A later-holiday turn to fashion might prove to be too little, too late for the retail bottom line given steep promotions and a surge in last-minute online sales that is likely to help drive e-commerce sales for the season to more than $90 billion.
“Apparel is finally starting to kick into the traditional holiday business you expect to see,” said The NPD Group’s chief industry analyst Marshal Cohen, noting that apparel was the only category to outperform during the sixth week of the holiday season, which ended Dec. 10.
Since then, trends have been seen as good, but not great.
“Technology is boring and that favors the apparel business,” Cohen said. “Apparel usually does well early and it does really well at the end of the season. This year, it got a late start due to weather and the absence of trends. The ath-leisure movement costs a lot less than sportswear. We’re seeing product going out the door at lower prices, aggressive discounting and an absence of driving trends.”
Just how drastically retailers cut prices will help determine their profits for the season. Cohen said teen retailers have panicked, “department stores are getting a little nervous and luxury retailers are looking a little nervous.”
According to NPD’s tally, apparel was up only 1 percent for the sixth week of the holidays and challenges abound with sales signs blaring about 50 percent discounts and online merchants staying in the game longer as they push quicker and cheaper delivery.
According to Adobe, this year’s online sales have reached almost $80 billion since the beginning of November, with predictions that the holiday season will rake in as much as $91.6 billion.
That’s an overall increase of more than 10 percent from a year earlier, with the growth rate accelerating over the past week. The last-minute digital shoppers are getting a boost this year on shipping costs, which were down 10 percent from Dec. 16 to Monday compared to 2015 figures.
“We’re seeing higher-than-expected growth rates later in the season,” said Tamara Gaffney, who is principal analyst and director at Adobe Digital Insights. “This points toward people increasingly taking advantage of expedited shipping and the ability to click and collect in-store.”
On the mobile front, smartphones have brought in almost $17 billion and tablets almost $8 billion, together driving 49 percent of visits and 31 percent of purchases.
Harper Reed, head of commerce at PayPal-owned Braintree, which powers and automates online payments, said he sees marketers taking advantage of a range of options to catch consumers wherever they can.
“I see e-mail as one of the key points of messaging that many retailers have,” he said. “E-mail is like the weird uncle who gives you good gifts on Christmas; it’s old, it’s weird, but it works really, really well.”
Marketing through e-mail is just one element in what Reed calls contextual commerce, meaning selling to the customer when and wherever they are. Reed said retailers are mentioning other ways to buy in their e-mails, through venues such as Facebook Messenger.
A recent L2 report found that fashion brands have begun taking advantage of the shift among consumers toward social media and the mobile web, but that there was room for improvement. L2 said only 11 percent of brands offer e-commerce options on Facebook and Instagram, while 64 percent have added “Shop Now” or “Learn More” buttons to their Facebook pages.
Facebook researchers have underscored the rise among U.S. consumers of mobile and video. Sixty-two percent of consumers said they planned to use their phones more to find gifts this year and consumers who are on mobile are 1.8 times more likely than the rest of the population to turn to Facebook and Instagram for gift inspiration.
Macy’s ran a number of video ads on Facebook and Instagram tailored to a mobile viewer that encouraged people to show content using a specific hashtag, and directed those who “engaged” with the ads to Macys.com. Tiffany & Co. created a film with actress Elle Fanning with 30-second spots on Facebook and Instagram, in combination with other immersive Facebook ads, including ads and link posts to various product categories. Lowe’s and Ikea both used Facebook Live for holiday campaigns.
“It’s really important to hit as many of these channels as possible, to take advantage of each incremental revenue increase there,” said Reed, who said it was still too early to tell which retailers won at contextual commerce this holiday season. “I would hope that the people offering more progressive technology are seeing the incremental revenue increase. I would expect that if you’re doing it in a smart way, that’s where the magic is. It does not disrupt the mobile commerce or web experience or e-mail, but it’s just adding a layer on top of those.”
All of the technology, he said, is about making the experience for the consumer better, such as investing in better shipping options as a default service.
Analyst Dana Telsey at Telsey Advisory Group said, “Online sales are the wild card” this year.
She noted Super Saturday this past weekend got off to a sluggish start due to the snowstorm in the Northeast, although the malls were packed by the afternoon and traffic on Sunday seemed to be average.
Midweek in Manhattan, there were shoppers and browsers along Fifth Avenue, but not all were carrying shopping bags.
A spot check at the Lord & Taylor flagship found there weren’t many browsers in the handbag section, while some were looking at the apparel sections on the second, third, fourth and fifth floors.
Most of the store’s sales activity seemed to be in the second-floor shoe area, where cold weather was driving interest in winter boots. There was a rare sale for select styles of Ugg boots.
Although there was a 20-percent-off discount — provided the item one wanted to buy wasn’t on the list of exclusions — if one had a coupon for scanning, prices seemed to be higher than over the weekend. One Lord & Taylor branded crewneck cashmere sweater style was on sale for $69, but could have been purchased for less a few days ago due to special pricing for Super Saturday.
Many merchants have been cutting back on discounts as the holiday draws nearer.
Eddie Bauer for Super Saturday weekend had a 50 percent sale on the entire site, but that ended on Monday. Many items on the site were still offered at a discount, with some higher than 50 percent off and many far lower, at just 35 percent off.
Jeff Edelman, director of retail and consumer products advisory services for RSM and a retail and apparel analyst for more than 40 years, was at the Short Hills Mall — known for its mix of high-end retailers — in New Jersey Wednesday morning.
“It’s quiet here. I’m surprised. I expected it to be a lot busier, and I’m also surprised at the markdowns that I’m seeing,” Edelman said.
He was at the mall over the weekend as well and said Bloomingdale’s had markdowns at 40 percent off over the weekend, but now those discounts were cut back to 30 percent off.
“Prices were lower over the weekend. It looks like they cut back. They were more aggressive over the weekend,” he said.
Edelman speculated that prices had gone back up slightly so retailers could take advantage of last-minute shoppers needing to buy something and capture a little bit more of the sale for their margins.
Retailers have also started to look beyond Christmas.
Edelman saw Nordstrom putting out select merchandise on tables as “previews” to the post-Christmas sale, noting that shoppers could buy one at one-third off on Wednesday, but couldn’t pick up until next week. Bon-Ton’s web site was hosting a flash sale and a notation about its “After Christmas Sale” ending Dec. 29.
“Many retailers have had a great online business and to some degree are missing out on store traffic. They’re getting the sale, but online sales don’t get that impulse purchase,” he said.
Edelman said margins are beginning to be an issue for retailers.
“I don’t think they will be making their margins,” he said. “I originally thought that margins would be under less pressure than a year ago because inventories were lower. From what I’m seeing, my read is that stores are getting a little antsy.”