Retailers who don’t have a strong e-commerce business could be sighing “Bah! Humbug” this year.
Among the different forecasters making their prognostications for holiday sales, one central theme is emerging: A Web presence is now more important than the physical store. That’s the key conclusion of several firms tracking online sales. While not earth-shattering, what’s different is that some are starting to discount the importance of the bricks-and-mortar channel.
Financial holding firm CIT Inc. just completed its seventh annual retail outlook report, with 250 senior middle-market retail executives surveyed — from across a wide range of sectors that includes technology and electronics — projecting that holiday sales will rise 6 percent or more. Nearly three-quarters of the respondents concluded that a Web presence is more important than a physical store. Seventy-one percent said revenue is growing from online, and 58 percent said brick-and-mortar-only stores will not survive in the future. According to CIT, one complication is that “more than 6 in 10, or 63 percent, believe that it has been challenging to implement an omnichannel strategy that provides a seamless experience to consumers.”
The majority of retail executives in the survey, at 72 percent, said having a mobile app is a competitive edge, with more than half, at 57 percent, believing that revenue is growing from mobile. Further, nearly 2 out of 3 retailers, or 62 percent, said they “expect to increase the number of staff they devote to the Internet/mobile sales channels for both the holiday season and upcoming New Year,” CIT said.
CIT’s respondents also weren’t optimistic about the future of the American mall. More than 4 in 10, or 45 percent of the retailers surveyed, reported a continued downward spiral in the relevance of the American mall. More than 6 in 10 believe that pop-up retailers are adding to the competition faced by the larger, more established retailers, and 61 percent believe that “one-stop shop” retailers such as Wal-Mart and Target will become the model for stores of the future.
Michele Dupré, group vice president for retail, hospitality and distribution at Verizon Enterprise Solutions — the enterprise group that tracks spending online, attributed the growth in online to the adoption by consumers of mobile devices, with the use of smartphones becoming even more important than tablets to do research and price comparisons. She also said decline in foot traffic at the malls is because “Millennials are not mall rats.”
James Marple, senior economist at TD Bank, said that tailwinds are supporting the consumer sector as the holiday season approaches. “In general, the economy is better this holiday season than last year, with 2.5 million more [individuals] employed and unemployment around 5 percent. Higher wage growth is giving way to income growth, and with low energy costs, that’s a good backdrop to consumer spending.”
The growth in online sales also seems to be impacting when retailers pull the trigger on their holiday promotions. Each year, there’s the sense that retailers are beginning their holiday push earlier than the year before, even if couched as a “friends and family” event as opposed to an outright holiday promotion. And the conclusion is that this year is no exception.
Marple’s colleague, Stephen M. Metivier, managing director for ABL retail finance at the bank, expects retailers to start deep discounting earlier into the season, noting that he’s already seen an uptick in “friends and family promotions.” Even at a 30 percent promotion rate, those discounts are not likely to help women’s specialty apparel retailers, many of which Metivier said target “professional women who are struggling to figure out [fashion-wise] what they want, and instead are focusing on shoes and handbags.” One problem, he said, is that the “customer is looking for something that not everyone has.”
IHS Global Insight is forecasting holiday sales to rise 3.5 percent over last year, which is lighter than 2014’s growth of 4 percent. Retail sales are expected to be around $630 billion. The strong dollar has helped lower imported consumer-goods prices and cheap oil is helping retailers with lowered transportation costs, IHS said.
IHS also said that retailers didn’t wait until Black Friday to begin their promotions, as many began promotions shortly after Halloween. The early discounts, stores opening on Thanksgiving and increased online shopping have reduced the importance of Black Friday sales, IHS concluded. It expects online holiday retail sales to outpace last year’s growth. They forecast that approximately $1 out of every $7 of holiday retail sales will be spent online.
MasterCard, more optimistic than others, is forecasting holiday retail sales to grow by 4 percent. More importantly, they also concluded that the dominance of Black Friday has waned, citing retailers extending their hours as one reason. While MasterCard sees more shopping taking place online, they are quick to note that e-commerce is still just a slice of overall retail sales.
For fashion retailers, MasterCard said that online apparel sales are growing as in-store apparel sales are flat.
Performance marketing firm HookLogic said the top e-commerce search term is “boots,” followed by Christmas pajamas, women’s boots, rain boots and shower curtain. Leggings are at sixth place, followed by desk, shoes, slippers and board games for the top 10 search terms. Flannel sheets, ornaments, pajamas, socks and dresses round out the top 15.
The performance marketing firm said mobile has already surpassed the desktop, making up 50.2 percent of e-commerce site traffic versus 49.8 percent for the desktop. So far shoppers have an average of 2.9 items in their online shopping carts, with cart value averaging $114.43. While cart value is expected to rise throughout the holiday season, it is also expected to drop on key selling dates as promotional deals drive prices lower.
The Conference Board, which does the monthly Consumer Confidence Index reports, said in its latest survey of holiday gift giving that U.S. households plan to spend an average of $576 this year, up from $538 last year. Overall, 8 percent said they plan to spend more this year on holiday gifts, while 27 percent plan to spend less and 62 percent said they plan to spend the same as last year.
Lynn Franco, director of economic indicators at the Conference Board, said, “While this season is shaping up to surpass last year’s, consumers are still unwilling to pay full price for gifts. The majority say they will be on the lookout for bargains and incentives.”
And while the Conference Board’s latest survey also concludes that the number of online shoppers continues to grow, three out of every five respondents said they expect a least a quarter of their purchase to be on sale or discounted. “Nearly three-quarters say they expect to purchase at least some of their holiday gifts online, while more than one out of four say more than half of their gifts will be purchased online,” the Conference Board said.
According to the Florida Atlantic University Business and Economic Polling Initiative, 30.7 percent of Hispanics polled expect to spend more money for holiday gifts this year, versus 28.9 percent in 2014. Overall, 13 percent said they will spend more than $1,000 this year, up from the 8 percent who said the same in 2014. And while they will shop the Black Friday and Cyber Monday sales, 27.7 percent of those polled said they expect to do most of their holiday shopping before Thanksgiving, compared with 21.5 percent last year.