Retailers got through the Thanksgiving stretch well enough, thanks largely to their online operations, but there’s a long bumpy ride ahead.
And they’re holding their breath that apparel will start to pick up.
Still, decent store traffic and the significant online gains from Nov. 24 through Nov. 27 have retailers hopeful of meeting their modest holiday gains of around 3 percent. Cyber Monday, which has evolved into a Sunday-Monday event; forecasts for a colder winter, and Americans seeking “retail therapy” for relief after the pain of the long and divisive presidential campaign are giving retail executives cause for optimism.
“People are saying, ‘let’s move on with life.’ That’s why you’re going to see strong sales,” predicted Greg Maloney, Americas chief executive officer of JLL Retail, which provides retail investment and property management services.
Craig Johnson, president of Customer Growth Partners, said overall for the Thanksgiving period, traffic levels were OK and flattish. “It wasn’t a blowout but it was consistent with our forecast of a 4.1 percent gain in total sales, $632 billion from November to December, compared to $607 billion last year, excluding autos, auto parts, gas, oil and restaurants. More than half the increase is coming from the Internet.” He’s more bullish than the NRF, which projects a 3.4 percent gain in sales for the season.
“This is the best year for consumer electronics since 2006,” Johnson said, spurred by TVs where prices were down 20 to 25 percent year-over-year. TVs, toys and other hardlines outpaced apparel sales, which were up 1 percent in sales dollars while apparel unit volume was up 5 percent. The difference is apparel’s 4 percent in price deflation.
Traffic was fueled by “tons of stores at 40 to 50 percent off. Some of the promotions were planned, some unplanned. He said shoppers from Asia were “mobbing the high-end of Woodbury Common” including the Prada, Saint Laurent and Tory Burch outlets, suggesting renewed interest in luxury among tourists. Many bring back items for family or friends, or resell them, he said.
“Black Friday is an imperfect predictor of the total season’s sales. Year after year, we have seen a lot of people buying much closer to need,” Johnson said.
Amazon, Best Buy, Target, Nordstrom, H&M, Lululemon, Sephora, Victoria’s Secret, Macy’s, J.C. Penney, Primark, as well as outlet centers such as Woodbury Common in New York, were seen as among the strongest traffic generators over the last four days, although observers said brick and mortar traffic was at best flat and most probably down.
Retailers caution that the Thanksgiving period, while critical, is not necessarily a barometer for the season. Concerns range from too much outerwear and apparel on the shelves to the shopping lull that occurs right after Cyber Monday and lasts until about two weeks before Christmas. Retailers hope the pause in shopping isn’t too deep, triggering steeper markdowns. Business should pick up again around Super Saturday, which this year is Dec. 17, but so could discounting.
“The Black Friday period is still meaningful, but I don’t know if it’s an indicator of how healthy the business will be for the next four weeks,” said Larry Mentzer, chief revenue officer for the Century 21 off-price chain. “It’s really about the last seven days. It used to come down to the last 10 days.”
“November is critical for selling outerwear. It has been way too warm,” said one retail ceo, who requested anonymity.
About one million more Americans are seen shopping this year’s Cyber Monday, according to the National Retail Federation’s Cyber Monday Expectations Survey conducted by Prosper Insights & Analytics over the weekend. NRF said 122 million Americans plan to shop online on Cyber Monday, up from the 121 million who planned to last year.
At Target, “We’re expecting a significant surge of activity on Sunday and Monday. I feel great about the advances we’ve made from a technology standpoint,” said Brian Cornell, chairman and ceo.
Asked about the lull post-Cyber Monday, Cornell said, “What we’ve all seen over the last few years is the dumbbell effect. A big surge at the beginning of the season and a big surge at the end. We have a number of great and exciting promotions and incentives for that gap.”
The NRF said 154 million consumers shopped during the Thanksgiving period compared to 151 million shoppers in 2015. Average spending per person totaled $289.19, down slightly from $299.60 last year, with an average of $214.13 specifically for gifts or 74 percent of total purchases.
“It was a strong weekend for retailers, but an even better weekend for consumers who took advantage of some really incredible deals,” NRF president and ceo Matthew Shay said. “In fact, over one-third of shoppers said 100 percent of their purchases were on sale.”
The survey for the weekend, conducted by NRF and Prosper Insights, found that 44 percent went online and 40 percent shopped in-store. The most popular day to shop online was Black Friday, up 1.3 percent from last year to 74 percent, followed by Saturday, 49 percent, Thanksgiving, 36 percent, and Sunday, 34 percent.
The survey also found that only nine percent of consumers have finished their holiday shopping, down from 11 percent last year. Twenty-three percent have yet to make any dents to their lists, up from 19 percent last year.
“Millions of consumers shopped over Thanksgiving weekend and reserved a portion of their budgets exclusively for Cyber Monday, knowing that there will be digital deals that are too good to pass up,” Shay said.
