US Insights

Similar Holiday Growth? It Doesn’t Feel Like it to Most Retailers

Doug Hermanson

Principal Economist

Retail 01.20.2017 / 13:00

Christmas-Shopping-Cart-Online-Shopping-Shopping-1082723

Online sales went from disrupting to dominating the holiday period.

Holiday retail sales growth matched last year’s moderate pace as steep price cuts once again hindered topline growth. For the second straight year, though, holiday demand was strong as shoppers took advantage of falling prices in most categories, including food.

In August, Kantar Retail forecast a modest improvement in topline nominal sales growth (forecast: 3.8%, actual: 3.4%) for Q4, but growth came in a bit below expectations due to an even steeper fall in food prices than forecast and softer spending plans late in the season.

Nevertheless, given calendar shifts and the various definitions that can be used for “holiday sales,” by most measures the 2016 holiday was in line with expectations of similar or a bit stronger growth at the topline. (See footnote at the bottom of this blog for Kantar Retail’s definition)

Kantar Retail Q4Channel

But a similar—or even stronger—holiday is not likely how most retailers are characterizing it as online sales went from disrupting to dominating the holiday period. 

The online and nonstore channel posted rapid growth (as just about everybody expected), but the nonstore channel’s record amount of year-over-year sales—a measure which takes into account growth and scale (which was also forecast by Kantar Retail) indicates online overwhelmed brick-and-mortar sales like never before.

Department stores took the brunt of shoppers’ heightened shift online. The consumer electronics, and combined sporting goods and hobby channel also fell steeply this holiday not only due to pressure from online, but also from store closures within the past year. On the other hand, furniture and home improvement specialists, and drugstores were able to buck the weak brick-and-mortar sales trend this holiday.

Among the other key macro trends that influenced holiday results were diverging spending plans among income groups. The post-election surge in the stock market encouraged upper-income households to expand their spending plans during the holiday period. This may have boosted luxury spending as indicated by a rebound in sales at jewelry stores in November. But the performance of department stores and clothing specialists indicate that if there was any potential lift to softgoods retailers it was offset partly by online competition.

The spending plans of lower-income households slipped in December, contributing to weaker sales in the mass/value channel at the tail-end of the holiday period. Meanwhile, supermarkets posted stronger growth this holiday despite a steep fall in food prices which could have potentially dampened nominal growth. This perhaps suggests that lower food prices across retail may have dulled to some extent the price focus of consumables shoppers, shifting more demand toward supermarkets and away from price-oriented mass/value retailers. The trend could also reflect the strengthening spending plans among upper-income households which tend to shop supermarkets rather than the mass/value channel.

Another holiday season is in the books, but this one was clearly different for retailers.  Shopper demands for seamless, stress-free shopping experiences reached a tipping point during the holiday. This reflects what matters most to shoppers in a retail experience as indicated by Kantar Retail’s ShopperScape® survey: price is important, but a stress-free shopping experience is increasingly important.  As we look to 2017, retailers and suppliers will need to evolve to meet these demands. Online often helps a shopper meet these goals, but the store certainly has a role in fulfilling these needs as well. 

Questions retailers and suppliers should be asking themselves as they recalibrate their strategies for 2017: How do we make shopping easier? How can we evolve the store shopping experience so it is as fun as the online experience is efficient? How can stores and digital tools be linked? What are the friction points in our omni-channel offer? 

Source: Kantar Retail

Editor's Notes

Kantar Retail’s topline measure reported in this blog is government-reported data for non-seasonally adjusted sales excluding automobiles, gasoline stations, food services, and fuel dealers for the fourth quarter. Other measures, such as non-seasonally adjusted sales for November and December which was reported by the National Retail Federation, suggest growth was a bit stronger. Notably, though, calendar shifts may have played a role in the “stronger” growth for the November-December period. Seasonally-adjusted data which adjusts for these shifts, but are often revised in the months following their initial release, indicate growth in November and December 2016 was similar to 2015.

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