Retail Outlook 2019: It’s Never Too Early to Talk about Holiday Shopping

Our 2019 retail outlook shows the holidays are driving consumer spending even earlier
 

Shoppers are heading online (and into the stores) early and more often.

Keith Jelinek

Let’s look at a fairly typical Black Friday consumer of 2018—in this case a female shopper—who started her shopping the Monday before Thanksgiving. Browsing online over lunch, she spotted and jumped on some great deals to make an early dent in her Christmas shopping. A day later, passing by a neighborhood storefront, she caught a glimpse of a shirt she simply had to have. She kept walking, but quickly made the purchase using her phone’s shopping apps. 

On Black Friday, our shopper visited her favorite department stores, where many items were marked off 30 percent to 40 percent. The rest of the weekend and into Cyber Monday, she monitored her favorite brands online and on her phone, pouncing whenever she encountered a deal too good to pass up. 

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Like our imaginary shopper, the consumers spending the most on or around Black Friday in 2018 didn’t limit themselves to shopping exclusively online or in stores. Instead, the big spenders were more likely omnichannel shoppers, equally willing to stroll through brick-and-mortar boutiques, click around online, or scroll through smartphone apps. 

Retailers, meet the shoppers of the future.

Our 2019 Retail Outlook Reveals One Rule: Shop Early, Shop Often

In 2018, according to the National Retail Federation, 165 million Americans made purchases between Thanksgiving and Cyber Monday, a 5 percent decline from 2017. But that doesn’t indicate a lack of interest in the event. More likely it tells us that that consumers are shopping before Thanksgiving, as retailers push their pre-holiday sales up earlier and earlier, stretching as far as a week before Black Friday in some cases. In BRG’s 2018 Holiday Outlook and Consumer Survey, only 14 percent of respondents said they were waiting for Black Friday to begin their shopping. 

According to the Wall Street Journal, 2018 featured the strongest holiday sales increase for US retailers in six years. WSJ noted, based off data from Mastercard SpendingPulse, that retail sales, excluding car purchases, rose 5.1 percent between November 1 and December 24 compared with that same period in 2017.

Over the five days between Thanksgiving and Cyber Monday, consumers each spent $300 on average, also down slightly from 2017. Again, this is probably not because anyone was shopping less, but because the deals were better and the discounts steeper. In 2018, the sweet spot for discounts was 30 percent to 40 percent off list prices.

Where were all these customers shopping? Generally, department stores had more traffic and more registers ringing on Black Friday than any other retail channel. 

Yes, you read that correctly—department stores are back. In December 2008, during the height of the recession, the International Council of Shopping Centers reported the weakest retail sales in 35 years. The biggest drop was in department stores, where sales had fallen 13.3 percent from November 2007. 

But many department store operators have combated the malaise, first by making significant changes to their product mix as well as inventory levels and second by moving aggressively into retailtainment—using experience and ambiance to keep customers in stores and willing to buy—for example, cloning some of the creative customer interactions we have seen, like Casper encouraging customers to take a nap while shopping. Some DSW stores offered spas with pedicures and manicures. Lululemon offered yoga classes and meditation spaces in store. 

Source: BRG 2018 Holiday and Consumer Survey

Source: BRG 2018 Holiday and Consumer Survey

 

Rising consumer confidence also fueled department stores’ comeback; they tend to perform best in strong economies, when consumers flock to their higher-end brands instead of outlet malls and off-price retailers.

But just because crowds are returning to actual stores doesn’t mean online and mobile shopping are going away. Despite the department store resurgence last year, mobile devices were still the largest drivers of actual purchases—fueled, not surprisingly, by the 18-to 24-year-olds market—during the five days around Thanksgiving. That includes purchases in stores, where price transparency has become a key factor in shopping journey: Consumers can commonly scan a product’s UPC code on their phones with apps like ShopSavvy, which will tell them what other stores have the same item for a lower price. 

Meanwhile, the line between e-commerce and in-store is blending as shoppers live in a seamless omni-channel experience. Today, a shopper can learn everything about a product without actually touching it—viewing it in multiple dimensions; seeing it in use or worn by a model, often in video format; reading reviews; and even, on some apps, learning what size would fit them best based on a picture uploaded from their phones.


Holiday Retail Trends 2019: A Guide for Retailers 

While many of the same trends will carry into 2019’s holiday shopping, smart merchants have by now learned that the one thing they can expect from today’s retail environment is change. But 2018’s holiday results can serve as a valuable guide in preparing for this year:

1. In-store experiences. While it’s critical to continue developing mobile apps and e-commerce, retailers shouldn’t lose focus on in-store experiences. Whether this means wine and cheese nights for loyal customers or childcare areas for harried parents, it’s important to offer something beyond the merchandise to provide a differentiated experience.

2 Get them into the store. Because once they’re inside, they’re more likely to keep shopping, and to buy. Most e-commerce shoppers only buy one item at a time and on average only have 1.2 items in their basket at any given moment. Online, people don’t keep browsing; in the store, they will.

3. Eliminate margin leakage. Careful planning and analysis can significantly improve net margins and eliminate margin erosion. The collision of promotional offers in an omnichannel environment
can provided unexpected discounts to customers, which is just a giveaway.

4. Make the sale. A retailer should do everything possible to close the deal once a customer is inside. This might mean offering to call another store to see if an item is in stock in another size, style or color and then having it shipped for free to the customer’s house. 

5. Free shipping. Shipping shouldn’t cost extra. Amazon Prime has made free shipping a de facto expectation in online shopping and thus a key driver in consumer decision making. While free shipping can be entry stakes these days, an area we see more customers gravitating to is order online and pick up in store. Customers are shifting more to this option for convenience, which reduces retailer costs and provides an opportunity to get the customer back in the store to buy another item, as well as making it convenient to drop off returns. 

With planning, design and buying cycles for 2019 already underway, successful retailers will win with product and engage with current and future customers in an even more competitive omnichannel environment, as we anticipate next holiday season to bring even more cost pressure.


Keith Jelinek is a managing director in BRG’s Century City (Los Angeles) office.

 
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