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Retail sales in November, and even the virtual shopping holidays of Black Friday and Cyber Monday, weren’t all they were initially cracked up to be.
This story first appeared in the December 14, 2011 issue of WWD. Subscribe Today.
A U.S. Commerce Department report issued Tuesday, as well as mounting empirical data from a variety of private-sector sources, revealed that November sales were below economists’ expectations, as sales at specialty, department and general merchandise stores rose modestly. A study by RetailNext, a firm that monitors traffic and buying at point of sale, even suggested that sales for Thanksgiving weekend were down, despite a Black Friday surge in department store sales and other mall anchors that elected to extend their hours to historic duration.
According to the Commerce report, apparel and accessories stores posted a seasonally adjusted increase of 0.5 percent to $19.1 billion in November compared with October, while sales at department stores inched up 0.3 percent to $15.3 billion. Sales at general merchandise stores, which include discounters and department stores, also increased 0.3 percent to $53.4 billion last month. The results included Black Friday and Cyber Monday sales, which are seen as barometers of consumer holiday spending.
In the overall economy, retail sales were up a slim 0.2 percent to $399.3 billion in November, falling below expectations.
Sales in the three retail categories rebounded in November from October, when department stores and specialty stores posted sales declines and general merchandise stores had flat results. On a year-over-year basis, sales at clothing and accessories stores were up 3.7 percent, while general merchandise store sales were 2.7 percent higher. Department stores continued to struggle, posting a 3 percent decline in sales in November compared with a year earlier.
“There has been extensive media hype on Black Friday sales,” said Chris J. Christopher Jr., senior principal economist at IHS Global Insight. “However, anecdotal information and the weekly data of International Council of Shopping Centers chain store sales indicate that consumers held back before Black Friday in order to take advantage of deep discounts.”
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Christopher called the November sales report “mildly good,” but cautioned that the headline number was driven by strong auto sales and a selective shopper looking for discounts.
“Americans face strong headwinds and retailers have to count on price discounting in order to get shoppers to open their wallets,” Christopher said.
Kevin Regan, senior managing director of FTI Consulting, said the retail sales numbers were not as good as expected, though there were strong pockets.
“I think what happened is middle-income consumers are still hedging their bets and trying to be very surgical in the way they shop,” Regan said. “They are buying for price and during that Black Friday weekend, retailers had to price things to move.
“The evidence in November says to me it is going to be steady,” he added. “I think that consumers are still being very careful and they are dipping into their savings and their incomes aren’t improving much. They are being cautious and at the end of the day, the holiday is going to be OK. It is not going to be something special.”
Steve Blitz, senior economist at ITG Investment Research, portrayed retailing as being in a zero-sum position. “Today’s retail sales data confirm that while consumers are out spending in the malls, they are able to do so by either cutting back on other things or using the price declines in certain food and energy items to fuel spending for holiday gifts,” he said.
Despite the disappointing November performance, retail consultancy Customer Growth Partners reaffirmed its expectations for growth of 6.5 percent in holiday sales, roughly double the estimates of others. Craig Johnson, president of CGP, noted that spending per U.S. adult during the holiday period will total $2,330, above last year’s figure of $2,212 and the prerecession record of $2,223 set in 2007.
“Consumers have, in fact, completed a ‘great reset’ in their saving and spending patterns and have now resumed their historic 4 to 5 percent spending growth we saw earlier last decade,” Johnson said.
Meanwhile, RetailNext, the San Jose, Calif.-based firm that collects store data through video analytics, in-store sensors and retailers’ POS information, reported Tuesday that department stores on Black Friday, the traditional kick-off of the holiday season, experienced a 29 percent spike in traffic and a two-point rise in conversion rates on the strength of longer hours and a barrage of promotions. However, there was a 14 percent decline, year-over-year, in traffic for the remainder of the Thanksgiving weekend for these stores.
Unable or unwilling to staff their stores to the same extent as their anchor competitors, specialty stores saw traffic decline 5 percent on Black Friday, with sales down 16 percent, conversion down 2.4 points and only a “slight increase in average transaction value.” For the weekend, their traffic fell 10 percent and sales maintained their 16 percent decline. Off-price stores had a 15 percent traffic increase on Black Friday with conversion up four points and transaction value down.
Shelly Kohan, vice president of retail consulting at RetailNext, said, “Early openings on Black Friday helped some of the large anchor stores but were an operational challenge for specialty retail. This ‘overnight’ trend forced most specialty retailers to open early to stay competitive and take advantage of traffic, but these retailers saw the same amount of traffic and sales spread over a longer period of time.
“Trends the first fiscal week of December showed similar declines in traffic across both specialty and department stores,” she added, pointing out that average transaction values were flat for both sectors, although department stores continued to benefit from “significant” increases in conversion rates.
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Kohan noted that apparel specialty retailers generally experienced larger declines in traffic than specialty retailers as a group. “In accessories, the traffic hasn’t dropped quite as much and in some cases conversion is up, but for the ready-to-wear merchants, both traffic and conversion are down.”
RetailNext’s data ran through Dec. 4 and included results from more than 40 U.S. retail chains. Kohan said she hadn’t seen a major reversal of fortune in the days since then. The numbers are for brick-and-mortar retail transactions only, although RetailNext observed that stores with substantial e-commerce businesses “experienced significant traffic and sales decreases over the Black Friday weekend.”
“A significant drop in traffic is pretty difficult to make up online and through e-commerce,” Kohan said. “Consumers today have a pretty tight grip on their wallets and they’re very choosy about what they buy.”
The increasingly discriminatory bent of the current consumer was borne out in the most recent Shopping Activity Weekly Holiday Trends report from The NPD Group, which clearly showed shoppers last week gravitating toward stores providing branded goods at steep discounts.
In the seven days ended Dec. 12, brick-and-mortar stores experienced a modest bump in their conversion rate — to 67.3 percent from 66.9 percent in the prior week. No channel within retailing registered a sharper ascent than factory outlets, where conversion jumped to 61 percent from 48 percent. National chains and department stores were both up, to 53 percent from 51 percent and 45 percent from 43 percent, respectively, while warehouse clubs ticked up to 84 percent from 82 percent.
Among the stores pulling in an increase in shopping visits, a metric not provided by NPD, were department stores, mass merchants and off-price stores. Off-price stores, however, saw a decline in conversion, to 52 percent from 54 percent, but above the 51 percent recorded one week earlier.
“The real winner this week was factory outlets, with conversion rate growth that makes for some impressive numbers,” said Marshal Cohen, chief industry analyst for the Port Washington, N.Y.-based market research firm. “Consumers are clearly telling retailers they want ‘brand names for less’ and the outlets deliver on that.”
The online share of buying visits remained in the high teens last week, as it did in the prior week after moving up from the low teens in the two weeks before that. Online’s share hit 17.4 percent last week, up from 17.3 percent in the week ended Dec. 5 and 13.9 percent during Thanksgiving week. NPD data indicate that online spending declined somewhat from the prior week, which began just after the conclusion of Cyber Monday.
Specialty apparel retailers saw a spike in online shopping last week as the percentage buying online moved up to 28 percent from 25 percent.
“There are more people visiting retail sites but not quite ‘pulling the trigger’ or purchasing as much as they have in prior weeks’ promotion-filled offerings,” said Cohen.