The Real 2016 Retail Spending Story

Here’s the good news about all of the data on holiday retail spending: don’t like what you read one day, don’t worry — someone else will come out with a new set of data the next.

And while that can be a bit dizzying, luckily, when the going gets tough and the data starts to get dizzy, the tough turn to the real data deal to get going.

Sarah Quinlan, Mastercard’s Senior Vice President of Market Insights, has her finger on the pulse of what’s happening this holiday season by looking at how consumers are using Mastercard to make the holiday – and hopefully the retailer’s holiday – merry.

So what’s the overall verdict? A strong year, if not a blockbuster year, and one with lots of shopping and selling left between now and when the ball drops on the 31st. Now all that strength isn’t quite distributed equally, however, with some areas are looking strong while others are persistently “laggards.”

As for the big takeaway?

The same at Christmas as it has been for the rest of 2016 — it’s all about the experiences.

What works

“The biggest myth we are hearing is that Black Friday wasn’t that big this year,” Quinlan told Karen Webster in their mid-holiday season debrief. “The reality is that this is still the biggest shopping day of the year in the U.S. — and that it is still showing growth is impressive because growing on a big base is harder.”

To which she added — “it’s all about the math.”

The season certainly got off to an earlier than normal formal start this year, Quinlan also said, and that race to the starting line contributed to spending ticking up 4.1 percent in November year-over-year. Black Friday alone saw a 2.2 percent pick-up, as consumers showed their renewed committed to getting to those sales.

“Look, we got off to a solid start to the season. It’s measured and it started early — but it is going to go all the way to the 31st,” Quinlan added.

It is, however, a slightly differently shaped season than normal, Quinlan noted — because Christmas will be on a Sunday, so the last Saturday of the season — usually the so-called Super Saturday — is likely be supplanted by Friday the 23d this year.

“Super Friday will only be rivaled by Black Friday. There are a lot of shoppers — particularly male shoppers — that really like to wait until the last minute. Stores tend to close early on Christmas Eve, so we expect that Saturday will not be that large day,” Quinlan noted.

Expected to have a particularly good “Super Friday” is jewelry — it is expected to be the biggest spending category on the day — because for the husband or partner who has left the shopping until the last possible minute, there’s nothing like the gift of bling.

Or at least, jewelry merchants better hope so, since so far jewelry has been among the slower growing categories in 2016.

A bit behind

Jewelry got off to a very strong start in 2015 — it was a leading category on Black Friday last year — but this year was a different story entirely, Quinlan noted.

“In fact, it has continued to lag. Jewelry had a weak start — and this time for the first time this year we saw mid-tier and costume jewelry slipping.”

That slip, she says, is part of a long and tough decline in luxury goods as a category. International demand, she noted, has been particularly soft this year, which is problematic because foreign buys are a major driver in the luxury good category. That global weakness, she notes, is an effect of a strong dollar.

Luxury, she notes, is also suffering from the discounting fever that many department stores — even quite high end retailers — are succumbing to as the holiday season rolls on. The temptation, she notes, is to try to pack the customers in with discount after discount — but that isn’t the effect it really has.

“We encourage merchants not to discount — because it doesn’t have the desired effect. When we look at small business sales we can demonstrate that these merchants can’t offer volume discounting — but they are getting the consumer that is willing to pay full price because they really want the goods,” Quinlan told Webster. “The discount isn’t going to spur the buying, all it does is make people wait and delay buying because they are always looking for more discounts.”

So what will spur the buying?

Building a better experience

Quinlan noted that when one deep dives into what consumers were buying in the early part of the holiday season — the big growth areas were in lodging, restaurants and airlines. Some of that, she noted, is people booking holiday travel. But a lot of that is people actually buying the gift of experiences for others.

And that, she noted, contains a lesson for merchants during the holiday season.

“As we are passing peak holiday eCommerce — because people do start to worry about having it on time for the holiday — brick-and-mortar business does get an advantage that they can build on by really customizing that shopper experience.”

That means having more sales people on hand, she notes — and also being ready to tie in events with in-store locations to the consumers who are there and shopping. The point, she notes, is to create the context in which consumers are naturally moved toward making the conversion.

And, of course, part of winning the game, she noted, is realizing it is long — and doesn’t end on the 25th. This year, with consumers off and on the road in the long week between Christmas and New Years, will be a huge opportunity to catch those end-of-the-month sales.

“The most valued commodity to any person is time — and this is the one week the consumer has time. She goes to many of the same stores she would go to — but she’s now on the road. That’s why it is so important that the relationship already exists between the store and the individual.”

We’ll keep you posted on which retailers succeed in building that relationship this season — and how they can carry all those good experiences into new customers and conversions in the New Year.