Although holiday sales results are still trickling in, based
on preliminary findings, many analysts are confident that holiday sales were
more or less in line with their predictions. “When the dust settles, we will see that it will be a good
season, with growth being 3.5 percent, close to, but slightly at the low end of
most predictions,” declared Michael Niemira, chief economist and director of
research at International Council of Shopping Centers (ICSC). The ISCS had
predicted that holiday sales during the month of December would grow around 3.5
to 4 percent, while the National Retail Federation (NRF) expected a growth rate
of 3.8 percent.
A study done by ICSC and Goldman Sachs showed a 4.5 percent
year-on-year increase in retail sales for the week that ended on December 24,
and a 5.3 percent year-on-year increase for the week that ended on December 31.
“The month as a whole started out weak but finished strong. The season started out weak, with
pockets of strength around Black Friday. But it also finished strong at the
tail end,” explained Niemira.
More holiday shoppers this year held off their shopping
until the week before Christmas. Retail research firm ShopperTrak reported that
holiday retail sales topped $44 billion in the week that ended December 24,
representing a 14.8 percent increase from the same week in 2010, and a 37.8
increase from the previous week in December.
Similarly, ShopperTrak noted that on the day after
Christmas, consumers spent $7.1 billion at retail stores — a 25.5 percent
increase over the same day in 2010. Foot traffic that day also increased 25.9
percent year on year.
Digital Tidings
Online shopping was also a major force this holiday season.
According to online metrics firm comScore, from November 1 to December 31,
consumers spent $37.2 billion on ecommerce, a 15 percent increase from the same
period in 2010. Ten shopping days during the season had over $1 billion in ecommerce
sales, up from just one day in 2010. Cyber Monday, November 28, pulled in the
highest sales with $1.25 billion, a 22 percent increase year on year.
Aiding this rise were strong sales of digital devices.
“While there didn’t seem to be those hot toy or must-have items this Christmas,
the big items were mobile devices and tablets that were bought individually for
yourself or given as gifts,” noted Greg Buzek, founder of global research and
advisory firm IHL Group, based in
Franklin, Tennessee.
In fact, those who received mobile devices as Christmas
gifts spent Christmas Day loading those devices. ComScore reported that digital
content download and subscriptions from tablets, ereaders and smart phones
accounted for 20 percent of all online sales on Christmas Day, up from a daily
average of 2.8 percent of online sales from November 1 to December 24.
Luxury Delivers
Affluent consumers provided much of the boost to sales this
season as they flocked to luxury retailers and spent their discretionary income
more liberally than the average consumer. “The high-end retailer has tended to
be the best-performing segment this season and this year,” said Niemira,
explaining that luxury retail’s strong showing this holiday season follows its
momentum of strong sales in 2011.
“Sales on the high end continue to outperform,” agreed David
Wu, luxury analyst at analytics firm Telsey Advisory Group, based in New York
City. He added that “jewelry remained a bright spot this season, with high-end
statement jewelry, bridal merchandise, diamond watches and charm bracelets
being particularly strong performers. What we will hear from a lot of the
jewelers is that they had a pretty healthy momentum throughout the holiday
season.”
Season of Discounts
Another defining characteristic of the season was aggressive
discounting by mass market and low-end retailers. “One of the biggest trends I
saw this Christmas was consumers looking for the big deals — as evidenced by
the big shopping levels on Black Friday morning and the shopping just before
Christmas when deals came out,” observed Britt Beemer, chief executive officer
(CEO) of America’s Research Group, based in Charleston, South Carolina.
Retailers that heavily discounted were in tune with the
reality that, due to a weak job market and overall economic recovery, a large
portion of shoppers this season were limited in their spending. “A big trend
this December is that more and more consumers were trying to pay with cash,
check or debit card. Due to budget constraints, around 44 percent of shoppers
were able to buy presents with only the cash they had on hand and that’s why
they were bargain driven,” said Beemer.
Many analysts worry, however, that retailers’ reliance on
discounting may have been too risky of a gamble. “Retailers have to be careful,
because it’s always a cat-and-mouse game. Generally, they are hoping they can
shell out a few deals and still make a profit,” said Beemer. Buzek expressed a
similar concern: “I think we may find that some of these retailers discounted
themselves out of profitability.”
Spending Continues
Because of the high volume of gift cards exchanged this
season, actual holiday spending will continue into the month of January. “One
of the things we observed from our surveys is that the share of holiday expenditures
in the form of a gift card was relatively high,” said Niemira. “Indeed, it is
the highest since 2006, so there will be more spending to come in the next
couple of weeks as gift cards get redeemed.” This unexpected spike in gift-card
giving has many analysts expressing optimism that, while the holiday season may
be finished, the holiday cheer is far from over.
Article from the Rapaport Magazine - January 2012. To subscribe click here.