It seems that as soon as the last firecracker expires in July our thoughts turn to the holiday season. This is especially true for crafty types who make their own wreaths, and for those of us with an interest in retail.
Each year, industry experts dissect the industry’s performance and consumer behavior, then begin to formulate their best predictions for what to expect next time. This is critical information, since the holiday period – the months of November and December, according to the National Retail Federation- account for around 40% of total sales.
Based on information from the 2015 season, as well as trends and developments for the year to date, here are some things to expect for the holidays in 2016.
Growth
In 2015, holiday sales overall rose 3 percent to about $626.14 billion, according to the NRF. That’s below the forecast for a 3.7 percent gain the group had expected, and a drop from the 2014 growth of 4.1%. Online sales rose 9% for 2015.
An improvement in these numbers is made more likely by recent job gains, which will increase earnings, as well as the continued improving health of the housing market. These factors can indicate an increase in consumer spending. After a slow start, consumer spending has picked up steam, with April of this year the start of an encouraging trend, according to the Wall Street Journal:
- Consumer spending on durable goods was particularly robust in April, likely reflecting healthy auto sales during the month.
- Personal income, including earnings from wages and other sources, rose 0.4% in April.
Increased Participation in E-commerce
As noted above, the growth in online sales was more rapid than that of brick-and –mortar retail for the 2015 season. The influence of E-commerce on the overall holiday picture will continue to be heavy, even though total sales at stores will remain more significant. Despite the popularity of online shopping, the majority of spending occurs in-store, according toKiplinger’s. One factor that helps to explain this is the fact that, while 30% of people who visit a store tend to buy something, only 3% of online visitors make a purchase.
More use of the Omni-Channel Approach
To take advantage of the public’s interest in seeing products online, savvy retailers will increasingly integrate their online presence into the store experience. Shoppers like to use the Internet to compare products and make a selection, but often prefer to buy the merchandise in person.
Using an omni-channel approach, retailers can make shopping more convenient, cut their own costs, and drive more business to their physical stores. The ICSC shares that 32% of consumers participated in “click and collect shopping” this past holiday season. This is the process in which a consumer makes a purchase online and picks up in store. Even more compelling is the knowledge that 76% of the people surveyed said that they bought something else when they went to pick up their original purchase.
Things like click and collect and next-day delivery have implications for how retail space will look in the years to come. Many retailers are looking for increased storeroom space so that they can act as small fulfillment centers for items purchased online for store pickup, and this also reduces the floor space needed in-store.
More Varied Tenant Mix
Fueled in part by numerous closings announced this year by retailers like Macy’s, Gap, Walmart, and J.C. Penney, the make-up of shopping centers has continued to shift. This will likely help to drive shoppers to stores this holiday season.
According to ICSC, there is increasing variety in the tenants found in U.S. shopping centers, which are becoming gathering places for the community as well as places to shop. We can expect to see more healthcare tenants, as well as increases in food, dining, entertainment, and health clubs.
These are just a few of the retail predictions coming down the pipeline. What trends are you seeing in your market?
