Are Retail Sales Less Busted Than They Appear?

The holiday season (that’s the period between Thanksgiving and New Year’s Day here in the U.S.) is just nearly at its halfway point, but already pundits are crafting narratives around a weak holiday season and the imminent demise of the retail industry that it all but surely heralds.

Poor Black Friday spending, liquidated inventory, crashed websites and a backlash against extended holiday hours may all be the harbingers of death for retail. Or, as a recent article in Forbes points out, these dipping statistics could be telling a more likely story about the way in which “spending” is defined and measured and the way consumer trends are analyzed, in both an industry and a consumer base that are undergoing rapid change.

The tale of woe for retailers, at least according to some, began with weak third quarter reports from several major retailers, including Macy’s.

Execs at the big brands were quick to shrug off the news, blaming the lagging sales on a warmer-than-average fall, which led to weak cold weather apparel sales, and an overstocking issue that forced some stores to liquidate inventory. But while everyone was hyper-focused on these major department stores, they were overlooking brisk business being done by specialty stores in Q3. Nike, Abercrombie & Fitch, American Eagle Outfitters, Under Armour and Foot Locker all did better than expected, suggesting that the younger set is, in fact, shopping — they just prefer to spend their money at specialty retailers over department stores.

Another millennial trend worth noting is the tendency to spend on experiences versus goods, sales that are not necessarily accounted for in retail reporting.

As Forbes points out, traditional “retail sales” measure only 40 percent of “consumption” spending. The other 60 percent of “experience items” are regularly left out. However, when they are taken into consideration, the numbers reveal a travel and leisure industry that is growing steadily, as well as increased revenues seen in the restaurant space. Airlines and hotel chains have been reporting large gains and operating at levels of capacity not seen in recent years, which suggests consumerism is alive and well, albeit perhaps in a nontraditional format.

There has been a lot of attention paid lately to how different generations shop. Comparison shopping is up, as is the use of couponing and discount shopping apps, which may persuade a shopper to abandon an in-store purchase for an online one or head down the street to a competitor’s location. This has had a damaging effect on in-store sales reporting and will only continue to increase as older generations become more comfortable with technology and younger generations come into their buying power. Thanksgiving saw a 9 percent jump in online sales (a trend that has been growing in recent years), while Black Friday experienced a 10 percent increase.

Looking for more signs that consumers are eager to spend this holiday season? Take a gander at the automotive industry.

Earlier this fall, Kelley Blue Book, a much-trusted auto industry publication and reporting agency, made predictions for an 11 percent increase over the calendar year and a 17.6 million unit pace. But the U.S. auto industry crushed that number (and the previously held October record set back in 2000) with a 13.6 percent increase in light vehicle sales over the previous October, putting the business overall on an 18 million unit sales pace, which would be the strongest annual showing in history, according to a recent Wall Street Journal article.

It’s easy to take a single data point (sluggish Black Friday sales or extra inventory at Macy’s) and use it to support a radical theory (the retail industry is doomed). However, a wider-angle view reveals that this holiday season may, in fact, be a record-breaker in many regards.

Signs of a confident consumer who is spending are, in fact, present — just not in the usual places.