Now that the dust has settled, the wrapping paper has been removed and the gifts have (mostly) been given to friends and family, the only thing left to do is sit back and count the spending figures.
And, as it turns out, joy to the world — retail is back. Or at least retail spending came back — in a big way — this holiday season, according to the latest edition of the Mastercard SpendingPulse report for holiday 2017.
According to the report, holiday sales were up 4.9 percent — the biggest year-on-year uptick since 2011 — and consumers set new records for the number of dollars spent. Online shopping had a strong year, reporting 18.1 percent growth since holiday 2016 — though much of that figure was driven by a late season rally by customers getting their second shopping wind.
But, Mastercard’s Sarah Quinlan told Karen Webster, the reality is that online will probably only clock in at 10 percent — or perhaps 11 percent — of total shopping, with the rest defaulting to the physical store.
“In terms of sheer, overall spend, we still love the store.”
But, she noted, that love is changing shape and form, and physical retailers are finally catching on to the change — and getting better are navigating it. Consumers, she noted, even when they are in the physical world shopping, are still on their phones searching, comparing, contrasting and on the whole changing what the context of commerce looks like.
“Retailers did a better job, in my opinion, since they know 82 percent of people are using an online device while shopping — and even when you have them in your store, they are searching all the time. I think retailers this year made a better effort reaching out and using that channel to their advantage. This was the first year I think omnichannel had a meaning.”
The point that the segment as a whole caught on to this year, according to Quinlan, is that customers want to shop whenever and however they — want without a lot of limits. And while some sectors did better than others — for a variety of reasons — the overall message of the season, according to Quinlan, was that players who meet consumers (instead of expecting consumers to come to them) bring them in — and when they do, those consumers spend money.
Hearth and home, Quinlan noted, were big winners — with appliance and home improvement product sales driving a lot of spend this holiday season. Electronics and appliance sales increased 7.5 percent, marking the strongest growth in those categories in the last 10 years.
The home furniture and furnishings category grew 5.1 percent, as did home improvement.
“And when we are talking about appliances,” Quinlan noted, “that is things like refrigerators and stoves — people were really thinking bigger.”
The strength in appliances, electronic and hearth and home spending, she noted was in line with expectations, given the early season trends and the fact that there were “a lot of big electronics releases this year.”
Other things, however, behaved a bit more surprisingly. Jewelry sales, for example, grew 5.9 percent during holiday 2017. That by itself is not much of a surprise — it’s hard to go wrong giving someone diamonds for Christmas — but that growth was largely generated right at the end of the season. December 23rd — falling on a Saturday — was a particularly powerful day and generated as much spend in that category as Black Friday, according to Mastercard’s figures.
“The 23rd and the 24th saved jewelry. It had been negative in November — we know guys are truly leaving this to the last minute,” Quinlan joked with Webster.
Also showing signs of life this season were department stores. Quinlan noted that the big improvement story here was merchandising — and matching their inventory to customers’ needs.
“We’ve been saying for a long time that department stores don’t have a sales problem, they have a merchandise problem — and so it was good to see this starting to turn around.”
Department stores, however, do have the small issue of being handcuffed to apparel sales — problematic, Quinlan noted, because it is the segment that is most sluggish from a sales standpoint.
Apparel, also continuing its 2017 year trend, was weak during this holiday season. Though eventually the figures ended up in positive territory and showed some marginal gains, Quinlan said, that was largely driven by upticks in specialty apparel driven by the season — and children’s clothing, which has been the sales engine keeping apparel alive all year.
The continually ailing segment, on the other hand, is women’s apparel, which has been in negative territory all year, and did not manage to break that losing streak even during the holiday shopping rush.
The reality, according to Quinlan, is that this is likely largely reflective of a bigger social trend, and unlikely to reverse course in the future.
“People aren’t dressing up for work as often anymore, and that has changed the sales patterns.”
Gift cards, she noted, did not have a bad year per say — but did have something of a flat year. They are also, she noted, increasingly more secondary gifts given alongside a major purchase - as opposed to the starring player they’ve been in years past - as consumer have gotten increasingly focused on personalization in the last few years.
Some trends, Quinlan noted, can be expected to continue into 2018. Consumers have been spending on experiences — airline sales were up 6 percent during early holiday spending, and that is likely to continue. Appliances and home improvement are also considered likely to show strength.
Overall, Quinlan noted, although there will likely be a new year lull in shopping as people open those credit card bills and need to repay their holiday shopping enthusiasm, the overall trend for 2018 is likely to be positive — the economic fundamentals of growing wages and low unemployment signal that shift.
“I actually expect this will keep going in the new year. We know a lot of people are getting a raise in the beginning of the year because we know the labor market is tight. Combine that with the tax bill, and a lot of consumers will have more money in their check — which bodes well for retail in 2018."