Life Support, there really wasn’t much to be excited about from a customer standpoint. Customer service has dropped to a new low and if retailers don’t change having so many bored, untrained and disinterested employees they aren’t going to be around.
There’s simply no there, there.
Certainly the unseasonable weather conditions had a lot to do with the sales shortfall. In addition, the holidays seemed to come so quickly after one another. Thanksgiving led right into Hanukkah and then Christmas all with very little time in between and warmer weather did not help.
In two words — consumption fatigue.
Several bad things happen when the holiday period starts almost immediately after the Fourth of July. For one thing, shoppers shop early and — since the middle class in this country is evaporating faster than a glass of Perrier in the Mohave — much of their disposable “gift income” is long gone before Thanksgiving.
And I think we are starting to see some blowback in the form of declining sales as certain consumers just get tired of being told to shop until they drop, almost like it was their patriotic duty. Black Friday, Cyber Monday, Refinance Thursday — or whatever — deals just get hard to listen to the 400th time around.
Additionally, the retail industry has taught people to wait until the January inventory reductions to shop.
Blend these factors into an economy where real wages continue to plateau or decline and where unemployment is driven more by people leaving the labor force than finding work and these results shouldn’t surprise anyone.
Time for a better mousetrap.
Retailers are finally realizing that they compete with more than just other retailers for those holiday dollars. As Gene and others have mentioned, a shift to giving experiences is on the rise and retailers need to go beyond viewing their stores as a distribution point for products.
It’s not just the weather or online shopping.
The U.S. has a real problem that is not being addressed. Outsourcing of low-skill, union manufacturing jobs is at the root of the “bifurcation” of the U.S. Read Charles Murray or others (and there are plenty). Pew recently supported the view into the shrinking middle class. The lingering austerity which cascaded from the collapse of Lehman Bros. continues to hold the country in its grasp.
I also think the unvarnished political rhetoric certainly can give succor to those just now realizing that ’60s social movements are the new reality in the U.S. and feel we are doomed as a result. There is a bunker mentality in the U.S. and I’m not speaking to the burgeoning prepper movement. The national mood is grim, as Trump’s poll domination proves. Goodwill towards men took the year off this holiday.
So holiday 2016? Will the Presidential campaign conclusion give some rest to the finger pointing? I think the mood will improve a year from now.
Like politics, retail ain’t for sissies!
In a word: junk.
I saw the same uninspired merchandise slightly rearranged and flanked by chocolate-covered pretzels and cable-knit sweaters. So, so many cable-knit sweaters.
A few thoughts:
1) Weather… please!
2) Online was a “bright spot”; again, please! Why do people endlessly talk “omnichannel” yet continue to break out online like it’s some kind of bonus? (Might as well break out sales made with $50 bills and notice they went up.)
3) I would say the sales were well within the margin of error; and if not, they were still the highest in history … be happy about it!
The question proposed in this discussion is important if this past holiday season’s results are a new norm. There should be no doubt that underemployment and wages are having a negative effect on retail sales. The lower energy costs we are happy to own are a bigger positive for business than consumers, and not providing the amount of discretionary dollars needed to boost the economy.
The total losses that were incurred for fiscal year 2015 may not be explainable by these factors alone. In addition to the large amount of businesses that have succumbed to the pressures of the 21st century, we are seeing similar closings within the schools and houses of religious practice. With this institutional downsizing, there is perhaps less interest and celebration of what was traditional practice. This perspective makes it easier to understand the substantial decline in the 2015 retail holiday season results. The demand for reliable 21st century consumer information is passing by the current retail industry at a pace that could inevitably become unrecoverable if this or a similar parallel assumption proves valid.
The middle class is struggling. Boomers are de-accessing rather than accessing. They have all the stuff they need. Millennials are paying off student debt, still living at home, and so do not need much of anything beyond replacement clothes and electronics. “Retail therapy,” “shop till you drop” is no longer in vogue as a pastime and is increasingly viewed by many as rather gauche. Stores and websites this season were filled with boring, mostly just-like-last-year’s selection of merchandise.
