An Unevenly Happy Holiday For Retailers

By many metrics, retailers should be feeling especially merry and bright about the 2017 holiday retail season. The stock market has more or less soared, the Consumer Confidence Index has hit its highest level in 17 years, unemployment is down, wages are starting to pick up and consumer credit looks to be on fairly solid ground.

All lights appear to be green for holiday season spending – and the forecasts are strong. Americans may be looking at another trillion-dollar spending season.

So, time to bust out the eggnog and celebrate?

Well, a closer look at retail data in particular is likely in order before one begins pouring anything, as much of the retail sector is facing some stiff headwinds heading into holiday 2017.

Department stores are, by and large, struggling. Some, like Kohl’s, have managed surprise beats during earnings season, but the more familiar song is being sung by retailers like Nordstrom, JCPenney, Macy’s and Sears, where foot traffic is down and turn-around efforts are underway, but not necessarily taking root.

And that is just the background tune that has been playing for a while in the segment. 2017 also came with a built-in difficult Q3 that included back-to-back hurricanes hitting populous U.S. markets, and unprecedented wildfires charring large sections of California. Those retailers are both facing facilities that may need repair or reconstruction, supported by customer bases that are thinking less about gift-giving than rebuilding their lives this holiday season.

Which is not to say retail will be a dead letter for the 2017 holiday – the fundamentals of the underlying economy are strong at present, and according to A.T. Kearney’s proprietary holiday spend research, thus far the numbers seem on pace to outstrip 2016.

But, according to their data, the final scoreboard will be quite uneven and will look a good deal different than it has in holiday seasons. Black Friday and Cyber Monday will command less shopping activity and spend than they have in years past, a trend consistent with the past few years but seemingly accelerating, as the decrease is looking to be in the order of 4 percent this year.

That drop is likely brought on by what experts are calling the Grey November effect, as retailer chains nationwide have been pushing their Black Friday sales out earlier in the month in an attempt to lure early shoppers.

There has also been a wave of retailers – including Home Depot, Ikea and Office Depot – that have announced they are skipping Thanksgiving as a commerce opportunity and letting their employees stay at home. REI is doing the market one better with its #OptOutside campaign, which will see their store closed on Black Friday as well as Thanksgiving.

The net effect has been to retrain consumers away from seeking Black Friday as the one-shot chance at holiday value, and instead as a single day in an entire commerce season that will likely include discounts throughout.

Even with the extra savings, about a third of consumers think it is likely they will spend more in dollars this year than last. Those expenditures will likely be category-focused – particularly in electronics, where the holiday season tends to both run up demand and spend tallies (as big-ticket electronics tend to have big-ticket price tags). And some, like the new iPhone, will not need any kind of discount to move from shelves.

And, whatever consumers’ chosen “big buy” happens to be, they anticipate paying quite a bit more than they did for it even two years ago. The median increase study respondent reported expecting 52 percent more than what they were spending for the top item two years ago. Mobile is also getting a longer time in the sun this season: 10 percent of survey respondents reflected that mobile phones and tablets would be their go-to commerce enablers this season.

The other likely power player this season is, once again, forecasted to be eCommerce, which could be looking at a spike of 16 to 25 percent over last year.

So, what’s the moral of this holiday shopping story? For some, it will be a holiday season for decking the hall with various boughs and enjoying the season’s spoils. But for various channels, geographies and categories, Christmas may be less happy and bring a more uphill climb.

Happy deal hunting.