RAPAPORT... Retailers and analysts worried about a potentially weak holiday shopping season breathed a sigh of relief this Black Friday as value-conscious consumers made the day-after-Thanksgiving one of the most successful retail days on record. According to a survey done by ShopperTrak, the Chicago-based retail analyst firm, Black Friday sales increased 6.6 percent over 2010 — the single biggest increase since 2007 — to a never-before-seen high of $11.4 billion. Retail foot traffic, a measure of the number of shoppers in the stores, also rose — 5.1 percent over 2010.
The number of shoppers out on Black Friday, according to the National Retail Federation (NRF), topped 86.3 million, while the total number of consumers shopping during the weekend, which ran from Thursday through Saturday, was 131.4 million.
The most popular shopping destinations this year, according to the NRF, were department stores and discount chain stores, which were visited by 48.7 percent and 37.5 percent, respectively, of all shoppers. About 14 percent of these consumers bought jewelry, while 39.4 percent bought electronic items and 51.4 percent bought clothing and clothing accessories.
The NRF also noted that the average consumer spent $398.62 on Black Friday weekend, up from $365.34 in 2010, bringing the total spending increase from Thursday through Saturday to 16 percent year on year, for total sales of $52.4 billion.
With many retailers, including Macy’s, Kohl’s and Walmart, opening at midnight Thursday, 2011 also saw a record number of consumers getting a head start on their Black Friday purchases. NRF reported 24.4 percent of Black Friday shoppers were at stores when they opened at midnight, up from 9.5 percent in 2010 and 3.3 percent in 2009.
Digital sales also played a major role this Black Friday, according to IBM Coremetrics, as online sales increased by 23.4 percent year on year, and mobile sales accounted for 9.84 percent, up from 3.18 percent in 2010. Digital metrics firm comScore pegged the online sales increase on Black Friday slightly higher, rising 26 percent to $816 million in sales. And that was even before Cyber Monday, traditionally the highest-volume day for online retailers.
Looking Ahead
With Black Friday over and the holiday season officially underway, analysts generally are more optimistic about overall holiday sales than they were just a week earlier. But as of press time, they were not yet adjusting their projections for holiday totals upward.
“Looks like Black Friday was a shot out of a cannon,” said Meir Kahtan, spokesperson for MasterCard Advisors’ SpendingPulse. “The question is: ‘Will people only shop on deals and stick to their lists?’ And what can retailers do to maintain the momentum and avoid the spending lull that happens every year between Black Friday weekend and Christmas Eve, effectively book-ending the value shoppers and the procrastinators?”
“We have projected a 3 percent increase in sales this December. But in 2010, we had a 4 percent increase; so, it’s definitely a little softer,” said Bill Martin, founder of ShopperTrak. Others, like Nikoleta Panteva, a senior analyst at Los Angeles–based IBISWorld, predicted a slightly higher sales increase. “While our forecast is that this season is not going to see a higher year-to-year increase than 2010, we do expect a sales increase of 3.3 percent.” At the other end of the spectrum, the NRF predicted a modest increase of just 2.8 percent.
Though shaky consumer confidence and high unemployment are a large part of this holiday sales slowdown, many also attribute it to consumers’ changing perception of what the holiday season means. “We are expecting a continuation of a trend that we saw last year, which is a return to family traditions and relationships,” noted Panteva. “So rather than going out eating or splurging on huge gifts, consumers are more likely to have large gatherings at home and buy presents that are a little more sentimental than they have in the past.”
Luxury Growth
There is, however, a silver lining to many analysts’ forecasts — the luxury retail sector. “I have seen evidence that the luxury sector is performing relatively better than the market as a whole,” observed Andrew Lipsman, senior director of industry analysis at comScore. Panteva, whose firm predicts a similar trend toward luxury retail, noted that jewelry, in particular, is going to be a hot-selling item this December. “We are expecting jewelry and similar accessories to grow pretty significantly, by around 7.1 percent.”
