E-commerce is shaping up to be the holiday season’s silver lining — so far.
This story first appeared in the December 3, 2013 issue of WWD. Subscribe Today.
But while the channel is posting dramatic growth, it is from a smaller base and is basically siphoning consumer dollars from brick-and-mortar stores, leaving the overall picture for holiday still decidedly bland. On top of it all, retailers are becoming as aggressively promotional online even before Thanksgiving Day, eating somewhat into the hubbub surrounding so-called Cyber Monday.
Online sales climbed by nearly 20 percent on Thanksgiving Day and Black Friday, according to IBM, while retail sales overall are headed for an increase in the low single digits.
IBISWorld predicted that consumer spending for the month of December would increase by just 3.4 percent to $68.9 billion over last year’s take — with apparel sales actually falling 0.5 percent to $9.1 billion.
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Sucharita Mulpuru, vice president and principal analyst at Forrester Research, noted that even though online sales are a “bright spot” with double-digit growth, this year’s online holiday shopping trends are similar to what’s occurred in the space historically. More market share is shifting to e-commerce sales, many of the traditional marketing tactics — like search and e-mail — remain effective and mobile continues to be important.
Mulpuru said more consumers are comfortable buying online, and if there is a “scramble,” retailers will send out more e-mails and offer free expedited shipping, a gift-with-purchase or a percentage off the entire order. “That’s really what people do. High growth online for these big days continues to grow,” she said.
The increase in brick-and-mortar doors opening on Thanksgiving Day also upped the ante last weekend — creating competition for what’s typically been a strong day for e-commerce.
Mulpuru noted that online retailers saw a softer Thursday than they have in the past, attributing this to the increase in stores opening on Thanksgiving Day eating away at e-commerce sales.
For Mulpuru, though, the “primary change” for online retail year-over-year is the increased usage of mobile devices.
Michelle Peluso, Gilt Groupe’s chief executive officer, told WWD on Monday that the majority of sales for the holiday weekend (Wednesday through Saturday) came from a mobile device — this holiday season’s dominant force. The company, which did $550 million in sales last year, maintains a percentage of mobile sales consistently in the 40 percent range, but this past weekend was the first time more than 50 percent of transactions came from the channel.
Peluso said Gilt’s revenues for Wednesday through Saturday gained more than 40 percent versus a year earlier, with Thanksgiving Day up 50 percent and Black Friday up 60 percent. She attributed this to a combination of existing consumers spending more and new members.
Gilt, which sends sales alerts around noon six days a week with the exception of Sunday’s 9 p.m. sale, saw the typical spike in traffic during this time but there was increased engagement in the evening. There was a surge in engagement on Black Friday between 9 p.m. and 10 p.m. as well as from midnight to 1 a.m.
Although still early in the day, she said Cyber Monday sales were off to a “very strong” start. The day’s sales including brands like Christian Louboutin, Missoni, John Varvatos and Ermenegildo Zegna.
“This is a shorter [shopping] season in general, and as a result many tried to pull sales forward. For most retailers, they did pull forward but it cannibalized Friday. For us, we didn’t see that at all,” Peluso said of the company bucking the industry trend that retail is down this holiday season. “We saw strong consistent gain year-on-year for Thanksgiving and Black Friday, and we’re expecting the same for Monday. We didn’t see the same cannibalization that Thanksgiving pulled from Black Friday that other retailers did.”
Research from IBM showed that Thanksgiving Day and Black Friday saw increases in total online sales of 19.7 percent and 18.9 percent, respectively, with the most significant surge resulting from mobile. Mobile traffic grew to 39.7 percent of all online traffic, and mobile sales comprised 21.8 percent of all online sales, a 43 percent increase from last year. On Thanksgiving weekend, according to the National Retail Federation, the average customer spent $177.67 online, or nearly 44 percent of their total holiday budget, up from 40.7 percent last year.
