At the start of the 2012 holiday season, retail experts anticipated an overall positive outcome. The National Retail Federation (NRF), for example, predicted that sales during November and December would increase 4.1% over last year to $586.1 billion.
However, post-holiday numbers are showing potentially different results: Research accumulated by the MasterCard Advisors SpendingPulse showed that holiday-related sales increased much less than predicted, up just 0.7% from October 28 to December 24, compared to 2% growth 2011. The SpendingPulse results were based on all sales using cash, checks and all credit cards in “key holiday categories,” including luxury goods, clothing, electronics and furnishings, as well as online sales.
To drive further foot traffic and sales, many retailers extended their holiday season, opening their doors on Thanksgiving night and releasing door-busters and promotions earlier than ever. While these strategies drew additional sales in the short term, they may have actually diminished the total results, according to Paula Rosenblum, Managing Partner at Retail Systems Research (RSR).
Advertisement
“Overall, I think retailers made some decisions they may later find themselves regretting,” Rosenblum said in an interview with Retail TouchPoints. “The earlier promotional calendar, coupled with Thanksgiving and Black Friday door-busters set a tone that essentially says to the consumer: ‘We’re pretty hungry for your business and will do whatever it takes to get it.’”
Additionally, with more days between Christmas and Thanksgiving in the 2012 calendar year, some consumers may have waited longer to finalize purchases, according to Bill Martin, Founder of ShopperTrak. “This became an excuse for shoppers to procrastinate,” he said. “With shoppers waiting to make a move, discounts were the theme in the final week leading to Christmas.”
Jim Dion, Founder and President of Dionco, agreed: “Retailers made consumers paranoid to complete purchases because they felt that if they did, they were going to miss a deal and feel stupid. And no one wants to feel stupid. We’re teaching consumers to wait for deals and we’re surprised when they do.”
This deal-focused mentality isn’t anything new, Dion added. “This has been a disaster in the making for the last few years. Every retailer out there seems to believe you can’t sell any products unless its a deal or its 40% to 60% off. Additionally, I’m shocked and amazed by retailers’ inability to master inventory management, when they start slashing prices six days before the holiday.”
But, at press time, Rosenblum suggested that retailers might want to wait to make a final call on the success of the 2012 holidays. Due to the rise in gift card purchases and heightened shopper frugality, Rosenblum noted that: “We’re going to see more post-holiday sales as consumers continue to look for deeply discounted merchandise.”
Hurricane Sandy And Fiscal Cliff Shake Up Retail Sales
Cautionary retailers always will leave the door open for unexpected circumstances during a sales season. At the end of October 2012, the Northeast and Mid-Atlantic regions of the U.S. were struck by Hurricane Sandy, which severely halted retail sales. In fact, the “Superstorm” was a leading cause of lackluster holiday sales results, according to Michael McNamara, VP of Research and Analysis for MasterCard Advisors SpendingPulse.
“The season got off to a difficult start coinciding with Hurricane Sandy,” McNamara said. “The first two weeks of November were negative as the Northeast and Mid-Atlantic regions experienced substantial declines in holiday related categories.” Both affected regions — the Northeast and the Mid-Atlantic — experienced the greatest year-over-year loss this holiday season, according to MasterCard. While the Northeast experienced a 1.4% drop in sales between 2011 and 2012, the Mid-Atlantic fell nearly 4%.
But sales did increase slightly from November 18 to December 1, when MasterCard pinpointed a “recovery in sales growth,” McNamara reported. “Promotional activity both online and within brick-and-mortar locations appeared to be successful in stimulating growth. Online sales growth returned to double digits during the second half of November.”
Following the environmental storm, the retail industry also may have felt the impact from the pending fiscal storm. In a survey of 2,893 U.S. shoppers, SOASTA, a web and mobile performance analytics company, concluded that concerns around the economy and impending reports on the inevitable “fiscal cliff” negatively impacted holiday sales.
A vast majority (83%) of consumers had concerns about the fiscal cliff, while 30% said it would motivate them to spend less. But overall, 40% believed that the holiday season showed that the economy was improving.
Rosenblum, however, questioned the impact of the fiscal cliff on holiday shopping behaviors. “I think if you asked a majority of consumers what the fiscal cliff was, they would say ‘I have no idea.’ But the media pounded the topic day after day so people likely figured there was something in it. Having said that, we’ve seen other years when consumer confidence was low yet sales came in at a respectable rate, so I don’t believe this was a driving factor.”
