Over the five-day Thanksgiving weekend including Cyber Monday, consumers didn’t turn out as expected or spend as much. If this weekend – the traditional kickoff for the holiday shopping splurge – is the measure, then it was a dud.
The number of shoppers in-store and online dropped by some 5.2% from 2019 pre-pandemic high, down from 189.6 million in 2019 to 179.4 million this year, according to the National Retail Federation (NRF).
And even with people having greater confidence from the vaccines this year, some 3.5% fewer consumers participated over the Thanksgiving weekend compared with last when 186.4 million shopped.
Consumer spending over the five-day Thanksgiving weekend didn’t live up to expectations either. Shoppers spent on average $301.27, down 3.4% from $311.75 spent last year and off 16.8% from the pre-pandemic 2019 high of $361.90.
Suggesting the apparent declines in both traffic and spend were caused by shoppers making early holiday purchases, NRF president Matthew Shay remains bullish on prospects for the rest of the holiday season.
“It’s our view that the macro conditions remain very favorable,” he said in a post-Thanksgiving conference call. “Our forecast for the holiday season is 8.5% to 10.5% growth over last year. For the first ten months of this year through October 31, retail sales are up by more than 14% compared to a year ago. Last year, retail sales were up close to 7% and we are substantially lapping that this year. Consumers continue to go out and engage in commerce. We certainly saw that this weekend.”
To put this year’s holiday projections into perspective, NRF expects November-December retail to grow in excess of 8%, excluding autos, gasoline stations and food service, on top of another 8.2% last year.
After the NRF released early predictions for a 3.6% to 5.2% increase in 2020 over 2019, last year’s final tally felt like a miracle. Now the NRF expects lightning to strike twice, which can happen, but it’s beginning to look less and less likely given this weekend’s results.
“This holiday season is in peril,” observes Phillip Jackson, chief commerce officer at Rightpoint, a digital customer experience consultancy.
Suggesting that more modest growth projections in the 3% to 5% range are more realistic, he says, “I don’t think that growth is as questionable, but where that growth will be and how people will be spending could potentially be a shock to our systems.”
Pushing against the headwinds
Nobody, not even NRF, disputes the headwinds facing retail over not just the next month, but well into 2022. Not only are retailers working against product shortages for the most in-demand items, but retail workers are in short supply too.
“Hiring continues to be a challenge,” Shay said. “We’ve got almost 11 million vacancies in the economy, and about 5 million people reportedly unemployed. So we’ve got a big mismatch there.”
During this holiday season alone, retailers are looking to hire close to 650,000 workers, which is up substantially from the 485,000 they needed last year.
However, in October only 35,000 workers were added to retailers’ payrolls and retail employment was 140,000 lower than in February 2020. And Rightpoint’s Jackson observes that LinkedIn lists nearly one million retail job openings.
Fewer retail workers, and more poorly trained ones at that, translates into poorer customer experiences which will only hurt retailers’ results this year and next. A big reason people shop in-store is because they want or need the help. They’ll turn away and go somewhere else if they can’t find it.
NRF predicts consumers will average about $1,000 on holiday purchases, but rapidly rising prices across the board can seriously hamper how much people can spend on holiday-related purchases, especially as gifts are more discretionary than food, heating and gasoline are.
“We are going to see a lot fewer gifts this year,” Jackson says. “Instead of having 25 presents under the tree, we’re going to index toward a couple of really special pieces.” That is, assuming shoppers can find those special items.
Black Friday data from Bluecore confirms Jackson’s prediction. Retail brands experienced an average of 8% fewer online purchases this year compared to last year, but average order sizes were up 9% overall.
The biggest increased spend was in the home goods category (up 24% growth), apparel (13%) and jewelry (13%). However, orders in those categories were down – home goods down 16% and both apparel and jewelry orders dropped 7%.
Consumer electronics was a loser by all measures. Orders dropped 23% and spending was down 4% with out-of-stocks averaging 41% higher. By comparison, home goods, apparel and jewelry had out-of-stocks under 10%.
Shoppers are managing the hit to their wallets this year by using buy-now-pay-later (BNPL) options. Adobe Analytics reported a 10% uptick in BNPL over 2020 with shoppers increasingly using it for less expensive purchases.
And the shame of giving a secondhand, gently-used item is gone. A survey conducted by resale site Mercari found that nearly 40% of respondents said they planned to buy at least one secondhand gift this year. Not only is buying secondhand a budget-friendly way to gift premium and luxury items, it also has appeal to more conscientious shoppers.
Winners and losers in-store
Not surprisingly, Black Friday took the lead as the biggest shopping day over the Thanksgiving weekend, both in-store with 66.5 million shoppers and online with 88 million visits.
Overall, Sensormatic reports retail traffic was up nearly 50% from last year, but down 28.3% over 2019 pre-pandemic levels.
Digging deeper into the retail winners and losers in footfall this year, Placer.ai shows nearly universal decline in traffic in 2021 compared with 2019 across the retailers it tracks. Among the exceptions were Sephora with a 21% increase, Tractor SupplyTSCO (12%), Ulta (10%), HomeGood (8%), TJ Maxx and WalmartWMT, both up 3%).
The losers lists is much longer:
- Big Boxes: BJ’s down 20%, Lowe’s (-13%), Sam’s Club (-12%), Home DepotHD (-11%), Costco (-8%) and TargetTGT (-3%).
- Department Stores: All off, including Dillard’s (-27%), Kohl’s (-23%), Macy’s (-18%), Neiman Marcus (-20%) and Nordstrom (-19%).
- Off-Price Retailers: Burlington held even, but Nordstrom Rack saw 27% fewer shoppers and Marshalls -2%).
- Specialty Stores: Dick’s Sporting Goods dropped 26% amd Best Buy down 24%.
Malls also did poorly when compared with pre-pandemic 2019 with both outdoor and indoor malls down 9%. However, compared with last year, indoor malls did better, up 84% in foot traffic, than outdoor malls, up 45%.
Online fell short too
On the e-commerce front, retail sales dropped 1.4% year-over-year from Thanksgiving Day through Cyber Monday, totaling some $33.9 billion, according to Adobe Analytics.
While the weekend was a disappointment, Adobe notes that from November 1 through November 29, consumers spent $109.9 billion online putting its projected $207 billion in online retail spending within reach.
Adobe figures that to be a 10% uptick over 2020 levels, but that would be half of the growth that NRF reported last year when online and other non-store sales grew 24% over 2019 levels.
And most of this year’s online sales growth accrued to big retailers ($1+ billion) rather than small ones ($10 million to $50 million).
Reading the tea leaves
For the rest of the month, it will be wait and see whether NRF’s forecasts holds, but if Thanksgiving weekend is a bellwether, it’s hard to see where 8.5% to 10.5% retail growth will come from.
“Consumers are not only resilient, but they’re resourceful. They’re adaptable,” NRF’s Shay said as he stuck firm to the association’s projections.
All that is undoubtedly true, but their resilience – the capacity to recover quickly from difficulties – may be wearing thin after confronting difficulty after difficulty over the past two years, especially as they face the prospect of ever rising prices along with the unknown threat of the emerging Omicron variant.
Perhaps consumers will use their resourcefulness to limit their projected holiday spending and adapt by giving fewer gifts and spending more time doing things with the people they love, which doesn’t have to involve a big outlay of cash.
In which case, retailers will need even greater resourcefulness to bring shoppers back in. The retailers which adapt most effectively will be the ones with the resilience to manage the continued difficult road ahead.