Sephora chief marketing and digital officer Julie Bornstein said that the retailer saw high growth in mobile traffic over the holiday weekend. Mobile traffic increased by more than 40 percent and mobile sales by upwards of 60 percent.
“The biggest takeaway we had was that our clients are buying more on mobile phones,” Bornstein said, adding that the most popular shopping times were midnight on Thursday (for online) and Friday morning (in stores).
Etsy ceo Chad Dickerson, who said sales for the holiday weekend were up over 60 percent year-over-year, also called 2013 the “year of mobile for the holidays.”
The vintage and made-by-hand marketplace has seen more than 30 million visits to Etsy.com since Thanksgiving morning, the majority of those coming from shoppers using a mobile device.
While the early promotions took a bite out of online sales over the holiday weekend for many, Target Corp. said it saw continued strength, especially on Thanksgiving.
Jason Goldberger, senior vice president of target.com and mobile, said Thursday was a record day for target.com this year and in 2012.
“While Cyber Monday will be great and so far it looks really good, Thanksgiving [sales] will be much larger,” Goldberger told WWD Monday afternoon. “Guests are definitely shopping earlier — meaning before Cyber Monday. We talk about Black Friday, but our Black Friday is Thursday, [and guests are] shopping even earlier in the day. Sales went live 3 a.m. Central Time, and we had an initial rush of orders.”
The deals offered by Target on Thursday were consistent in-store and on target.com — part of the retailer’s omnichannel strategy that’s been a focus for the past two years, according to Goldberger. He said the retailer presents online and brick-and-mortar as “one Target.” The retailer began offering free Wi-Fi in all of its stores in October 2012 and last month set up a program allowing customers to buy online and pick up in store. There are also many items showcased on target.com that are only sold in-store — like groceries — but they are still visible on the Web site so consumers can see what’s available.
Target.com offered specific Cyber Monday deals, including a promotion where if consumers bought one full-price item of men’s or women’s apparel, jewelry, accessories and shoes, they get a second one for 60 percent off.
The final tally for Cyber Monday sales will be ready today. Last year, excluding mobile, Cyber Monday generated $1.465 billion in sales, a 17.1 percent rise over a year earlier.
A survey conducted by Prosper Insights & Analytics over the weekend for the NRF projected that upwards of 131 million people, or 54.8 percent of those surveyed, would shop online Cyber Monday, up from last year’s 129 million. About 19 percent of shoppers surveyed, or 24.8 million people, said they plan to shop on their mobile device, a 22 percent rise over the 20.4 million last year and a significant jump from the 3.7 million who shopped via mobile in 2009.
What’s still not clear is how all the holiday sales are going to impact profit margins once the season is over.
Laura Gurski, partner and global leader of the Consumer Product & Retail Practice at management consulting firm A.T. Kearney, contended that promotions starting as early as right after Halloween resulted in consumers essentially skipping Thanksgiving as a major shopping event. Thanksgiving sales ate into Black Friday, and she called items for sale over last weekend “overly promoted and significantly discounted” — with retailers sacrificing their margins for volume, even though it didn’t quite “pay out for them.”
But the biggest story for Gurski this season with respect to online is the behavioral shift in the way consumers are buying. She explained that online shoppers typically make a “point purchase” — meaning they know what they are going to buy, and they likely aren’t going to buy several items at once out of convenience because they are all sold on the same site. This has taught consumers to look for a deal in every element of the purchase — and this is increasingly transcending the in-store shopping experience.
“If you’re buying a TV and you need a stand, you won’t buy them together — whereas in the past you might have bought everything you needed at one time. We’re seeing consumers walk into a brick-and-mortar store and shop as if they’re online: buying just one item,” Gurski said.
She added that mobile has contributed to this phenomenon. With mobile apps, shoppers can buy additional items online, even before they check out of the store. “It’s become a new way to ‘chore stack,’ preempting the need to drive to multiple locations and having those other items mailed to you instead,” Gurski said.