Retail expects record $1 trillion in total holiday sales this year

Online shoppers showed up big Thanksgiving Day through Cyber Monday by spending an estimated $24.2 billion this year, up 23.3% from a year ago, according to Adobe and eMarketer.com.

Andrew Lipsman, a principal analyst for eMarketer, said that set the stage for the first $1 trillion holiday spend on record. He predicts total holiday sales will increase by 5.8% year-over-year, the fastest growth rate since 2011.

“While e-commerce will continue to see strong double-digit gains, brick-and-mortar retail should be a particularly bright spot this holiday season,” Lipsman said. “Not every brick-and-mortar retailer is thriving, and several have shut their doors this year, but others are really capitalizing on the strong consumer economy. Retailers are luring in shoppers with remodeled stores, streamlined checkout and options to buy online, pick up in-store.”

Lipsman pegs brick-and-mortar sales for the full holiday season at $878 billion, growing 4.4%, despite the 1% dip in traffic reported during the Thanksgiving weekend. Lipsman said e-commerce sales should total $124 billion, growing 16.6% from a year ago.

“Brick-and-mortar sales are stronger than in recent years and will account for two-thirds of the growth concentration in 2018,” Lipsman said during an eMarketer.com webinar on Thursday (Dec. 6.). “Brick-and-mortar sales account for 7 out 8 dollars in spending across all categories this holiday season.

Lipsman said in-store sales are strong overall thanks to strong consumer confidence, low unemployment, rising wages and falling gas prices which is acting like cash windfall for many middle-income consumers in time for the holiday season. There is also an extra week between Thanksgiving and Christmas, with the maximum 32 days giving consumers more time to shop.

“We find when consumers have money and more time they tend to spend more on themselves in addition to their gift buying,” Lipsman said.

While in-store shoppers are carrying the majority to the retail weight this holiday, Lipsman said e-commerce sales, fueled in part by mobile applications, are also playing an important role to push the total spend over $1 trillion for the time in history. He also outlined several trends he sees playing out during the holidays to help drive overall sales higher.

With more store closures like Toys R Us, Lipsman said market share in certain categories is up for grabs and retailers from Walmart to discounters like T.J Maxx are hoping to capture a bigger share. He said sales made via smartphones are helping to drive more e-commerce sales and they represented about 40% of online sales during the Thanksgiving weekend. He expects to see the omnichannel path to purchase become a new normal with consumers opting to pick up online orders in stores to prevent loss by theft when packages are left on the doorstep.

For those shoppers who do buy online and want items delivered, he said free shipping is a must for the holiday season.

“Consumers will not settle for anything less than free shipping and this comes at the expense of the retailer,” Lipsman said.

He also expects blowout sales this season for consumer electronics and apparel. Lipsman said 4K television sales were strong during the Thanksgiving weekend as were smart home accessories and the latest updates in speakers and audio gear. He said apparel is also poised to do extremely well.

“Apparel is the biggest category and the most discretionary of all categories,” Lipsman said. “But when consumer spending is strong this category outperforms and it should do very well this year.”

ONLINE COMMERCE
Lipsman said e-commerce sales are growing at a healthy clip, and from the Thanksgiving weekend through Cyber Monday, total online sales grew by 23.3% from a year ago. Thanksgiving Day there were online sales of $3.7 billion, up 28% year-over-year. He said Black Friday online sales also rose 23.6%. Saturday and Sunday sales rose 25.5% and 25.6% year-over-year. Cyber Monday sales of $7.9 billion were up 19.7% from a year ago.

He said retailers that did particularly well online during the Thanksgiving- Black Friday weekend include:
• Kohl’s, up 42%
• Nordstrom, up 33%
• Walmart, up 32%
• Macy’s, up 30%
• Target, up 29%
• Amazon, up 27%

He said Best Buy online sales rose just 2% and JCPenney e-commerce sales increased 3% year-over-year. Lipsman said the online sales concentrated around Thanksgiving weekend continue to increase from 16.2% of total season sales in 2015 to nearly 18% of expected sales this year.

With so many promotions around Black Friday, Lipsman said the annual shopping weekend remains as important as it ever was, despite the fact deals are being offered earlier each calendar year.

“Black Friday is still the largest shopping day of the year, by far, and it’s the second- or third-largest shopping day online as well,” Lipsman said. “It’s important for retailers to launch promotions at that time so they can carry through the entire weekend into Cyber Monday. Consumers start shopping when they are ready and that is usually around Black Friday.”

He said consumers are slightly less price sensitive than in recent years, but they do expect to get free shipping when ordering online. He said retailers with strong brands, in-demand products and omnichannel execution are poised to do the best this holiday season.