Retail is in my blood and I’d like to be optimistic, but frankly I think we’ll be having this exact same conversation/post mortem again next year.
There is too much optimism about consumers returning to pre-2008 levels and types of spending. Older consumers have changed and younger consumers were never there. Predicting current behavior based upon old assumptions is going to result in missed projections. What is to be learned? We need new assumptions.
I think everyone had good answers and insights into this question. But two that strike me as worth a second look:
- The observation by many that experiential gifts are becoming more popular and widespread is worth note.
- “… the retail industry has taught people to wait until the January inventory reductions to shop.” I haven’t seen the statistics to back this up yet. I don’t think there’s a problem with shopping early, and I don’t think there’s a problem with sales and promotions into January, but how many people do you know that wait until after Christmas to buy Christmas presents?
How many disappointing holiday sales reports over the years have been blamed on the weather? Sorry, but stock prices still decline after news of disappointing results. Profits and stock prices also decline when there is an “extreme deflationary retail environment” AKA too much discounting.
Weather can’t be changed, but inventory can be better managed, merchandised and yes, promoted. And while that supports a “deflationary retail environment” there are other factors that force retailers to use discounts to drive sales.
Retail, especially among the chains, is boring and largely undifferentiated. There are too many merchants selling the same goods and being forced to compete on price because, unlike Amazon, there is little that they do to be relevant to consumers.
We live in age of big data, but it’s used for decision support rather than to deliver a better and more relevant customer experience, much less a more relevant marketing message.
Finally, barriers to selling are coming down. Manufacturers are increasingly opening their own retail channels and they (can) typically add more value than retailers choose to do. Couple this with the power and excellence (at least from a customer experience standpoint) of Amazon and it’s easy to see why retail — at least non-Amazon retail — was disappointing this past holiday.
Last year’s holiday season showed how important online channels are. That’s not to say that brick and mortar isn’t, but meeting shoppers everywhere they are is a must for retailers. Many retailers didn’t take the opportunity to spread out their sales, but they won’t miss the mark this year. I think a lot of retailers learned important lessons this past holiday season and there should be intensified competition this year.
The big takeaway from this piece is that while brick and mortar holiday sales were down, online sales were up. At GoECart, we believe that this trend will most certainly continue in the future, as more and more consumers shun the lines at retail stores and shop online from the comfort of their couches.
Analysts have continued to underestimate the ecommerce growth for several years now. They have just begin to acknowledge that they believe that ecommerce will in fact constitute a larger share of the overall retail sales than predicted earlier.
The first quarter is the time for merchants to examine their omni-channel capabilities to prepare for 2016 and beyond, and determine if their operation has an effective order management system that can handle sales across all channels. OMS has now become the backbone for delivering a true unified commerce shopping and service experience to customers.
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The article says it all. Lower gas prices were offset by meager wage gains and higher rent and health care costs, and consumers chose experiences over traditional gifts. The rich are getting richer, but average consumers are still suffering from the Great Recession. Wages have not caught up and, without must-have gadgets, consumers chose to spend their holiday dollars elsewhere.
What were the reasons for the shortfall in holiday sales? Very interesting question that assumes that “sales” are purchases that take place in stores.
In the words of NRF: “online sales jumped nine percent to $105 billion, above the association’s forecast.” Could it be in fact that some of traditional holiday store sales simply moved over to online? If you are an effective omnichannel retailer that could be a reality.
There is an archaic legacy of counting store sales separately from online. In the future of retail the critical success factor is whether OVERALL sales collectively grow, not the store trends.
I think Tom’s article pinpoints it, “With restaurant sales and travel spending strong, some felt more consumers were choosing experiences rather than traditional gifts.” We wrote about this trend several weeks ago.
