Early Read on Holiday 2014: Deep December retail "lull" pivots to peak shopping season
By Craig Johnson, Customer Growth Partners
Retailers now stand at the two-thirds point of the Holiday shopping season, 41 days into the 61-day November-December statistical calendar—and two weeks until Christmas. But on a dollar basis, at this writing they have barely reached 60% of Customer Growth Partner’s (CGP) projected $590 Billion in sales, due partly to lackluster retail spending entering holiday—but most importantly to this year’s particularly pronounced “December lull” in shopping.
A phenomenon first seen in the mid-2000s, the December lull eased during the recession—when sales plunged throughout the season—but then intensified in the post-recession years, especially as Black Friday promotions (read “hype”) proliferated. As Black Friday sales—and hours open, including Thanksgiving openings—expanded, the inevitable result was to pull retail sales forward from the post-Black Friday period, mostly from December.
With each passing year, the December lull has deepened, and this year, as most stores opened by 5pm or 6 pm on “Black Thanksgiving,” the demand pull-forward increased so much that the shopping pause actually started on Thanksgiving weekend Saturday and Sunday, so that the December lull actually started in November!
In the wake of the Black Friday weekend, some industry observers estimated a sales decline of as much as 11% (per the National Retail Federation) from last year. Based on our 16-researcher field team’s data from 80 venues nationwide—across over 2000 datapoints for each major retailer---CGP estimated that sales for the four-day weekend actually rose some 8.5% from 2013, reflecting both robust online growth and the demand pull-forward from December.
Subsequent data from independent sources such as payment processors, and retailers such as Costco (up 8% for Thanksgiving week) and Abt Electronics (13th largest in U.S.: Black Friday weekend up 25%), confirmed CGP’s estimates issued on December 1. Lastly, the Dept. of Commerce November retail sales data shows year-over-year growth of 3.35%, consistent with CCP’s 3.4% forecast.
But Black Friday’s solid results did not alter CGP’s preseason holiday forecast of lackluster growth—since we had assumed that 2014 would again see the demand pull-forward pattern. [CGP’s 14th annual holiday forecast of 3.4% growth, well under the 4.1%-4.9% year-over-year consensus range, is based on a top-down econometric model and bottom-up data at 50 retailers compiled by its field team. CGP’s $590 billion forecast includes all retail sales except autos/auto parts, gasoline/oil and restaurants; the NRF is similar but also includes auto parts and fuel oil.]
CGP has conducted Holiday forecasts since 2001 and nationwide store checks since 2008. Based on our data, several trends are emerging.
1. Apparel Woes Continue: After another dismal year, apparel (+2.5% in November) faces an over-inventoried/over-promoted holiday—except in performance-wear and boots
2. Consumer Electroncis Seeing Best Sales in Five Years: For the first time since 2009, there is some real excitement in CE (+6.1%)—from TVs and audio, to low-cost laptops and the iPhone 6
3. Non-Holiday Retailers Enjoying Robust Holiday: Although not major Holiday shopping destinations, home improvement (+4.7%) and drug stores (+4.6%) are growing strongly
4. Fast-Growing Sectors Still Face Margin Weakness: Although CE and home appliances are this year’s stars of the show, they are notoriously low-margin product lines
5. Increasing Strategic Focus on Holiday’s “Second Season:” The Christmas to New Year’s week is no longer just for exchanges and discounts, as more retailers bring new full-price spring items to the floor, often launching fresh goods a week before Christmas.
The December lull wraps up tomorrow, and Saturday Dec. 13 will be one of the biggest days of the year, and this weekend will be the second busiest of the year, even surpassing Black Friday’s Saturday-Sunday, when traffic shifted to Thanksgiving and earlier in the week. But the top day of the season will again be the last Saturday before Christmas, December 20, “Super Saturday.” That Saturday will be an ideal five days before Christmas: close enough to create a sense of urgency for last-minute Dads desperately seeking singing Elsa dolls, and luxury shoppers waiting for the next credit card billing cycle—but far enough to not conflict with family travel plans.
Outlook for 2015
Historically, holiday has been an imperfect predictor of the subsequent fiscal year for retail. In 2007, holiday sales rose 2.6% year-over-year, yet retail sales flatlined in 2008, in a recession that actually started in December 2007. Conversely, holiday sales ticked up a minuscule 0.9% in 2009, yet full-year retail sales rose a robust 4.5% in 2010.
For the new year, the holiday tea leaves are still steeping. But based on November’s growth of barely 3.3%, it seems that 2015 will see another sluggish year retail growth, with store-only sales barely positive if not flat, and topline growth focused in online sales and the luxury sector. Among merchandise categories, home improvement retailers are likely to continue their long climb back unless the housing sector decelerates further. But the dicier questions are whether the new-found and robust rebound in consumer electronics will continue—and whether the long-awaited rebound in apparel will ever appear.
Criag R. Johnson is president of Customer Growth Partners, New Caanan, Conn., a consulting and research firm focused on the retail and other consumer industries. Founded in 2001, CGP has conducted industry-leading forecasts of holiday and back-to-school sales since then. CGP’s 16-member field team conducts primary research weekly in over 80 major shopping venues nationally.