As retailers get deeper into the holiday 2015 season, so does their anxiety.
There’s no reason, at least for now, to abandon forecasts for modest sales gains of 3 to 4 percent and there’s time for business to pick up before Christmas. Online sales gains are sure to continue to offset store traffic declines. Still, based on accounts Sunday from retail executives and industry experts, business for the Black Friday stretch overall, store and online sales combined, was just OK, not great.
So now executives are turning their hopes to today, so-called Cyber Monday, and hoping their extended online sales — which are more like Cyber Week — will result in robust traffic. Many Cyber Monday ads are indicating the same savings available in stores and online, which could change the shopping pattern from prior years.
Whether in-store or online, outerwear and most apparel categories have been weak, meaning fashion retailers could be left with excess inventories, ultimately reducing margins while providing shoppers with bigger discounts closer to Christmas and New Year’s. The waiting game begins to see who will blink first.
It might take a while. There is a traditional lull in business right after Cyber Monday, which is seen persisting through around Dec. 12, when there should be a marked pickup in gift shopping that culminates the last weekend before Christmas.
More significant for the long term are the lessons being learned in a season of changing shopper patterns and industry dynamics — about the continued steep rise of the Internet — including this year, more than ever, the growth of mobile commerce; how discount-oriented consumers are increasingly becoming, and how retailers must re-examine their portfolios both in terms of store counts and how assets are utilized to support all channels of shopping. Major retailers such as Macy’s have been closely re-examining their square footage, and closing some units while contemplating alternative uses for certain locations.
Macy’s, along with J.C.Penney and the Hudson’s Bay Co, cited a rush of bargain hunters for Thanksgiving Day and Black Friday doorbusters, though the crowds quickly thinned in malls across the country by early afternoon Black Friday, and Saturday’s traffic was like a typical Saturday in the mall — nothing special. Still, when online sales, as well as pre-Thanksgiving promotions across channels, were factored in, business was not as bad as mall traffic alone implied.
“I don’t think brick-and-mortar will go away, but we’ll have to re-engineer the model,” Lou Amendola, chief merchandising officer for Brooks Brothers, told WWD on Sunday. “That may be scary for some, but every few years the industry has to change.” At Brooks Brothers, the percentage of business done online is growing at a rate of 5 to 7 percent a week and will represent 50 percent of sales this year. Five years ago, it was 20 percent at best, Amendola said.
“Unlike 10 years ago, we live in a world in which you can shop anywhere at any time. It’s no longer about one day, but a season of digital deals, and savvy online shoppers are ready to see what exclusive promotions retailers have in store for Cyber Monday before they checkout,” said National Retail Federation president and chief executive officer Matthew Shay. “Shoppers have seen promotions roll out for the past several weeks, but if the price is right on Cyber Monday, they’ll definitely show up ready to spend.”
According to the NRF’s “Cyber Monday Expectations Survey,” conducted by Prosper Insights & Analytics over the weekend, 121 million shoppers plan to shop online on Cyber Monday, down slightly from the 126.9 million who planned to participate last year, partly because of all the advance promotions. Mobile device usage is expected to be up from 24.4 million last year to 29.6 million this year.
Noting that unemployment is down, wages are increasing, and gas prices remain low, Shay said, “Consumers are in a good place to get us to a very good holiday season.” He stood by NRF’s forecast earlier in the year calling for a 3.7 percent holiday sales gain. He added that based on the Thanksgiving and Black Friday weekend period,”We are in a very good place based on the last few days to be just right in that range. Overall, people were very pleased with the way weekend has gone. You have to look at this in its totality. You can’t just look in-store or online.”
“We were pleased with Black Friday,” Jerry Storch, ceo of Hudson’s Bay Co., told WWD on Sunday. For the retail industry overall, Storch said, “It looks like the store business was about the same as last year on Black Friday and online was up double digits. You need to combine Thursday and Friday at a minimum,” he advised, to get a clearer measure of the total business across all channels, since many stores were open on Thursday and promoted Black Friday deals days before.
Storch disputed widespread media reports that the Black Friday period was a bust. “It’s as if they decided what was going to happen before it actually happened,” he said. “It was far from the demise of Black Friday. Traffic overall has been down but conversions are up so business is okay.”
