What retail apocalypse?

Photo: Walmart
Dec 27, 2017

While the disruption that has resulted in the closure of thousands of stores has been the talk of retail this year, the industry just scored its best holiday period since 2011.

That’s according to Mastercard SpendingPulse, the first firm to release its holiday recap. Sales from November 1 through December 24 expanded 4.9 percent vs. the previous year period, setting a new record for dollars spent. Mastercard tracks retail spending by all payment types.

“Overall, this year was a big win for retail,” said Sarah Quinlan, SVP of Market Insights, Mastercard, in a statement. “The strong U.S. economy was a contributing factor, but we also have to recognize that retailers who tried new strategies to engage holiday shoppers were the beneficiaries of this sales increase.”

Some key findings from the Mastercard SpendingPulse report:

  • Home goods: Electronics and appliances jumped 7.5 percent, the strongest growth of the last 10 years. The home furniture and furnishings category grew 5.1 percent, as did home improvement.
  • Apparel: Despite the massive store closings affecting these channels, specialty apparel and department stores saw moderate gains.
  • Heavy early-season promotions: The first three weeks of November saw significant jumps.
  • Last-minute spending: December 23 ranked close to Black Friday in terms of single-day spending.

The holiday gains were attributed largely to healthy job growth, coupled with modest inflation, moderate wage boosts, consumer confidence being at an all-time high, and some timing benefits.

“You had a unique Christmas this year, which fell on a Monday,” Sucharita Kodali, at Forrester Research, told USA Today. “That means people are with their families on the days leading up to it. It’s very conducive to store shopping. This is an unusually good year where a lot of things came together to favor the stores.”

The gains in Mastercard’s survey were led by online shopping, the sector being blamed for disrupting retail in recent years. Online grew 18.1 percent over the holiday period, boosted by a late season rally. On Tuesday, Amazon boasted about a robust holiday performance, including adding more than four million Amazon Prime free trials or paid memberships in one week alone during the holiday season.

DISCUSSION QUESTIONS: What do you think drove the apparent healthy holiday gains this holiday season? Are retailers adapting better than many predicted to the overall disruption caused by the impact of online and mobile?

Please practice The RetailWire Golden Rule when submitting your comments.
"...many brick-and-mortar retailers stepped up to the challenge of online shopping by offering greater and more engaging shopping experiences in-store."
"The economy was clearly the biggest driver, with strong employment and consumer confidence."
"Several factors came into play, including low unemployment, the “wealth perception” of high stock prices and a break on the weather..."

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32 Comments on "What retail apocalypse?"

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Mark Ryski

The U.S. economy, by every measure, has been performing very well over the last year and it’s not all that surprising to see this translate into a great holiday season for retailers. The timing of Christmas didn’t hurt either. I do believe that retailers are better adapting to the impact of online and mobile, in fact, retailers are disrupting themselves. While one good holiday season doesn’t necessarily quiet the death rattle some have predicted for retail, it certainly shows the resilience of the industry.

Zel Bianco

A few things were big factors this year. A long weekend allowed last-minute shoppers like me the opportunity to pick up a few more things. I think this was the case for many men. Consumer electronics were big winners as well, namely with Echo and its competitors, but it should be noted that 4K TVs were selling at a very brisk pace given the crazy low prices that were being offered. As I’ve commented before in previous posts, the industry says the sky is falling and what I see is that stores this year could not have been more crowded. Could it be that perhaps some of the store closures are just part of the normal adjustments that needed to be made as some retailers expanded too fast and sometimes in the wrong locations? That remains to be seen, but at least there were be some positive signs this year that will make the upcoming NRF less dreary.

Michael La Kier

The economy has been in a long growth period and — it seems — people are ready to spend. This year retailers also discounted healthily on some key items shoppers have had their eyes on for awhile (Amazon Echo Dot is the number one seller at Amazon). Combine this with the calendar when Christmas falls on a Monday and it’s a recipe for success. HOWEVER, higher consumer spending does not mean that all of retail is saved. Like always there are winners and losers and we’re sure to see multiple retailers who did not hit their numbers go out of business at the beginning of 2018.

