It’s (officially) the most wonderful time of the year! November 1 marks the beginning of the holiday season, when retailers everywhere strain to get a piece of that $466 billion in U.S. sales. After releasing our holiday sales forecast in early October and distributing our first consumer survey mid-month, we took a look at some of the overarching trends based off survey findings, economic analysis and plenty of conversations with retailers.
While it may not seem like this holiday season is too different than years’ past – shoppers are obviously focused on prices and retailers are expected to be offering strong promotions even earlier – this is bound to be a holiday season like none other. Here are ten trends gleaned from our full data reports.
#1: Slow and steady wins the race. Early last month, NRF released its 2011 holiday forecast, which estimates that holiday sales will rise 2.8% this year to about $466 billion. That’s slightly more than the ten-year average but nowhere near the 5.2% gain we saw last year. While many current consumer sentiments are eerily similar to what we experienced in 2008, retailers and shoppers have been adjusting to the uncertain environment, which is good news. But there’s no doubt that continued consumer uncertainty and high unemployment is putting a damper on spending.
What’s changed since our forecast? We’ve had both good news and bad news. The good news: Third quarter GDP was stronger than expected, and unemployment claims have been trending downward compared to earlier this year. That said, consumer confidence isn’t where it needs to be and the housing market is making access to credit difficult for some people who are under water on their homes.
While it’s true that September sales rose 5.8%, it’s important to remember that Hurricane Irene and a late back-to-school season were both factors behind September’s sales gain, which is why a moderate forecast is still a best-case scenario for the holidays this year.
#2: All shoppers are not created equal. Think we’re in for a ho-ho-hum holiday season? It depends on who you ask. According to Shop.org’s eHoliday survey, nearly seven in ten online retailers expect their sales to grow at least 15% this holiday season. This projection is reinforced by NRF’s holiday survey as well, which found that the average person plans to do 36% of their holiday shopping online – up from 33% last year and the highest in our survey’s history. (Note: This doesn’t mean that 36% of purchases will be made online. It means that more than one-third of the time, people will be leveraging the web to research products, find gift ideas and compare prices before making a purchase – either online or in a store.)
There’s no question that the multichannel shopper presents the biggest opportunity for retailers. Holiday shoppers who shop in multiple channels will spend 22% more this year than people who are only shopping in a store. All this to say: Retailers, make sure your websites are speedy, accurate and information-filled. (Easier said than done, I know.)
#3: And..? You know the Coke Zero commercial that shows the kid growing up who is always expecting more? (An ice cream cone with sprinkles, a job offer with stock options…) That’s the holiday shopper in a nutshell. Today’s consumer has high expectations – they already assume retailers will be offering low prices or strong promotions, and they want to know what they’re going to get on top of that. This “price plus” shopping mentality is all part of the value equation, which incorporates price with other elements like quality, convenience and service. In fact, according to our survey, people were more inclined to say these elements are important factors in their decision on where to purchase – possibly because they already assume low prices are a given.
How does a shopper define value? Maybe it’s a digital photo frame that holds more pictures and a better resolution, or a store with short checkout lines and fully-stocked shelves. Some consumers may be persuaded by retailers who pledge a certain amount of proceeds to charities, especially if their individual contributions have been impacted as a result of the economy. Even layaway is part of the value equation, as evidenced by Walmart’s newest ads and heavy layaway emphasis from retailers like Sears, Best Buy, Toys “R” Us and TJ Maxx.
#4: Now you see it, now you don’t. After retailers got sideswiped by too much inventory in 2008, they pulled way back – causing some inventory shortages of popular products. While inventory levels are still very lean this year, which may impact availability of top products, retailers have done an incredible job streamlining their supply chains to ensure that they’re maximizing regional or local markets that may be performing particularly well. The handbag selling well in New York that is sitting idly on the shelves in Miami may relocate to the colder climate. Winter coats in Chicago can get shipped off to Des Moines and video games in Phoenix can get transported to Las Vegas. For retailers, this means an even greater opportunity to sell popular products at a profit. For shoppers, it means that merchandise may be easier to find…as long as it’s not “THE” must-have item this holiday season.
Also on the inventory front, retailers were able to place holiday orders later this year for shipping – enabling them to get a better sense of consumer sentiment closer to the holiday season before making a commitment on how much merchandise to buy. We all know that there’s a lot than can happen in a few short weeks, so having time on their side from a shipping standpoint was a crucial factor in helping retailers protect their profits and manage inventory.
#5: You better shop around. In a sluggish economy, people shop in fewer places…right? Wrong. In fact, during periods of consumer uncertainty, people dedicate themselves maniacally to finding the “best” deal – and they shop all over the place. According to our survey, a majority of shoppers will visit discount retailers this holiday season. But they’ll also be shopping at department stores, clothing stores, electronics stores, craft stores, grocery stores…you name it, nearly every category is seeing an increase in traffic. And shoppers aren’t discriminating on product. People won’t hesitate to buy toys at a grocery store or stocking stuffers at a wholesale club – and this trend offers opportunities to retailers in all categories.
