by Shraddha Gupta
24-January-2019 | 7 mins read
A political deadlock in Washington and the slowing global growth in 2018 had been leading to a rising sentiment of retail uncertainty and a volatile market to capture. But strong sales numbers for the recently concluded holiday season in the US has left retailers celebrating, with boosted shares to report. According to a Mastercard report, sales during the holiday shopping season rose by 5.1 per cent, to over US $ 850 billion in 2018, the strongest in the past six years.
National Retail Federation had forecast US holiday retail sales to rise between 4.3 per cent and 4.8 per cent in November and December, reaching up to US $ 720.89 billion. This forecast compares with an average annual increase of 3.9 per cent over the past five years. Keeping up with what was predicted, the Mastercard report also states that online sales jumped 19.1 per cent compared to that in the last year. The categories of home and apparel saw maximum growth, as clothing also benefited from a strong back-to-school season, which boomed with a 7.9 per cent increase over 2017.
Other factors that hugely contributed to this growth were early discounts by numerous retailers, and the falling of the Christmas Eve on a Monday this year, which gave the customers an extra day for shopping. Steve Sadove, Mastercard Senior Advisor, also believes that, “Gas prices are low. People are benefiting from lower tax rates. You have an environment where people are, bottom line, feeling good about their own personal financial situation and that’s been reflected. Also, by combining the right inventory with the right mix of online versus in-store, many retailers were able to give consumers what they wanted via the right shopping channels”.
Adding onto the reasons behind a rising consumer confidence, Bob Phibbs, CEO of New York-based consultancy, The Retail Doctor, said, “The reality is that the consumer felt comfortable enough to splurge and we’re hearing more and more that it’s for items for themselves.” Although he also mentioned concerns such as tariffs and the partial current Government shutdown that can damper on 2019’s retail outlook.
Department stores, though, finished the season with a 1.3 per cent decline from 2017, in part because of various store closings. Still, online sales growth for department stores climbed by 10.2 per cent. This data shows that even though department stores are still a major destination for shoppers throughout the peak shopping season, the current retail scenario demands each brand to create an environment that draws the consumer in. Moreover, every channel has to be utilised to convert that consumer, be it online sales or buy online/pick up in-store options.
Amongst online retail giants, Amazon claimed to have a ‘record-breaking’ holiday season, with a billion items shipped for free through Prime in the US alone. The company shares spiked by 9.5 per cent to US $ 1,470.90, with Amazon Prime being the key driver as a billion items were shipped for free. In terms of fashion, Amazon said, that among its most popular fashion brands this year was 120-year-old Carhartt, which specialises in work jeans and apparel, selling more than 1 million Carhartt items this season. Amazon also reported that more than 50 per cent of items sold in the company’s stores this Christmas season came from small and medium-sized businesses.
Other fashion retailers who saw a jump in share prices were Kohl’s Corp which rose by 4.2 per cent, Macy’s Inc. which gained 3.6 per cent, Nordstrom Inc. which rose by 3 per cent and Target Corp and Walmart Inc. which saw a rise of over 1 per cent. Shares of American Eagle Outfitters, especially for its jeans business, rose 10.7 per cent to US $ 19.37, while shares of Urban Outfitters, the owner of Free People, Anthropologie and its namesake, were up by 7.3 per cent to US $ 34.06.
According to a survey, demand was especially strong for winter apparel in the fashion category and for home goods in stores like Home Depot. Demand for outerwear, boots and all things related to denim contributed to a 7.9 per cent increase in apparel sales, the highest spike since 2010, according to Mastercard. “Shoppers have been bulking up their wardrobes since September, when apparel sales rose as much as 9 per cent versus zero growth last year”, said Sadove.
experienced a setback in holiday sales, that is US department store JCPenney which witnessed comparable sales drop by 5.4 per cent over the December holiday period, and confirmed the closure of three stores over the ‘next few months’ as part of an ongoing evaluation of its store portfolio.
According to GlobalData Retail Managing Director Neil Saunders, the reasons for JCPenney to go into such a downward spiral were factors such as not being able to capitalise on the favourable trends as other retailers potentially were able to do.
“Stores, for example, were densely packed full of merchandise and provided consumers with a less than inspiring shopping experience. The same is true online where a vast array of products with few standout items reduced conversion rates. Extensive discounting did little to remedy these weaknesses or stimulate revenue growth,” Saunders said.
UK Holiday Sales expected to increase around 5 per cent
Though final results about how holidays sales went in the UK are still not compiled, eMarketer Retail had predicted that total holiday sales in the UK will jump by 4.7 per cent to reach £ 98.06 billion (US $ 126.26 billion). The expectation of strong spending is fueled by low unemployment, low inflation and strong wage growth in the UK, despite ominous daily headlines warning of Brexit and economic uncertainty. Another milestone that was expected for Holiday sales 2018 was in the percentage of shopping that will be done online. The prediction indicated that UK holiday e-commerce will jump nearly 16 per cent this year to £ 21.22 billion (US $ 27.33 billion), which represents 21.6 per cent of total holiday sales, the highest percentage ever.