Paula Rosenblum
Okay, I’m going to ask for some props here. Greg Buzek and I started beating the drum of the “apocalypse” as a false flag back in April. We knew it before, but we were sitting on a stage as a panel at a user group conference and that’s when we really started beating the drum. This was ALWAYS clickbait. Always. It goes with the “7.5 million retail jobs lost to automation” and “23 percent of malls closing in three years” clickbait. I think they call it “hogwash” in the Midwestern U.S … and having read the original “research” on all three stories, I’m quite comfortable calling it the same. What caused the healthy gains? I think retailers bought a bit less, we finally saw an end to the “race to the bottom” (effectively, there’s not much lower you can go and stay in business) … price parity is mostly achieved, and retailers avoided some of the doorbuster insanity of years past. Turns out it made for a better shopping experience anyway. I am really curious… Read more »
Dave Bruno

Okay, Paula, you definitely get “props” from me! I remember when I first heard what you and Greg were discussing at our User Conference in May, and it struck a nerve. Prior to that point, I thought retail was doing better than people were saying, but it was really hard to believe it with so much bad retail news dominating every news cycle. But the minute I heard you guys, it was like a beacon in the darkness. And the holiday season was, just as you and Greg predicted, a testament to the idea that retail is (finally) adjusting and evolving to the drastic shifts in business conditions that have been occurring for the better part of the last decade. In my opinion, the future looks bright.

Brandon Rael

It’s honestly a combination of factors that have contributed to the overall gains in the retail industry. Retailers have been increasingly responsive; delivering the right combination of curated assortments, pricing and promotions to the ever-agile, empowered, digitally-connected and mobile-first consumer.

It also is a significant advantage to have very positive public relations around the leading economic indicators. If anything, the fourth quarter and the holiday season have demonstrated just how significant the retail and CPG industry sectors are to our overall economy, job market and confidence as a nation.

Perhaps with the emergence of a commerce model where you can shop where, when and how you wish, retailers have the ability to engage with the digital-first customer well beyond Black Friday. Overall, we can all admit that there is an overall positive feeling going into 2018 for the retail industry as it continues its evolution — not necessarily the apocalypse.

Phil Chang
Phil Chang
Retail Influencer, Speaker and Consultant
3 years 11 months ago

I will join the applause for mocking the retail apocalypse. I hate that phrase. Retail is a changing game, and will continue to evolve. As with all things that change, this year was about trying new things and presenting fresh options for consumers to purchase what they want, when they want it and by the end of the year, they could receive it almost right away.

Success this year was simply putting multi-channel into play. Folks were able to buy online or in-store and feel like they weren’t missing anything or excluded from deals one way or the other. Bravo to the retailers who tried new. Make sure your list has new next year — retail is all about making next year better than this year!

Max Goldberg

It’s the economy. The growth, albeit modest, in household income, allowed consumers to spend more this holiday season.

Ed Dunn
3 years 11 months ago

There is really one factor — the rise and mass adoption of Bitcoin during the year created consumer confidence to take profits and go out and spend. It is not fair to discount or dismiss the role Bitcoin mass adoption played in 2017.

Bob Phibbs

You’re joking, right?

Chuck Palmer

Ed, could you elaborate? I have to admit I haven’t studied Bitcoin so I don’t see a connection here. I might be thrown by your use of “mass adoption.”

Ken Lonyai

“Retail apocalypse” has been a really great headline phrase for those publications and pundits grasping for attention. The reality is, capitalism always prunes weak competitors from the market, sometimes in bunches like we’ve seen in retail for the past few years. The headline drama is overblown and part of the evolution of the same retail vertical that lost many household names pre-internet.

Still, a decent economy may be behind all the spending right now. If economic factors including employment turn for the worse, it’s likely that physical retailers will bear the brunt far more than digital counterparts and the pundits will rev up the apocalypse predictions all over again.

Importantly though, the seasonal growth numbers reported do portend a message/warning: m-/e-commerce growth is still far outpacing brick-and-mortar growth. If that sustains at rates outpacing GDP growth (as it has), a reckoning has to come.

Phil Masiello

I believe it was driven by two factors. First, the discounts were stronger than in years past as retailers wanted to drive traffic and sales. Advertising on mobile and other digital platforms was higher than in years past. Many retailers were trying to lure shoppers away from Amazon and get them into their stores.

Second, the economy has been performing very well. Whenever we have growth in the stock markets, people feel wealthier and spend more. All-in-all, between brick-and-mortar and online, it was a fairly healthy spending season.

Whether retailers are adapting to an omnichannel world has yet to be seen for the long-term. There are still many major retailers whose basic digital functionality is far behind those of their competitors. But this holiday season was certainly a boost for many.

Adrian Weidmann

The physical store will NOT go away. The store will continue change and evolve to meet the aspiring expectations of the digitally-empowered shopper. We are all learning to adapt and address the changes that need to happen in order to survive the evolution and shopping revolution. The retailers and manufacturers that are experimenting are winning. Those that don’t and continue to bury their heads in the sand will be marginalized and perish.