#6: Thank you, sir, may I have another? For anyone who is looking for a reason to loosen the purse strings, your justification can’t get any better than this one. According to our holiday survey, six in ten holiday shoppers have set aside money to make additional “non-gift” purchases for themselves this season. The average person will spend $130 on these purchases, an all-time high and a 16% jump from last year’s $112.
Why, in an economy like this one, are people setting aside money during the holidays for these other purchases? Quite simply, retailers have done an admirable job telling consumers that the holiday season offers the best prices – and many Americans seem to have delayed purchases to wait for the best deals. Kids might get a new hat and mittens. Dad might replace the snow blower. Mom might swap out some kitchen gadgets or small appliances. And none of those items will get wrapped up and put under the Christmas tree. Regardless of the item, many families have set aside a substantial chunk of change for these “non gifts” this year.
Retailers are embracing this trend. Case in point: The home page of J.Crew’s website features a photo of an immaculately-dressed woman with the caption, “To You, From You.” Just makes you want to go shopping, doesn’t it?
#7: This year’s gift-giving theme: “Everyday appropriate.” In 2008 and 2009, both years when holiday sales saw declines from the year before, shoppers were all about practical, necessity gift purchases. This year, there seems to be a little bit of wiggle room on the wish list. The most popular items this year aren’t necessarily cheap, but they are appropriate to wear or use on a regular basis. What this means: don’t be shocked to see people spring for the $200 coffeemaker or the $400 watch, but the evening clutch might be a tough sell. The challenge for retailers, of course, is to present each gift option in a way that people will think it’s versatile and applicable for a variety of occasions. Even that pair of diamond earrings [cough cough].
#8: The Early Bird catches the worm, but the Night Owl catches the sales – on Black Friday, at least. This is the tenth holiday season we’ve been conducting holiday data with our friends at BIGresearch, so we have some pretty compelling year-over-year trends. Within the last decade, we’ve seen Black Friday morph from a leisurely mid-morning venture around a handful of stores to a competitive free-for-all among retailers eager to nab those first holiday shoppers. Last year, it got even earlier, with 24% of shoppers hitting the stores before 4 a.m. And with announcements this week by Macy’s, Kohl’s and Target that their doors will open at midnight Thanksgiving night, you can be sure that more people will be staying up to go shopping rather than setting their alarms to wake up before the sun. (Last year, the number of people who went shopping at midnight tripled from 2009 – no doubt the numbers will climb even higher this year.)
And after Gap joined Walmart, Sears and Toys “R” Us by opening on Thanksgiving last year, don’t be surprised if other retailers this year follow suit to offer shoppers an even earlier start to their holiday shopping. What will the Thanksgiving weekend hold for retailers this year? We’ll have to wait until our November survey is released to find out.
#9: Free shipping isn’t free…but it works. Here’s a dirty little secret: retailers have a love/hate relationship with free shipping. Why? For starters, it’s hardly free – after all, somebody has to pay for the 20,000 people that FedEx is hiring this holiday season – but shoppers have tunnel vision for this incentive and have come to expect free shipping like they expect low prices. And retailers are listening. According to Shop.org, a record 92.5% of online retailers will offer free shipping this holiday season – and that’s not only going to be a Cyber Monday staple. Free shipping offers are likely to be found all holiday season long, as 56% of retailers say their budgets for free shipping are higher this holiday season than last and one-third say free shipping offers will start earlier in the season than last year.
The dilemma for retailers has become weighing the “conditions” surrounding free shipping. What’s the minimum purchase required for shipping to be free? Which items are included (or excluded)? Currently, it seems like retailers will be promoting free shipping with conditions most often but a handful are planning some “no minimum” promotions on key spending days.
#10: Yes, Virginia, there is an app for that. A few years ago, when everyone in retail started getting themselves in a tizzy over the “mobile” trend, we lumped all the gadgets into the same category. But what we realized within the last year is that people are using their mobile devices in very different ways. This year, we took a deeper look at consumers’ use of smartphones versus tablets, and the results were fascinating.
Half of Americans with smartphones will use their devices for holiday shopping this year, according to our survey – primarily to research products or compare prices but also to find retailers’ information like store hours and locations. Consumers will also use phones while shopping in stores to read reviews or redeem coupons – while a smaller number (16%) will actually use their phone to make purchases. So when you think of smartphones, think mobile. These devices are carried everywhere.
Tablets are a different beast entirely. While there aren’t too many people whipping out their iPad at retail stores, they are using the devices to shop. According to our survey, 70% of tablet owners will use their devices for holiday shopping this year, and they are twice as likely to use tablets to purchase merchandise as smartphones. When you think tablets, think of someone sitting at home on their couch in front of the TV.
And there’s our list of the top ten holiday trends for 2011 based on our surveys and economic analysis. What other trends do you think we’ll see develop over the next two months? What are we missing?