First Data: Bricks Held Their Own Against The Clicks On Black Friday

First Data’s latest “2018 SpendTrend Holiday Insights” report on the holiday season showed an unspectacular pre-holiday (defined as the three weeks leading up to Thanksgiving and Black Friday) spend rate, only to be redeemed and outpaced by an accelerating pace of spend through Thanksgiving, Black Friday and Cyber Monday. As it has in the past, First Data examined point-of-sale (POS) activity across 1.3 million merchants, and that roster included more than 1 million brick-and-mortar stores and 200,000 eCommerce merchants.

All in, Thanksgiving and Black Friday showed growth of 7.1 percent, versus the pre-holiday period, according to data released today (Dec. 4). That came on top of the pre-holiday spend growth of 2.6 percent year on year. Breaking down the numbers a bit, retail pre-holiday spend was the slowest growth seen in three years at 1.3 percent. However, First Data said that Thanksgiving and Black Friday growth was up 7.5 percent, driven by strong growth in both eCommerce and brick-and-mortar.

“It’s a solid start to the season,” said Glenn Fodor, senior vice president and head of First Data Insights, who noted in an interview with PYMNTS that this year’s growth rates come off a blistering pace last year.

To get a sense of continued trends: 2018 saw a total retail growth spend of more than 11 percent from last year, which was on top of a 7.8 percent gain in 2016.

“That is tough to top,” said Fodor of the 2017 number, but the 2018 holiday data illustrated that consumers are holding up very well, “and that is what we expected headed into the holiday season.” The positive macro underpinnings are there — spanning consumer confidence, a robust job market and positive growth in consumer wages.

He noted there were indicators in place that the holiday season would, indeed, put up strong growth in 2018, as 12 of 13 indicators tracked by First Data — ahead of the holiday season — showed acceleration in the third quarter over the second quarter.

“You have eCommerce doing what eCommerce should be doing,” he told PYMNTS, “and it is doing very well.”

Brick-And-Mortar’s Death Greatly Exaggerated

Against that backdrop of eCommerce growth, brick-and-mortar is holdings its own and growing in the low single-digits, said the executive, even as eCommerce has grown to 35 percent of total spend.

“Most of that growth [in brick-and-mortar] has been supported by transactions, rather than pricing and ticket-size changes,” he said, stating that transaction was responsible for 90 percent to 95 percent of brick-and-mortar’s advancement. This illustrated the fact that there is indeed foot traffic … well, afoot, contrary to the conventional wisdom that brick-and-mortar is dead.

What was down? Sporting goods was off 3.7 percent year on year across brick-and-mortar and eCommerce channels — a pattern seen last year.

Alternatively, electronics were up significantly, with consumer software stores up 20 percent on Thanksgiving and Black Friday. In fact, as noted during the interview, the fastest-growing segments (five of them) notched growth rates of more than 20 percent, including travel, discount stores and specialty retail.

“You’ve got a little bit of everything spattered around here,” Fodor told PYMNTS. “This is a broad-level support across a bunch of different aspects of the economy.”

Looking at ticket sizes, he noted the disparity in food and beverage, where eCommerce spend was $49 versus $36, and where order-ahead “has been a big dynamic this year.” Notably, retail and auto parts showed a big disparity between bricks and clicks, at a respective $136 versus $234. Overall, retail saw eCommerce sales at $106 versus $63.

Want to lay a foundation for a shift to commerce rendered in bits and bytes — pun (partly) intended? Fodor noted that the average ticket size of building materials/DIY was $216 in the retail realm, far outpacing the $83 spent in physical stores over Thanksgiving and Black Friday. Furniture and home decor saw $296 in average ticket size spent via eCommerce versus $162 in-store, skewing the whole retail sector a bit higher.

“It’s a fact,” he said of the aforementioned numbers, “that for auto parts, that is the next thing to go online. It started in electronics, continued through to fashion and to drugstores, and the next domino to fall is auto parts.” The mindset is one where people are more comfortable buying bigger ticket items online, Fodor explained. “The interface that you are working with is making you more comfortable in pressing that [buy] button. There are plenty of pictures, there is plenty of detail. There are reviews online. There is a 360-degree view of what you are buying.”

SMBs Are Optimistic — Consumers Are, Too

“[Small and medium-sized business (SMBs)] are as optimistic as ever,” he said. The transactions, ticket sizes and total spend show that SMBs are doing better than the total portfolio, up mid-single to high single-digit percentage points. The transaction growth may not be as relatively strong (at about 1.2 percent), he noted, but beyond that metric, total spend was up 5.5 percent.

Fodor continued, “What the SMBs are doing very well is that they are upselling you when you get there, so the ticket sizes are increasing.” Service seems to count, he said, as consumers get curated advice.

Geographic trends show “parallelism across the continental United States,” as cited by Fodor. Pre-holiday shopping season growth, measured across geographic regions, was a bit above 1 percent, by and large, where growth was 3 percent to 4 percent.

In the end, headed into the end of the year and the trend toward consumers opening their wallets, in reading the “tea leaves” from the data that is in hand, “you cannot argue with consumer confidence where it is. You cannot argue with jobs [and unemployment levels] where they are. You cannot deny that brick-and-mortar is not dead and it’s still here,” he said.

However, one risk to the whole spending equation lies in the variable that is the stock market. It’s been volatile since September. “Handicapping that is next to impossible,” he concluded.