To repeat, when quizzing my grandchildren (ages 11, ten, seven and seven) on what were the best Christmas presents they got last year, it was not the toys, the electronics or the games — it was the experiences. For the older ones, a basketball game at the Barclay Center with the all-access ticket that gets them whatever food the want for free; for the younger ones, the superhero exhibit at the Discovery Center.
So this year it was simple, a repeat of the Barclay Center for the older ones and the Star Wars exhibit at the Discovery Center for the younger ones. For my son and son-in-law it was chocolate and spirits. For my daughter and daughter-in-law it was a day at a spa.
Assuming the liquor store does not count in the holiday measurement, over the last three years my holiday purchases have morphed from almost 100 percent things to almost 100 percent experiences.
Hey at least they grew 3 percent, as the days of double digit gains are over. Deep discounting will not go away and online deals are easy to click and order without leaving your house. It is a Brave New World. For some businesses it is wonderful and for others things are bad, which is how business has been for hundreds of years.
Consumers are hurting and need to spend wisely, as healthcare costs continue to take more of our money and the economy in most areas is not good at all. You can spin it any way you want, but 2016 doesn’t look so good either, and stores must control costs to stick around. Even Walmart is shuttering some unprofitable locations, and how many would have imagined that? The other factor was the warm weather which killed clothing sales, so add it up and be grateful you had any growth at all last year.
As I wrote in this post, Retail Sales Report From The Mall: Customer Service On Life Support, there really wasn’t much to be excited about from a customer standpoint. Customer service has dropped to a new low and if retailers don’t change having so many bored, untrained and disinterested employees they aren’t going to be around.
There’s simply no there, there.
Certainly the unseasonable weather conditions had a lot to do with the sales shortfall. In addition, the holidays seemed to come so quickly after one another. Thanksgiving led right into Hanukkah and then Christmas all with very little time in between and warmer weather did not help.
In two words — consumption fatigue.
Several bad things happen when the holiday period starts almost immediately after the Fourth of July. For one thing, shoppers shop early and — since the middle class in this country is evaporating faster than a glass of Perrier in the Mohave — much of their disposable “gift income” is long gone before Thanksgiving.
And I think we are starting to see some blowback in the form of declining sales as certain consumers just get tired of being told to shop until they drop, almost like it was their patriotic duty. Black Friday, Cyber Monday, Refinance Thursday — or whatever — deals just get hard to listen to the 400th time around.
Additionally, the retail industry has taught people to wait until the January inventory reductions to shop.
Blend these factors into an economy where real wages continue to plateau or decline and where unemployment is driven more by people leaving the labor force than finding work and these results shouldn’t surprise anyone.
Time for a better mousetrap.
Retailers are finally realizing that they compete with more than just other retailers for those holiday dollars. As Gene and others have mentioned, a shift to giving experiences is on the rise and retailers need to go beyond viewing their stores as a distribution point for products.
It’s not just the weather or online shopping.
The U.S. has a real problem that is not being addressed. Outsourcing of low-skill, union manufacturing jobs is at the root of the “bifurcation” of the U.S. Read Charles Murray or others (and there are plenty). Pew recently supported the view into the shrinking middle class. The lingering austerity which cascaded from the collapse of Lehman Bros. continues to hold the country in its grasp.
I also think the unvarnished political rhetoric certainly can give succor to those just now realizing that ’60s social movements are the new reality in the U.S. and feel we are doomed as a result. There is a bunker mentality in the U.S. and I’m not speaking to the burgeoning prepper movement. The national mood is grim, as Trump’s poll domination proves. Goodwill towards men took the year off this holiday.
So holiday 2016? Will the Presidential campaign conclusion give some rest to the finger pointing? I think the mood will improve a year from now.
Like politics, retail ain’t for sissies!
In a word: junk.
I saw the same uninspired merchandise slightly rearranged and flanked by chocolate-covered pretzels and cable-knit sweaters. So, so many cable-knit sweaters.