Storch said the Saturday after Black Friday industry-wide is “always kind of its own event,” adding, “It tends to be significantly smaller than Thursday and Friday, though there is change this year. Some retailers started cyber events Saturday and certainly almost all started cyber deals today. What we are seeing is one giant online event that starts on Thursday and runs into Cyber Monday.”
At Target, “We’re on track to have a very strong online weekend heading into Cyber Monday,” Brian Cornell, chairman and ceo, said Saturday. Target.com for the first time is offering a 15 percent discount on the entire site.
“It’s a big move for a general merchandise discounter like Target,” said Jason Goldberger, president of Target.com and mobile. “Target is going all-in on Cyber Monday in a bigger, bolder way that we have ever before.”
The retailer has 75 e-doorbusters lined up for Cyber Monday as well as discounts in apparel, home and toys, and is offering free shipping on every order. Target on Black Friday shipped eight times as many orders from its Woodbury, Minn., facility compared with an average day, the company said.
Brooks Brothers’ Amendola said online sales were “through the roof” for the holiday weekend. “It was really a shocker. Traffic in the stores was off, though when adding the online business, overall sales were better than the year-to-date trend. So when you add it all together, the weekend was pretty good.” He said all categories performed well. “We’ll have to see if this weekend was just a blip, but it definitely brought optimism back to the season,” he said.
MAINTAINING THE OUTLOOK
“This is not going to be barn burner, but we should be OK for the season,” said one retail chief operating officer, who requested anonymity. “Maybe most retailers were scratching their heads over what happened Black Friday. Everybody was getting upset or crazy about it. But it was just the first salvo. It’s really about the whole holiday season. In the next four weeks, there’s a lot of business to be done. I think the customer has gotten really smart. They don’t rush. They know Black Friday deals aren’t necessarily the best deals of the season.”
According to RetailNext, net sales for the combined Thanksgiving and Black Friday period were down 1.5 percent year-over-year on flat traffic. But the firm said the average transaction value was up 1.1 percent.
Dana Telsey from Telsey Advisory Group said, “Traffic was below last year,” noting that promotions began earlier in the month and that many were also available online. The early winners seem to be American Eagle Outfitters, Hollister and Target, while Abercrombie & Fitch, Express, Gap and Wal-Mart appeared to have lighter traffic, she said.
Matthew Boss, an equity analyst at J.P. Morgan, said the early holiday read from online sales was strong, though stores were suffering. “I don’t recommend a single department store [stock] and I don’t have a ‘buy’ rating on virtually anything in the mall right now….In apparel, you have this larger-picture deflation. You have competition from online entrants. I don’t think any of these [retailers] are clearing through as much inventory as they need to.”
Hana Ben-Shabat, a partner in A.T. Kearney’s retail practice, said retailers on Manhattan’s Fifth Avenue took one of three promotional approaches. Mainstream apparel names like Ann Taylor, Express and H&M called out big discounts, including 50 percent off entire store inventories on Black Friday. Club Monaco and Coach offered a sliding scale of promotions, with a bigger purchase yielding a bigger discount. Then Black Friday “rebels” like Nike and Lululemon offered no special promotions. “They have the strength of their brands and they don’t feel the need to discount,” said Ben-Shabat. “All in all, I think we’re getting to the point where there probably is less excitement about Thanksgiving and Black Friday than in the past. Part of it is because you can get the same deal online, so why go to the store?”
According to Custora E-Commerce Pulse — which tracks U.S. e-commerce data from more than 200 online retailers, 500 million anonymous shoppers and $100 billion in e-commerce revenue — e-commerce revenue Thanksgiving Day was up 12.5 percent. Almost 40 percent, or 39.3 percent, of orders were placed on a mobile device, up from 34.3 percent in 2014, with the majority (78.3 percent) of these orders placed on iPhones or iPads.
TOYS, ELECTRONICS, ATHLEISURE PACE SALES
On Thanksgiving, electronics and toys were top sellers at eBay — with nine Star Wars items and two hoverboards sold a minute. Top-selling electronics were the Sony Playstation 4, Microsoft Xbox Live 12-month gold membership, the Lenovo 15.6″ B50-45 Notebook, Apple iPhone 6S and Microsoft Xbox One with Kinect. As for toys, the Lego Movie Super Secret Police Dropship and Despicable Me 2 Minions Night Light Lamp were the bestsellers.