The main reason behind this growth, explained Martin, is jewelry’s value not only as a sentimental gift, but also as a long-term investment. “We think that Christmas is always a strong time of year for the high-end sale, and this year will be stronger, given the trend of getting value for your money. Jewelry is a good investment, in terms of it being an asset that appreciates, and this is something consumers are smart about, especially in the high end of the market, and especially in this economy.”
Digital Holiday
As they were on Black Friday, internet retailers will be a noticeable force this holiday season, with consumers moving online to find deals and forgo the stress of holiday shopping in stores. “More and more shoppers now go online to check prices, find the best deals and educate themselves before they go to the stores,” said Wendy Liebmann, chief executive officer (CEO) of New York City–based WSL Strategic Retail. “For so many, click and buy will continue to be the easier, less stressful option, especially with free shipping.”
Lipsman predicted that the internet retail sector would be responsible for a large portion of holiday sales as it builds on the momentum it has had since the beginning of the year. “Generally speaking,” he explained, “through the first three quarters of this year, ecommerce growth has remained fairly strong — around 14 percent — so we would expect that to grow. The average consumer is now online and is comfortable purchasing online.”
Though ecommerce is growing, brick-and-mortar stores can take solace in the fact that for many high-end purchases, consumers prefer shopping offline. “For things like jewelry and precious gems and metals, people still like to buy in person. They want to inspect the quality and have someone to talk to, because it’s a pretty significant purchase,” said Panteva.
Realizing this, many brick-and-mortar retailers are honing in on their customer service this holiday season. “Retailers have spent the past couple of years making sure they have optimized their performances — so they are really a lot smarter today about inventory and about having enough of the right staff at the right times,” said Martin. “This speaks back to making the experience good for the customer, because nobody wants to go to a jewelry store and walk away unrequited — they would like to go and have a good experience.”
Whether customers will continue to come out this holiday season to shop and to spend remains to be seen, although many retailers are hoping the momentum from Black Friday will carry through to make this season one to remember.
SPENDING TRENDS
The National Retail Federation (NRF) released its top trends for holiday 2011 based on its recent surveys and analysis of the economy.
• Slow and Steady Wins the Race. NRF estimates holiday spending will be $466 billion — a moderate 2.8 percent increase over 2010 — as retailers and consumers adjust to a new retail environment.
• All Shoppers Are Not Created Equal. Nearly seven in ten online retailers expect increases of 15 percent for the season. Multichannel shopping presents the biggest opportunity for retailers as multiple-channel shoppers plan to spend 22 percent more than those who just shop in a store.
• And…? Customers are in a “price-plus mentality” and expect a combination of price + service + quality + selection + convenience. Even layaway is part of the equation.
• Now You See It, Now You Don’t. To prevent the price-slashing sales of 2008, retailers are keeping inventory very lean — and placing orders for later shipment to have time to gauge consumer sentiment.
• You Better Shop Around. Customers are almost “maniacal” in finding the best deals and the best prices — and will shop anywhere to get them, from discount stores to department and specialty stores.
• Thank You, Sir, May I Have Another? Six in ten people are setting aside money to make nongift purchases for themselves this holiday season.
• Everyday Appropriate. The most popular items may not be inexpensive but they are versatile enough to wear or use on a regular basis. Consumers will buy luxury goods, but they’ll choose items that they can use in a variety of ways and not just for a single special occasion.
• Free Shipping Isn’t Free, But It Works. Shoppers have tunnel vision when it comes to free shipping and expect it the same way they expect low prices. Retailers are responding; the challenge for them is determining the minimum purchase, if any.
• Yes, Virginia, There is an App for That. Mobile will play a larger-than-ever role in holiday shopping, but the way consumers use their smartphones vs. tablets varies greatly. Half of Americans with smartphones will use them to comparison shop and redeem coupons, with only 16 percent saying they will use them to actually make a purchase. However, 70 percent of tablet owners say they will use them to buy products.
Article from the Rapaport Magazine - December 2011. To subscribe click here.