Retail

Former Saks CEO On Retail’s Big 2018 Holiday Jump

Holidays are nothing if not factories for new memories. When it comes to retail, recollections seem likely to linger upon the ongoing (and significant) growth in eCommerce, the developing relationship between online and physical stores, a big boost in apparel sales, and the role of mobile in the journey from browsing to purchase.

But that’s not all.

There is a decent chance that the 2018 holiday season will be remembered as a time when it became much more clear that survival in the cutthroat pursuit of commerce depends on the stories one can tell about a product or brand. That was a theme of a PYMNTS interview conducted Thursday (Dec. 27) that featured Karen Webster and Steve Sadove, senior advisor for Mastercard and former CEO and chairman of Saks Inc.

No doubt by now you’ve heard the headline (and mostly good) news about holiday shopping. According to Mastercard, overall retail spending increased 5.1 percent year-over-year to more than $850 billion. Online shopping grew 19.1 percent. Mastercard, in its SpendingPulse report, defines the holiday shopping season as running from Nov. 1 to Dec. 24.

“It was a very healthy holiday season all around,” Sadove told Webster.

Holiday Numbers

Department stores experienced a 1.3 percent decline, which came after two years of sales growth, with some of that drop blamed on store closings. That said, department store eCommerce increased 10.2 percent year over year.

Home improvement product sales, meanwhile, increased 9 percent, a growth trend that started before the holiday shopping season, and which Sadove attributed to sluggishness in new housing sales and a resulting “reinvestment” by consumers in their existing residences.

Apparel booked a 7.9 percent year-over-year gain, which the SpendingPulse report said was the best growth rate since 2010 — and which Sadove said was among the biggest increases in memory. One reason for that jump was the relatively cold weather in much of the country, which inspired consumers to buy such items as coats and boots, he said. (But weather can hinder as well, and physical retailers faced the challenge of cold weather on the East Coast for Black Friday and wet weather in mid-December for both the West and East coasts, according to Mastercard.) Consumers also were interested in investing in new fashion trends.

Another factor driving sales of apparel — and other items — was the good economy, which features low unemployment and relatively low gas prices as the year enters its final week (still a vital time for retailers, of course, as they finish out the fourth quarter).

Stuff vs. Experience

Those conditions breed an optimistic attitude among consumers, and led them to buy “stuff” during the 2018 holiday shopping season along with “experiences” such as restaurant visits and similar purchases, Sadove said. “Stuff did well but so did experiences,” he said, underscoring the optimistic view that consumers in general have right now — a view that continues to hold even as tariffs threaten retail supply chains and prices, and the government shutdown and other political issues threaten to put a damper on purchasing power and consumer confidence.

Mobile, too, continued to exert is power over retail, with 80 percent of purchases affected one way or another by that channel, Sadove said.

Consumer Experience

That is part of the overall story of the ongoing spread of digital commerce, of course, but there is another trend growing in importance, one that is especially visible in clothing sales but also present in food and other forms of retail. More and more, consumers — specifically, millennials, about whom PYMNTS has detailed research — are demanding experiences that are authentic and what Sadove called “ethical,” which generally relates to sourcing and sustainability.

Consumer experience has always been a prime part of retail — ask your grandparents or parents about those old department store Christmas displays, or the treat of going to those in-store lunch counters as children — but consumer desires have changed. “I think the consumer today really wants to understand the story” about products, Sadove said. And that demand for story can play a meaningful — perhaps even necessary — role in thriving in a world in which Amazon continues to command a larger chunk of consumer spending.

And providing that experience is crucial to maintaining brick-and-mortar stores as a reliable source of profit, among other goals. “You have to have meaningful experiences in stores if you are selling the same stuff” as competitors,” he said. “You have to produce a unique or differentiated product that has a story to it, or it will go to the least common denominator, which is price.”

Put it this way: There is decreasing margin for error. There is — and will be in 2019 — much talk about the shifting boundaries and relationship between physical and online retail. But as Sadove put it, “You have to be excellent at both. You have to provide that (in-store) experience, and you have to offer an online experience as good as Amazon’s.” That includes having the analytical chops that the eCommerce operator has. “Those are the variable everyone has to play with,” he said, “and that’s what makes it a complicated business.”

Complicated yes, but as the early holiday returns are showing, rewarding and lucrative as well, even with Amazon playing its outside role. Stories and memorable consumer experiences stand as ways to win over consumers and make them loyal to your product, brand or store — a trend that seems very likely to grow in the new year.

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