The shopping dynamic is changing. “Omni” shopping has taken hold to a greater degree as more consumers bought or researched products online and picked them up or purchased them in stores. Online research led to higher in-store conversion rates, even with the lighter customer traffic. While J.C. Penney and Macy’s experienced long lines outside some key locations, thanks to doorbusters, across the nation there was less urgency to race to stores for deals. The stampedes of years past didn’t materialize, and crowds were orderly. Consumers felt they could shop later in the day on Nov. 25 and Nov. 26, at their leisure.
“Results across the retail industry underscore the superiority and vitality of the all-channel model,” said Jerry Storch, ceo of Hudson’s Bay Co., parent of Saks Fifth Avenue, Lord & Taylor and Hudson’s Bay stores in North America. Based on his own observations and those of retail tracking services, Storch concluded that brick-and-mortar sales across the industry were in a “statistical dead heat with last year’s levels while online sales grew double digits.”
“The omnichannel promise is kicking in, particularly for a business like Best Buy,” said William Taubman, chief operating officer at Taubman Centers.
Traffic at the Mall of America on Friday was “fantastic,” said Jill Renslow, senior vice president of business development and marketing. “The mall opened at 5 a.m. The line started at 3 a.m. We had 1,500 people waiting at the north doors.”
Mall of America attracted shoppers with contests, activities and a prize redemption area/lounge. Shoppers who arrived at 5 a.m. received Mall of America gift cards worth between $10 and $500. Other consumers received scratch-and-win mystery cards. “We gave away 10,000 cards and $200,000 worth of prizes,” Renslow said. “Every card is a winner. There were big screen TVs, fishing poles and concert tickets. It really helped generate that early-morning traffic.”
Wal-Mart launched select Cyber Monday deals early Sunday in advance of its full menu of deals midnight Sunday. The early wave included a Samsung 32″ LED HDTV for $147.99, regularly $419.99; and a Shoppies Girl Gemma Stone Raglan T-shirt with legging set, $12.97, regularly, $19.97.
Kevin Mansell, president and ceo of Kohl’s, said the retailer saw “solid” brick-and-mortar traffic on Nov. 24 and early Nov. 25 and “double-digit, record-breaking online sales.”
“We’ve seen excitement around electronics with TVs, game systems, cameras and items like Apple Watch, which sold out quickly. In addition, toys and home have performed exceptionally well and active and wellness has been strong. Loyalty is a key differentiator for Kohl’s with Yes2You Rewards and Kohl’s Cash, which really helped drive business on Thanksgiving and will be critical for the rest of the holiday season,” he added.
Among the weekend surprises, Aéropostale, which has been weak for years, was said to have drawn big crowds with its 70 percent off sale. Macy’s took a hit when its web site experienced disruptions on Black Friday. On Nov. 27, the retailer offered an extra 20 percent off online and free shipping at purchases of at least $25, as well as “Cyber Week specials” for the first time, through Nov. 30. According to a Macy’s spokeswoman, “The delay issues were resolved Friday. We were still taking a high volume of orders, but traffic was slowed. All the online promotions currently running were planned.” The $27 billion retailer is closing about 100 stores this year and leaning more on its web site for revenues.
Lou Amendola, chief merchandising officer for Brooks Brothers, said his expectations for the weekend were not huge and the results were “maybe a couple of points better” than the trend season-to-date and flat to last year — “Our traffic in our brick-and-mortar stores was down double digits, but half of that was made up online. It’s not a season where people are not spending, but we’ve gotten reports that business is supposed to be up 3.6 percent and we haven’t seen that yet.”
He said dress and sport shirts were clear leaders while tailored clothing, which had been the star, lagged a bit, indicating shoppers were gravitating toward gifts.
Bob Mitchell, co-ceo of Mitchells Family of Stores, said the weekend was “mixed,” with Nov. 25 strong and Nov. 26 slower. “Traffic was slightly down and there were fewer serious buyers, but the average spend was up.” The top performer was high-end outerwear, he noted, as colder weather drew shoppers to the stores.
Mitchells does not run promotions or Black Friday specials. “This weekend is the smallest of all for us,” over the holiday period but the two extra shopping days this season are expected to “help December in a significant manner,” he said. “But it’s way too early to gauge the whole November-December season at this point, and every year business gets later and later.”
Ken Giddon, president of Rothmans, a three-unit men’s chain in the New York area, said he “beat expectations” last weekend. “I have no idea why. We were no more promotional than last year, even slightly less. I don’t know if it was post-election where those who were depressed at the outcome needed some shopping therapy and those who were exuberant decided to fulfill their pent-up demand.”
He said thanks to recent colder weather, outerwear was particularly strong, people were buying suits, and denim alternatives such as mélanges and twills from J Brand and Citizens of Humanity did well.
“I think Christmas will be pretty strong,” Giddon said. “I don’t see a lot of ‘woe is me,’ so I’m pretty fired up.”
“We were very happy with the results on all three days,” said Mentzer of Century 21. “We saw nice incremental sales gains both in stores and online.” The business got a lift from a promotion offering $30 off $160 spent, and $40 off $200 spent, and from opening eight of the off-pricer’s 11 stores on Thanksgiving, compared to four last year.