A few thoughts:
1) Weather… please!
2) Online was a “bright spot”; again, please! Why do people endlessly talk “omnichannel” yet continue to break out online like it’s some kind of bonus? (Might as well break out sales made with $50 bills and notice they went up.)
3) I would say the sales were well within the margin of error; and if not, they were still the highest in history … be happy about it!
The question proposed in this discussion is important if this past holiday season’s results are a new norm. There should be no doubt that underemployment and wages are having a negative effect on retail sales. The lower energy costs we are happy to own are a bigger positive for business than consumers, and not providing the amount of discretionary dollars needed to boost the economy.
The total losses that were incurred for fiscal year 2015 may not be explainable by these factors alone. In addition to the large amount of businesses that have succumbed to the pressures of the 21st century, we are seeing similar closings within the schools and houses of religious practice. With this institutional downsizing, there is perhaps less interest and celebration of what was traditional practice. This perspective makes it easier to understand the substantial decline in the 2015 retail holiday season results. The demand for reliable 21st century consumer information is passing by the current retail industry at a pace that could inevitably become unrecoverable if this or a similar parallel assumption proves valid.
The middle class is struggling. Boomers are de-accessing rather than accessing. They have all the stuff they need. Millennials are paying off student debt, still living at home, and so do not need much of anything beyond replacement clothes and electronics. “Retail therapy,” “shop till you drop” is no longer in vogue as a pastime and is increasingly viewed by many as rather gauche. Stores and websites this season were filled with boring, mostly just-like-last-year’s selection of merchandise.
Retail is in my blood and I’d like to be optimistic, but frankly I think we’ll be having this exact same conversation/post mortem again next year.
There is too much optimism about consumers returning to pre-2008 levels and types of spending. Older consumers have changed and younger consumers were never there. Predicting current behavior based upon old assumptions is going to result in missed projections. What is to be learned? We need new assumptions.
I think everyone had good answers and insights into this question. But two that strike me as worth a second look:
How many disappointing holiday sales reports over the years have been blamed on the weather? Sorry, but stock prices still decline after news of disappointing results. Profits and stock prices also decline when there is an “extreme deflationary retail environment” AKA too much discounting.
Weather can’t be changed, but inventory can be better managed, merchandised and yes, promoted. And while that supports a “deflationary retail environment” there are other factors that force retailers to use discounts to drive sales.
Retail, especially among the chains, is boring and largely undifferentiated. There are too many merchants selling the same goods and being forced to compete on price because, unlike Amazon, there is little that they do to be relevant to consumers.
We live in age of big data, but it’s used for decision support rather than to deliver a better and more relevant customer experience, much less a more relevant marketing message.
Finally, barriers to selling are coming down. Manufacturers are increasingly opening their own retail channels and they (can) typically add more value than retailers choose to do. Couple this with the power and excellence (at least from a customer experience standpoint) of Amazon and it’s easy to see why retail — at least non-Amazon retail — was disappointing this past holiday.
Last year’s holiday season showed how important online channels are. That’s not to say that brick and mortar isn’t, but meeting shoppers everywhere they are is a must for retailers. Many retailers didn’t take the opportunity to spread out their sales, but they won’t miss the mark this year. I think a lot of retailers learned important lessons this past holiday season and there should be intensified competition this year.
The big takeaway from this piece is that while brick and mortar holiday sales were down, online sales were up. At GoECart, we believe that this trend will most certainly continue in the future, as more and more consumers shun the lines at retail stores and shop online from the comfort of their couches.
Analysts have continued to underestimate the ecommerce growth for several years now. They have just begin to acknowledge that they believe that ecommerce will in fact constitute a larger share of the overall retail sales than predicted earlier.
The first quarter is the time for merchants to examine their omni-channel capabilities to prepare for 2016 and beyond, and determine if their operation has an effective order management system that can handle sales across all channels. OMS has now become the backbone for delivering a true unified commerce shopping and service experience to customers.