The late rush to buy Christmas gifts – a healthy surge that retailers have capitalized on for decades – just didn’t materialize this week.
Now retailers are left looking for much more in the days ahead, particularly Saturday, which is expected to be fueled by the steepest markdowns of the season, up to 70 percent or more, as well as the onset of gift card redemptions and returns.
In a season filled with changing shopping patterns, record-high temperatures, excess inventories and limited expectations, the silver lining is the calendar. The day after Christmas falls on a Saturday when most people don’t work. There could also be a lift in resort and spring merchandise, including swimwear and coverups, due to the warm weather and lots of Americans spending to travel.
On Christmas Eve, retailers never let up encouraging shopping at the eleventh hour but continued to see disappointing turnouts as they have for most of the season. Holiday 2015 has been impacted by the weirdly warm weather in the East, tourism declines in major cities, notably New York, Miami, Los Angeles, Chicago and San Francisco, early promoting which took some of the wind out of Black Friday, Cyber Monday and the week before Christmas, and shifts in consumer spending to more on dining out, theater tickets, spas and traveling, and less on fashion and accessories.
“Traffic is terrible,” said one chief executive officer of a national chain contacted Thursday. “This warm weather is an absolute killer. Stores are overstocked in outerwear, leather and accessories which make up a lot their Christmas business. Apparel retailers are under the gun, but there are also a lot categories not under the gun, like home, jewelry, toys and electronics. I think it will be busy Saturday. Business could be positive.”
“December 26 will be critical,” said Kevin McLaughlin, cofounder and creative director of J.McLaughlin, speaking of the industry in general. “It will be a telltale day. Everyone is off.”
At midday Thursday, McLaughlin described the streets on sections of the East Side of Manhattan as “really quiet. Spooky. That being said, there is some business out there. What you have left is a very receptive customer.”
He suggested that some retailers may actually be too heavily promotional. “That can be a turnoff, but the customer does not want to spend any more than they have to. You have to have a lot of value in what you are selling.” About 20 percent of the merchandise in his stores is on sale, and about a third of the merchandise is fresh spring/resort goods.
“This week has not been as strong as we would have liked. Traffic is off. It’s the result of fewer tourists and warm weather,” said Susan Davidson, ceo of the Scoop designer and contemporary chain. “Surprisingly, outerwear and cashmere sweaters for us are doing well,” she added, citing Zac Posen, Belstaff, Herno and Moncler as standouts.
“Last year, outerwear was strong so everybody went after the business this year in a big way. Now they have lots of inventory,” said one retail source who requested anonymity. “Everybody is promoting like crazy but when I think about it, it’s been like this all year. Retailers were running 60 percent off before the 4th of July.”
Another fashion retailer said you have to consider the mind-set of the consumer. “There is a resentfulness to the imposition of having to go out to buy gifts. Some people feel, there’s an imposed festivity. That they have to get out and get the gift shopping done. If you are a merchant, you have to work really hard to make the whole experience as pleasant and painless as you can. You have to be thoughtful.”
The retailer also said that concerns over security in the malls could be keeping some people at home, and inclined to shop online. Sales on the Internet continue to be robust, though they don’t compensate enough for the diminishing traffic in the malls.
On the Verizon network, wireline broadband traffic attributed to e-commerce shopping activity was heavy this week. On Tuesday, traffic was 11 percent above average daily levels this holiday season. On Wednesday, it was 13 percent above the average day.
“As expected, the powerful trifecta of last-minute holiday shopping, sustained promotional offers and final guaranteed shipping deadlines has continued to drive strong online and mobile commerce activity this week,” said Mark Sidwell, director of retail mobile solutions sales for Verizon. For post-Christmas, “online and mobile engagement will continue to be strong as retailers enter the next phase of the season when all of those millions of gift cards start to be redeemed.” Sidwell believes the findings indicate that there is still wallet share to be gained as many consumers are out in force finalizing their shopping lists.
Back in the stores, the situation was compounded by reports this week of travel delays on highways and in airports which got people on the road sooner, further depleting store traffic. Late Wednesday, two dozen tornadoes swept through seven states, killing at least 10 people. Major urban areas were not hit, though retailers concentrated in smaller communities, such as Wal-Mart, J.C. Penney and dollar stores, lost business. “A few of our stores closed for periods of time last night due to the weather but no stores were damaged,” said a J.C. Penney spokesman.
“Memphis, which is a hub for Federal Express, had tornadoes and crazy storms. From a business perspective, it’s delayed some shipments and there have been some Web site problems,” observed Evan Gold, executive vice president of global services for Planalytics.
Gold said that up and down the I-95 corridor, “We weren’t just breaking temperature records. We were shattering them,” with certain days 40 degrees above normal in such cities as Philadelphia and New York. “People are out wearing short sleeves and shorts.”
In contrast, ice and snow is predicted Monday for Michigan, Minnesota and areas in the Central Plains, potentially hurting the post-Christmas selling in those areas. However, the East Coast will continue to be warmer than normal but less warm than this week.
Retailers, Gold noted, should be able to capitalize on the relatively cold temperatures in the Pacific Northwest and California. “If you are a national retailer, it’s not as bad. Hopefully, you move more product to the west, consolidating merchandise,” in regions where there’s higher traffic and demand for cold-weather merchandise.
Here’s how Deborah Weinswig, executive director of the Fung Business Intelligence Centre for Global Retail & Technology, characterized the season. “The holiday 2015 e-commerce sector is performing robustly so far, generating several $1 billion-dollar sales days. However, concurrently, traffic for brick-and-mortar retailers show a year-over year decrease,” she wrote in a report issued Thursday.
Among the key trends, she said that “Holiday shopping is beginning earlier. There is an explosive growth in the use of smartphones, and shipping has emerged as a major sales driver.
“Right now, retailers are entering the final push to rack up last minute shoppers’ sales, running flash sales and staying open for 170 hours straight during the weeks of December 7–24, like Toys “R” Us and Kohl’s, respectively. These preliminary holiday results indicate that our estimate of 3 percent to 4 percent sales growth is on target.”