“There is holiday creep. Black Friday has become diluted, but it is still a phenomenon,” Mentzer said. “People will go out and wait on line. There is something cultural about that day for an American shopper. We definitely had people waiting to get into our stores.”
Mentzer believes that so far this season, retail promotions were generally planned in advance and not reactionary. “I didn’t see retailers giving anything away. The promotions didn’t seem any deeper or dramatic. It’s really a market share game on Black Friday. No one was super aggressive dumping inventory,” though he acknowledged that could change later.
Shay of NRF insisted that “there’s no discounting at the expense of margins. All we’ve seen is a very thoughtful approach to getting customers out.”
Charlie O’Shea, lead retail analyst at Moody’s who focuses on big-box retailers and Amazon, noted that most of the 40 to 50 percent apparel discounts widely seen are planned promotions. Once the promotions hit 70 percent off, that could either be an indicator that the retailer didn’t manage the promotions right overall or that one particular item was a fashion miss.
David Bassuk, managing partner and co-head of the retail group at consulting firm Alix Partners, said, “Our clients saw a bit of good news on their early read on Black Friday, noting that it was fairly positive and that the extended sales over the long weekend has been going very well. There’s been a big transfer of shopping patterns to online, but they expected that. So far they are positive about the beginning of the holiday [sales] season.”
Bassuk also said most of the current promotions are planned, and even though they seem steep, it’s about winning consumer dollars early rather than later when deeper promotions might be required. He said that many consumers would rather wait to get better deals and take the risk of an item selling out.
At Taubman Centers, “There’s no question traffic was up materially. Every single one of our mall managers said traffic was up,” Taubman said. “What you are seeing now is a picking up of demand after the hostility of the election has passed us. September and October were not great.”
According to Sarah Quinlan, senior vice president of market insights for MasterCard Advisors, “The consumer has continued to spend. We’ve seen very good spending the entire month of November and double-digit growth online Thursday and Friday and high-single-digit growth for brick-and-mortar.”
She said the shopping was less harried. “You didn’t see people sleeping out. They feel they can shop how and when they want. Omnichannel is finally a reality,” with people shopping both channels in their holiday buying journey. She used the word “patient” to describe the consumer mind-set.
“The challenge is…Americans have not been buying apparel,” Quinlan said. Many places of work, MasterCard included, do not require people to dress up anymore, she said.
Among those fashion retailers struggling is Neiman Marcus, though last weekend shoppers embraced ornamentation and velvet, according to Ken Downing, senior vice president and fashion director.
“Everything embellished, decorated, adorned, embroidered and super special is what the customer is finding most exciting for holiday gift-giving,” he said. “Velvet in every category for men and women has been popular from the beginning of the season and is continuing strong over the holidays.”
Curiosity and good weather brought customers into the Forty Five Ten flagship that opened Nov. 12 across from Neiman Marcus in downtown Dallas. “It more than met our expectations,” store cofounder and president Brian Bolke said of the holiday weekend. “Traditionally, this is never an important weekend for us because our core clientele generally travels, so it was nice to see new faces.”
Traffic was in line with expectations at Cotton On, which has 130 stores in the U.S. The retailer offered 40 percent off the entire store and 50 percent off everything online beginning Nov. 27 for Cyber Monday.
“For our customer, it’s the one time of year that we offer a promotion of that magnitude so we’ve really been pleased with how the customer responded to that,” said Cotton On Group USA country manager Mark Pan.
Fabletics, part of the TechStyle Fashion Group portfolio of brands that includes JustFab and ShoeDazzle, over the weekend offered 50 to 70 percent off, on par with a year earlier, according to president and general manager Gregg Throgmartin. “We had a nice average ticket so the basket was good,” he said. “They were not just coming in and buying the opening price, promotional items. They also saw the value in the most expensive items and were buying the things that they loved.” Consumers seem “confident” he added, buying across all the price bands.
The Thanksgiving stretch wasn’t all about price promoting. Some shopping centers provided new experiences. Westfield Corp. introduced a robot called “Pepper” at Westfield San Francisco Centre and Westfield Valley Fair in Northern California. Pepper will be tested for a few months and engages with humans with games and selfies, and soon will help shoppers navigate the centers, according to Westfield San Francisco Centre senior general manager Leah Heil. “The outlook for this holiday is looking very good right now and adding something like Pepper is another layer of an experience for our customers,” Heil said.
The Americana at Brand and The Grove centers on Black Friday began offering complementary Uber rides to shoppers spending at least $300 while Irvine Spectrum Center offered free valet, carousel rides and ice skating admission on Black Friday, making for “more of a social event than ‘I need to go out and get a great deal,” said Irvine Co. retail properties chief marketing officer Easther Liu.
Irvine’s Fashion Island center in Newport Beach this month added same day deliveries in Orange County and texting for inquiries. “The differentiator is the experience…to get a shopper out of the house, get off their computers and come to our centers,” she said.