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Industry
2014 Holiday Wrap-Up
By Brian Bossetta
Though the hard data is yet to be tabulated, forecasts of 4 percent growth in year-on-year sales by most economic prognosticators for Christmas 2014 were on the mark, with the International Council of Shopping Centers (ICSC) projecting $575.3 billion in total U.S. retail sales. Of that holiday total, shopping center sales were expected to hit $488.6 billion, which would represent a 4 percent increase from the $470 billion in 2013. Electronic and mail-order sales were predicted by ICSC to reach $86.7 billion for the period, an 11.3 percent jump from a year ago.
Most analysts credit an overall healthier economy for the surge in Christmas sales, fueled by dropping gas prices and friendlier weather in most parts of the country — a drastic change from a year ago when harsh wintry conditions prevented many shoppers from heading to the stores.
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Jewelers benefited from the more positive economic mood as demand for luxury goods increased. One week before Christmas, the National Retail Federation reported that 17 percent of shoppers had already bought jewelry. Record highs in the Dow Jones Industrial Average and Standard & Poor’s (S&P) 500 Index also helped to spur holiday jewelry sales, according to Dana Telsey, chief executive officer (CEO) and chief research officer for the Telsey Advisory Group (TAG), a Manhattan-based research and brokerage firm that focuses on the consumer market. Consumers felt better psychologically about the economy than they did a year ago, Telsey says. She believes that the strength of holiday sales, higher-end sales in particular, points to an ongoing economic recovery that “has been going on for a while now, aided by decreasing gas prices, better job numbers and innovation among retailers.”
Though American shoppers were in more of a spending mood for Christmas 2014, most still remained cautious about how they spent and were far from frivolous with their purchases. That is why, according to Sarah Quinlan, senior vice president of market insights for MasterCard Advisors, the jewelry sector fared so well. “A gift of jewelry is not disposable, it doesn’t decline in value,” Quinlan says. “It’s an experiential purchase. The jewelry I’ve purchased, I remember where and when I purchased it and I also remember the occasions when I’ve worn it.”
The nostalgia and the emotion behind a piece of jewelry — “it’s also something I can pass down to my daughter” — is why jewelry sales, Quinlan says, have been on the rise for 21 continuous months and also why jewelry was one of the strongest categories during the period between Black Friday and Christmas Eve. “During that period,” Quinlan notes, “the average jewelry purchase was $2,600.”
Another factor in surging demand for jewelry is that with more money in their pockets, American shoppers were less inclined to look for the best deal and more willing to be patient in finding gifts of meaning and worth. “Aesthetics and artistry are elements in what people were looking for in gifts and those are certainly characteristics of beautiful gems and stones,” says Dr. Jim Taylor, vice chairman of YouGov America, a professional research and consulting organization headquartered in Waterbury, Connecticut.
Taylor also points out that prior to the beginning of the economic recovery, when consumers were spending less and confidence in the economy was still weak, jewelry sales waned. “Jewelry didn’t get purchased for a while, so there’s been a deficit,” Taylor says, adding that now there’s a bit of compensation for those years when jewelry sales dropped off.
With a more positive outlook of the economy taking hold, Taylor says, many consumers have celebrated a return to financial health by “rewarding themselves” with gifts while shopping for others. The annual Survey of Affluence and Wealth, released this fall by Time Inc. and YouGov, predicted that 45 percent of shoppers planned to purchase gifts for themselves while doing their Christmas shopping, and jewelry, according to the survey, was the top choice among self-gift purchases.
But, like other analysts, Taylor notes that the Dow hitting a record 18,000 was a significant factor in jewelry and other luxury purchases during the 2014 holiday season. “That kind of record by Dow covers a lot of willingness to buy special things such as diamonds and jewelry,” Taylor says. “The stock market is tied to the luxury market,” points out Jesse Tron, spokesman and director of communications for ICSC. Along with the Dow and the S&P 500, home values have rebounded, which also influences luxury purchases, Tron adds, including jewelry.
Pam Goodfellow, consumer insights director for Prosper Insights & Analytics, a consumer intelligence company based in Worthington, Ohio, cites mounting consumer confidence as a key reason for robust Christmas jewelry sales and retail sales in general. According to the company’s consumer survey of December 2014, 47.2 percent of American consumers surveyed felt “very confident or confident” in a strong U.S. economy, a rating that reflects the highest consumer confidence reported by the survey since the recession.
Putting that rating in perspective, Goodfellow says the survey found just 20 percent “very confident or confident” in 2008 and only 30 percent in 2009. “Personal budgets were higher this Christmas, which meant consumers could spend more on luxury and nonpractical gifts,” Goodfellow says, adding that her company also ranked jewelry in the top five desired gifts for 2014.
Perhaps the biggest statistic that jumps out from the 2014 Christmas shopping season is the substantial increase in online shopping. It topped out at $48.8 billion, a 15 percent spike from a year ago, according to the digital metrics firm comScore Inc.
Another online factor that contributed to the success of the 2014 Christmas season, according to Telsey, was the new service of online pickup, in which consumers shop and buy online but go to the store to claim their purchase. This is an example of innovation by retailers that takes advantage of the access consumers have to shop online and with their digital devices while at the same time driving traffic into their stores.
Online shopping, Goodfellow says, represents a permanent shift in shopping patterns, as the use of smartphones and tablets becomes second nature to consumers. “This technology allows consumers to check prices and inventory while they are in a store shopping,” Goodfellow goes on to say. “They can often find free shipping, they can search for extra discounts. It just gives consumers an advantage. It empowers them. It makes them feel good.”
Not only were gift cards one of the top gifts for Christmas in 2014 — with sales estimated at $124 billion — but the prevalence of gift cards is a further sign that consumers are feeling better not only about the country’s economy but about their own. “When you are feeling better about your finances,” Tron says, “you are more willing to show how much you can spend, especially when you can give someone a gift card for $100 or more.” And with 70 percent of gift cards not redeemed until a month or so after Christmas, the success of gift cards could significantly help carry the momentum from the 2014 holidays into the New Year. “Gift cards are like cash gifts,” Goodfellow says. “They help to extend the holiday season.”
Article from the Rapaport Magazine - January 2015. To subscribe click here.
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