2017 was a record-breaking year for holiday sales. According to numbers published by Mastercard Spending Pulse, U.S. holiday sales (across all payment types, but excluding automobiles) were up 4.9% for the period from November 1 through December 24, with more money spent than ever before. This resulted in the most substantial year-over-year (YOY) increase since 2011.
With success shared across all categories of stores (big box, discount, full price, specialty, etc.), it is estimated that $598 billion was spent across retailers this holiday season. The $33 billion growth from 2016 began early in the season and continued until Christmas.
• Thanksgiving Day: Online spending was up 18.3% YOY.
• Black Friday: The most substantial day of spending with online expenditures up 16.9% to a new record. Meanwhile, in-store visits were down less than 1% YOY.
• Black Friday Weekend: Both online spending and mobile conversion rates were up 10.1%.
• Cyber Monday: Online spending hit $6.59 billion (up 16.8% YOY) to become the largest U.S. online shopping day in history. Mobile achieved its first $2 billion day.
• December 23: The second biggest day of spending.
Based on published reports, retail categories with sales stronger than the overall average, included:
• Electronics & Appliances: Up 7.5%, achieving the strongest growth for the decade.
• Jewelry: Up 5.9% with much of it coming from last-minute sales.
• Furniture & Furnishings: Up 5.1%.
With unemployment at a 17-year low and consumer sentiment at a 17-year high, it’s likely shoppers were feeling freer with their wallets this year than in recent memory. Customer Growth Partners, a company that analyzes retail trends, also credited the high valuation of the stock market for the 2017 holiday spending levels. According to Craig Johnson, owner of Customer Growth Partners, “The single biggest driver of retail sales is growth in real disposable income. And when real income goes up, people have money in their pocket, and they’re able to spend it…. All the signs, all the ingredients are in place for a sustained retail rebound here this year.”
Earlier this year, Fox News (and many others) declared a “retail apocalypse,” reporting on retailers closing stores, filing for bankruptcy or sunsetting operations altogether. While some retailers, such as American Apparel, Bebe, Hhgregg and Wet Seal, did not make it to the 2017 holiday season, most survived. In fact, even discounts were at stable levels in 2017. MarketTrack, LLC analyzed 50,000 printed promotions during the holiday season, comparing them to the year prior. While apparel promotions were slightly higher than 2016, discounts for computers, electronics and toys and games were reduced. The overall discount level was 39% ― equal to the year prior.
After announcing record volumes of shoppers on their website throughout November and December, many industry experts estimated that Amazon secured approximately 50% of all online sales for the 2017 holiday season.
• Amazon Prime Membership: Achieved an all-time high after 4 million people subscribed in just one week.
• Mobile Shopping via the Amazon App: Up 70% YOY for the 2017 holiday season.
What were we buying? Not surprisingly, Amazon had the answer to that question.
• Best-Selling Item Across All Categories: Echo Dot
• Most Streamed Song: “All I Want for Christmas” by Mariah Carey
• Most Requested Drink Recipes (via Alexa): Martini, Manhattan
• Most “Wished for” and Borrowed (via Amazon Prime Reading) Book: The Handmaid’s Tale by Margaret Atwoods
• Top Selling Grocery Items: Keurig coffee & bottled water
• Most Popular Toy: Nerf-N-Strike Elite Strongarm Blaster
• Most Purchased Home Product: TP-Link Smart Plug
• Top Selling Home/Health/Personal Care Products: Fitbit Charge 2, 23andMe DNA Ancestry Test Kit, Radha Beauty Aromatherapy Top 8 Essential Oils sampler set
• Most Popular Wireless Products: Tile Mate Key Finder & Phone Finder, PopSockets: Expanding Stand & Grip for Smartphones & Tablets, Wemo Mini Smart Plug
• Other In-Demand Items: iRobot Roomba 690 Robot Vacuum, Instant Pot DUO80 (combination pressure cooker/slow cooker)
The gifting of experiences (travel, dining, etc.) was also popular in 2017.
The package carriers had a strong season as well. FedEx, UPS and the U.S. Postal Service all reported record volumes of deliveries. UPS even had to request office staff pitch in as drivers to make sure the 750 million packages they delivered during the holiday season arrived on time. Like the retailers who push for strong after-Christmas sales, the season is far from over for the shipping companies. In December, UPS was averaging 1 million returns a day, but they estimate January 3 will be the peak date for returns with a level of 1.4 million packages getting sent back that day. The CMO of FedEx, Rajesh Subramaniam, estimates 15% of all goods and 30% of all apparel purchased online are returned.
“Fewer people are living paycheck to paycheck. There is a lot more spending from the lower- and middle-income groups, while the upper-income groups are splurging,” noted Chris Christopher, executive director of HIS Markit, an economic research firm. This economic confidence led to holiday spending by a broader swath of the population than the year prior.
Driven by economic confidence, according to Alan Ikemura, senior product manager at Experian’s analytics unit, credit card debt was climbing throughout 2017. In Q3, it reached $757 billion ― up 11% year over year. Credit card delinquency rates were up 16% in the same quarter, an indication that consumers may be reaching unsustainable spending levels.
What does this mean as we move into 2018? Retail is certainly not dead. But the brands most likely to succeed are those that best attract, engage and service their target customers. Make sure you understand your audience and stay nimble. Remember, brick-and-mortar and online formats support each other. Websites and mobile apps work together. Luxury items can be discounted. If you deliver the experience your customers want, you’re most likely to be on the road to long-term success.
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