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In-Depth
Last-Minute Rush
The holiday season is expected to be a good one, as shoppers have more spare cash
By Shuan Sim
Shoppers have no intention of spending any less than they did for the holidays in 2014, surveys from the National Retail Federation (NRF) and Deloitte showed, though they are doing their shopping in November or later. While the expected sales increase in 2015 isn’t anything spectacular, it is, at least, a steady growth from the previous year. These results quell retailers’ fears that the recent correction of the stock market and consumers’ gloomy perception of the labor market could negatively impact the festive shopping mood, analysts revealed. Overall, retailers can expect a 3.7 percent increase in holiday sales to $630.5 billion this season — higher than the ten-year average of 2.5 percent, according to NRF forecasts. Holiday sales are expected to account for approximately 19 percent of the retail industry’s annual sales of $3.2 trillion in the U.S., the forecast showed.
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Consumers are doing their holiday shopping later, starting at the end of November or even into December. Brinkman noted that the traditional shopping days of Black Friday and Cyber Monday have become less of a draw. “Consumers don’t feel the sense of urgency. They know that you don’t necessarily get a better deal on Black Friday, and so they are willing to hold out for better deals,” he said. Deloitte’s survey showed that 44 percent of shoppers intend to do the majority of their holiday shopping in December or later (see chart on page 49). In fact, 16 percent of respondents indicated that they would do their shopping after Christmas Day, possibly taking advantage of sales. Perhaps in response to the delayed shopping sentiment, retailers have started advertising their holiday sales earlier, communicating promotions sooner, so consumers have more information on deals at their fingertips. Jim Taylor, vice chairman of YouGov, a global market research company, observed that retailers also have been adopting other methods to increase demand, such as ramping up layaway shopping — allowing shoppers to pay in installments without interest and receive the item upon full payment. Jewelry retailers have been offering this service, which eases the purchase decision, as jewelry is traditionally a big-ticket item. Retailers have also been sending direct-mail advertisements to their best customers, offering exclusive deals. Taylor believes that some retailers, in their bid to drum up business, have simply accepted lower margins on their goods just to move products.
Shoppers are becoming savvier and increasingly more comfortable with making purchases online. In fact, Taylor notes that 2015 might be the year online shopping surpasses traditional brick-and-mortar shopping. NRF’s survey indicated that 52.9 percent of respondents intended to do some shopping online. Most survey takers — 32.9 percent — announced they would do about one-quarter to one-half of their holiday shopping online, with the rest done at traditional stores. Closely following at 29.6 percent were those who would do one-half to three-quarter of their holiday shopping online. As with traditional shoppers, price considerations and deals were the most important factors for online shoppers, with 80.5 percent saying bargains and discounts were the reason they would buy online. That is not to say that online shopping will completely supplant traditional shopping. “Brick-and-mortar stores still matter,” asserted Pam Goodfellow, consumer insights director for Prosper Insights and Analytics, a consumer intelligence company. “Shoppers want to be wowed by the retailer. When they go into a store, they want to feel like they’re being rallied; they want to feel good about the money spent.” Retailers can channel consumers’ desire for convenience and deals by making sure that their online environment is consistent with in-store experiences. “Especially with jewelry, which is such a heavy ‘touch-and-feel’ business, jewelers need a well-positioned online and offline image and to ensure that their pricing strategies are the same,” Taylor explained. Jewelers should seek to project what Taylor calls a “rarity strategy.” “Jewelers have to add a collector’s enthusiasm to their products,” Taylor noted, explaining that retailers have to be willing to make customers feel special and see the apparent value of the jewelry they offer. While that task is easier in-store, the challenge is in making sure that value proposition translates online. According to Goodfellow, some retailers are setting up web rooms online to allow shoppers the convenience of doing the legwork from their home. “Jewelry consumers are doing more searching online before they make a purchase decision,” she said. According to Brinkman, 75 percent of online shoppers look at reviews by other customers and 60 percent look at retailer recommendations.
“This is a ‘valued’ Christmas,” Taylor said, explaining that many consumers are seeking to mark the season with memorable gifts of quality over quantity. “This sentiment actually proves beneficial for the jewelry industry.” Taylor pointed out that 24 percent of high-income families see jewelry as a top gift choice this season, according to YouGov’s research data. Of the top 1 percent income earners in the U.S., 43 percent responded that they would like jewelry as a holiday gift. “They’re looking for something high quality, high service and of high craftsmanship,” he noted. Brinkman observed that consumers are looking for that “one-of-a-kind gift” this season. “They’re looking at local retailers, pop-up stores,” he said, citing a rising trend of shoppers willing to try out a new and different store this year. The Deloitte survey found that 59 percent of survey-takers shop local to support the local economy; 54 percent shop local to find that unique gift. Seventy percent indicated they would go to a new store for better prices and 54 percent would go to a physical store to see and touch the product.
Shoppers have more spending money right now thanks to lower consumer prices. The consumer price index fell .2 percent across all items in September due to lower oil prices and near-zero inflation rates, according to data from the Bureau of Labor Statistics. “This provides extra discretionary income for shoppers,” said Lynn Franco, director of economic indicators and surveys at The Conference Board, a research organization on consumer confidence and economic indicators. According to Deloitte’s survey, consumer spending has rebounded to the highest levels since 2000. Pricing, however, still remains the deciding factor for where a shopper chooses to shop, noted Franco. According to the NRF survey, 73.1 percent of respondents felt that sales and discounts swayed their shopping decisions, followed by quality of merchandise.
Brinkman observed that the U.S. has recovered from the August stock market correction and that the country’s stock markets are trending higher again. Most analysts felt that the downturn had little impact on how consumers intend to spend during the holidays. “When the stock market goes down, people are quick to blame it,” remarked Goodfellow. “When the stock market does well, no one ever attributes the increase in sales to it.” Goodfellow explained that the factors that made an immediate impact were wage growth or employment. In NRF’s survey, 66.1 percent of shoppers surveyed said that the state of the U.S. economy did not affect their spending plans for the holidays. Consumers felt that job and wage growth in the U.S. had been stagnant, but in fact, employment has been steadily growing. Goodfellow pointed out that the growth has benefited the lower income group more than it has for the middle and upper-middle income. “People are more willing to spend on categories that got thrown away during the recession and feel more comfortable about spending on luxury,” she concluded.Article from the Rapaport Magazine - December 2015. To subscribe click here.
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