Tom Erskine
3 years 11 months ago

Consumer confidence and wage gains among the middle class drive retail sales, and we are finally seeing that in the U.S. Add to that the timing of Christmas on a Monday and you get a great year for stores. But for some retail formats, this is only a reprieve.

Indoor malls, large-format department stores with minimally differentiated collections, etc. may have been granted a reprieve this holiday, but the long-term forecast is not good. In the meantime, retailers that continue to innovate are seeing strong performances, and there are plenty of new entrants from the e-commerce world that recognize the need for a physical presence.

Dick Seesel

Several factors came into play, including low unemployment, the “wealth perception” of high stock prices and a break on the weather that helped drive sales of seasonal goods. But I think there are two other key factors in this holiday season’s apparent success: First, the large number of store closings during the first half “cleared the deck” for those left standing to gain market share. And even more important, most brick-and-mortar stores finally figured out how to leverage their own e-commerce business into a true “omnichannel” experience for their customers.

Cynthia Holcomb

The economy and the promise of the new economy coming our way. A weeding out of “mass vanilla” retailers, brands and products. The huge reinvention of a few large retailers transitioning from frumpy to current, via emotionally-driven pop music ads. And finally, product. Diversity in product for the first time in years. Walk the Target floor; it’s starting to look like the “cool” Target of the past styled for the M and Z generations.

Kevin Sterneckert
3 years 11 months ago
Ok, so we all know there was hype in the “apocalypse” reporting that we were subjected to in 2017. I do want to note, for many retailers, the apocalypse was very real — according to bankruptcydata.com there were 662 retail bankruptcy filings in 2017 up 30 percent from 2016 — there were more than 7,000 store closings. Where the reports got it wrong was trying to claim that retail is dead … really? Online sales for the 2017 holiday season were up 18.1 percent according to MasterCard. I agreed with Paula and Greg and frankly a number of other students of retail — yes, bad things did occur and will continue to occur, but retail is not dead. Retail as we knew it has dramatically changed and, for the most part, changed for the better. It will soon be a distant memory to wonder if a retailer has what you need in stock, or to make a purchase only to find out later that the item was sold for a lower price somewhere else, or… Read more »
Mark Price
Mark Price
Managing Partner, Smart Data Solutions, ThreeBridge
3 years 11 months ago

The economy was clearly the biggest driver, with strong employment and consumer confidence. In addition, market consolidation may have improved overall customer experience and resulted in consumers purchasing at higher levels than previously. The higher customer experience is likely driven by omnichannel behavior, which the best retailers have invested in.

Shep Hyken

A big reason for the great numbers is the economy. People have confidence in their jobs and the stock market. Unemployment is very low and that is a good thing for retail and the economy. As for store closings, that is not so much to do with the economy as over-saturation and the lack of balance between in-store and online retailing. The company that gets that balance right will prosper.

Karen S. Herman

While a stronger economy and lower unemployment rate contributed to opening the pocketbooks of shoppers this holiday season, it is important to mention that many brick-and-mortar retailers stepped up to the challenge of online shopping by offering greater and more engaging shopping experiences in-store. From POP-in@Nordstrom to Everlane’s first store in New York City to the sleek integration of IoT in Fabletics stores, brick-and-mortar retailers gave shoppers many reasons to visit and purchase in-store this holiday season.

Sterling Hawkins

It was easy to let the record store closings overshadow the record store openings that happened during the exact same time period. Change can cause upset/worry and that’s exactly what we were seeing: change. It looks like retailers are finally starting to address that brick and mortar is changing (not going away) and benefiting from the results. The boost from the economy and holiday timing only helped.

Peter Charness

Apocalypse? Retail up solidly this year … Customers spending in near record amounts … usual question each retailer needs to ask: are you getting your fair share of wallet? If not, how can you provide a better experience to the customer through product, price (still up there) and convenience (rapidly becoming the cornerstone)?

Jeff Miller

A few key points on a healthy holiday season:

  1. Strong economy;
  2. Timing of the weekend;
  3. Competition is good and creates change and innovation for retailers to do better to attract and keep customers. Many retailers have made those tough changes;
  4. The key part of the question is “better than many predicted.” The predictions are always more dramatic than reality. Online, mobile, voice and Amazon will continue to eat away at brick and mortar retail but smart retailers will adapt. In-store retail is in decline, but is far from dead.