Adobe reported that e-commerce sales on Thanksgiving totaled $1.73 billion, with 57 percent of traffic coming from mobile devices. Black Friday sales between midnight and 11 a.m. EST hit $822 million, slightly less than the 19 percent increase projected by the analytics firm, and by 7:30 pm on Black Friday, Adobe said consumers would spend $2.27 billion online by the end of the day.
Liza Landsman, chief customer officer at Jet.com, which last week raised $350 million in funds, said that Black Friday saw the site’s highest sales to date at $2.18 million. This number includes both the marketplace and JetAnywhere, which allows members to shop from participating third-party sites. “Based on trends, we expect Monday and potentially Tuesday to be bigger than Friday,” Landsman said, adding that the four-month-old online marketplace expected surges around Thanksgiving but instead saw a gradual rise in traffic begin about a week before Thanksgiving, with an uptick in toys and electronics.
Joanna Lambert, vice president, global consumer product, at Paypal, said that the company is seeing increases in mobile payment transactions, as expected. PayPal isn’t disclosing the dollar amount of mobile transactions over the holiday but said that about 30 percent of overall purchases are happening on mobile, representing a 40 percent increase year-over-year. Lambert credits the launch of “one-touch” checkout a few months ago as resulting in more conversion and less shopping cart abandonment.
“More and more people are moving their shopping to online and to mobile, but the trend just continues to hockey stick. You start to see that trend line really start to escalate year after year,” Lambert said, adding that Black Friday continues to “gray” as retailers launch deals before Thanksgiving. Fashion was the number-one shopping category on Black Friday, and four times more popular than the second-best category, electronics.
“I found that Black Friday by 1 p.m. or 2 p.m. petered out, then it became business as usual in the malls,” said retail analyst Walter Loeb. “Saturday there was no significant momentum. But if you add store sales and cyber sales together, retailers were about 3 to 5 percent ahead. You can’t get exact numbers yet.”
More than 10 inches of rain fell in North Texas from Thursday through Sunday morning, and three deaths were attributed to flooding, though the deluge helped business at certain malls as shoppers sought warm places to shop and dine. Galleria Dallas, for instance, reported that its parking garages were full by 2 p.m. Friday, which usually doesn’t happen until the week before Christmas.
“The rain always brings people indoors looking for something to do,” observed Kristen Gibbins, executive director of marketing and strategy at NorthPark Center in Dallas. “The weather helped us in terms of traffic, and cooler temperatures get people excited for the winter to shop for themselves and Christmas. We are trending to exceed $1.3 billion by yearend. We did over $1.2 billion last year so we have a steady rise year after year.”
Technical difficulties took a toll at neimanmarcus.com. The Web site suffered outages for at least 12 hours on Friday and a good portion of Saturday. “It was off and on — some orders were getting through — but it’s stable now so they extended the offers that were being made on Friday,” corporate communications vice president Ginger Reeder said Sunday morning. “I have not heard that they determined a specific cause.”
Online and in stores, Neiman’s bestsellers included fashion embellished with folkloric influences, ponchos, capes, flared jeans, statement earrings and red in many shades, Reeder noted. “For men, sneakers continue to dominate, and hoodies are selling as well as statement outerwear.”
Icy weather in the Midwest hampered traffic at five of Von Maur’s 30 stores, noted Melody Wright, chief operating officer of the Davenport, Iowa-based department store. “The good news is that at the rest of our stores we were still up in low-single digits both days even with some horrendous weather,” she said. “The Web has been good. Traffic was definitely up.” Top categories were jewelry, handbags and shoes, which saw solid double-digit gains, as well as cosmetics, lingerie and men’s sportswear.
Black Friday on Chicago’s North Michigan Avenue, also known as the Magnificent Mile, was severely clipped by marchers protesting the October 2014 fatal shooting of a black teenager by a white Chicago police officer. Marchers locked arms in front of the Nike flagship and Water Tower Place retailers Neiman Marcus, Tiffany and Macy’s to prevent shoppers from entering, shouting, “No Justice, No Shopping.” True Religion shut its doors in the early afternoon after protesters “came into the store and actually started rioting,” an employee said. Police made three arrests, two for traffic violations and one for battery. Tension had been building in Chicago since Tuesday when police released a dashboard video that showed police officer Jason Van Dyke shooting 17-year-old Laquan McDonald.
