Retail Rap: Stocking Stuffers

With 2014 almost over, another holiday shopping season is drawing to a close. The looming question on everyone’s mind, of course, is whether holiday sales managed to live up to the (mostly) positive holiday forecasts from analysts and retail organizations.



As I mentioned in a previous column in this space, Black Friday landed with a resounding thud, failing to meet expectations and surprising most observers with underwhelming numbers. Given the fact that we didn’t see what we expected on Black Friday (and that the weeks since have been decent, but not remarkable), it seems like our post-season analysis will discover that the last week before Christmas—particularly the last pre-Christmas shopping weekend—will have been enormously important, and ultimately defining.



If you think about it, it’s remarkable just how important a relatively small handful of shopping days can be, not just for individual retailers, but for the industry as a whole. Considering the fact that some retailers rely on November and December sales for as much as 30 percent of their annual total, and that the biggest chunk of those sales take place over Black Friday weekend and in the final run-up to Christmas, we’re actually talking about just one or two weeks potentially making the difference between a narrative of robust sales/momentum or a disappointing result at a time when all signs pointed to optimism.



And with 2014 numbers impacting portfolio and expansion decisions downstream in 2016 (as 2015 is already largely set), the shape of the retail real estate landscape nearly two years from now could be fundamentally altered by what took place in just the last few days!



While the final chapter of 2014 won’t be revealed until the New Year, there are a few things that caught my eye during the holiday shopping season that I thought were interesting and/or worth noting:



Discount dynamics

One of those is the discount phenomenon. Not just the number of discounts, but the sheer size of them. Seemingly every brand is offering holiday discounts, and they are deeper than I can remember seeing at any time in recent memory. It remains to be seen if and how much this practice impacts profits, but that is something worth following as reports are released in the New Year.



Sector surprises

While it isn’t necessarily a surprise that apparel sales have been languishing, or that electronics is performing well, the degree to which both of those trends has exceeded expectations has raised some eyebrows. Industry buzz is all about the struggles in apparel, where retailers just can’t seem to discount clothing enough to get things to pick up.



Comeback kids

Considering that plenty of analysts (including me) have pointed out the fact that Best Buy has been in a downward spiral for some time now, it is a refreshing change to report that I think Best Buy will actually have had a good year when it is all said and done. To some extent, strong electronics sales have bolstered the troubled brand, but Best Buy has also made some sound strategic decisions that seem to be working out—including the “department storing” I’ll describe a bit later.



I also see discounters doing well this holiday season, particularly Target, which has come back strong from the credit card hacking scandal that rocked the brand earlier in the year. A new CEO and a renewed commitment to more designer brands and a higher-end model seem to be paying dividends for Target, which looks likely to create some additional separation between itself and its category competition. To me, Best Buy and Target are the two biggest surprises as 2014 draws to a close.



Department storing

Best Buy’s relatively recent decision not to downsize in an existing locations seems to be a wise one. But the electronics retailer has also done an extremely good job of bringing brands into their stores. It is almost like a department store model, where designer brands have their own in-store kiosks, complete with on-site product experts (these days it’s not unusual to hear someone tell you some version of: “I’m with Samsung, not with Best Buy”). Manufacturers obviously like it—because they are able to establish a brick-and-mortar presence without the expense or investment—and the approach seems to be gaining traction with consumers, as well.



A lump of coal

A rising tide may lift all boats, but what if one of those boats has sprung a leak? At the opposite end of the spectrum from Best Buy and Target is Sears, which continues to stagnate—and that might even be too generous. Sears is in more dire straits than JC Penney, which is not exactly lighting the industry on fire. Even at a time when most of us are hopefully filled with the holiday spirit, it is difficult to summon up enough optimism to see Sears’ future prospects as anything but grim.



That’s it from me in 2014—everyone enjoy an extra cup of eggnog and spending time with friends and family, and we’ll reconvene in the New Year with some early insights into what really happened over the last two months of holiday shopping. As always, we appreciate your feedback, insights and comments as readers—it’s part of what makes this column so much fun!



Feel free to leave a note below or email me: [email protected]. Let’s keep the conversation going strong into 2015.