TAME CROWDS ON THE WEST COAST
At retailers and malls on the West Coast, there were the usual deal hunters and a mood that more mute than manic. “It’s interesting to see the customer moving away from just simply shopping to find the best deal, to being a little more specific with the dollars that they’re spending,” said Christine Olcu, global head of retail at American Apparel, which offered half off much of its merchandise. The company, currently in bankruptcy, saw a good portion of regular-priced and new merchandise accounting for transactions last weekend, including one best-selling $38 metallic jersey wrap top.
“I was out in stores in the Los Angeles market and there really wasn’t that frenetic or that really frenzied midnight shopper,” Olcu said. “It felt a lot more under control…We just saw the same business spread out over a longer period of time. What that says to me is that the customer comes out to these shopping events with a very specific dollar to spend.”
The boho-inspired women’s boutique Planet Blue took a different tack. “In general, we’re not a promotional retailer,” said vice president of retail David Lindell. “We’re significantly less promotional this year versus last year and we’ve really made a conscious effort to run a full-price business and focus on relationships with clients and strategic buying. There is a massive market saturation for promotional business.” Cashmere sweaters priced $250 to $500 were big sellers along with pieces from resort offerings, but people were largely shopping for items to wear to Christmas parties and other events in December, Lindell said.
Retailers that drove strong traffic into L.A.’s Beverly Center on Black Friday included Macy’s, H&M, Forever 21 and Uniqlo. Based on the weekend and the center’s overall performance this year, officials expect business for the season will be up.
Caruso Affiliated executive vice president of operations Jackie Levy said the shopping center owner is optimistic about how its centers will cap the year, partly based on gift card sales and the Santa photo business, which were both up Black Friday weekend. Tory Burch, Lululemon, Barneys New York, Topshop and Sephora were among the more popular destinations.
“We think there is a big bifurcation,” said Craig Johnson, president of Customer Growth Partners. “Hard lines guys are generally OK, particularly Home Depot and Loews. Best Buy was up in unit volume but flat because of huge price compression on TVs. Women’s in general is very slow. The caveat is that [women’s apparel specialty chains] have never been big Black Friday destinations. It’s more about department stores, teen chains and hardlines,” though he believes Lululemon fared well last week.
Johnson sees a major shift where Black Friday, traditionally dominated by 65 percent male shoppers, has now flipped to where 65 percent of the shoppers in stores are women. “Shopping behavior for Black Friday has reverted to traditional shopping patterns, which as you know, is mostly done by women.”
Bob Mitchell, co-president of Mitchells family of stores, said it has been a “very challenging fall leading up to the holiday. Traffic has been down the whole season.”
He said the Internet is “taking a little bit of business, but the psyche of the Wall Street customer changed over the summer when the market plummeted and affected fall.” He said the impact has been across the board in men’s, women’s, casualwear and tailored.
However, there was an uptick in the first week of November when business at the company’s stores was “slightly ahead” and traffic picked up. “But this weekend is the smallest weekend for us. The luxury customer is either at home or away and they’re not coming to us for Black Friday deals. We don’t play the promotional game.”
NOT JUST IN THE U.S.
U.K. retailers once again offered their own Black Friday deals — although few consumers understood the reason why. Most British shoppers opted to go online for deals, with Amazon leading the way on the first day of sales. The U.K. version of the online retail giant reported an approximate 25 percent increase in the number of items sold this year as compared to last year. By 10 p.m. Friday, the site, which was offering an average discount of 40 percent off current prices, had already sold 7.4 million items, at a rate of around 86 items per second. Last year, sold about 5.5 million items, at a rate of around 64 items per second.
Christopher North, managing director of Amazon U.K. said: “Throughout the year, we have been investing in more distribution centers and hiring many more great people in anticipation of our biggest Christmas period ever and, in particular, our biggest ever Black Friday. The bargains are not over yet. There is still time to take advantage of the great savings with deals running throughout this weekend.”
Retail analysts said that overall online sales were estimated to exceed 1 billion pounds, or $1.5 billion at current exchange, on a single day for the first time.
Despite the surge online, stores did fairly well. Jace Tyrrell, ceo of New West End Co., which represents retailers in Bond Street, Oxford Street and Regent Street, said, “In the first four hours of trading [on Friday], we saw a 10 percent uplift in footfall compared to Black Friday last year. There is a terrific atmosphere on the streets, with shoppers enjoying the first discounts of the season in an unashamedly festive setting.”