REAL ESTATE

Now Trending: 2015 Holiday Season Retail Storecast

BY Jeff Green

“Now Trending” is an exclusive online series to chainstoreage.com, featuring trending topics that impact the retail real estate landscape.

With (believe it or not) the holiday season almost upon us, it is time once again to take part in the annual ritual of crystal ball gazing and seasonal sales forecasts. That is by no means intended to be dismissive of such predictions, as a great deal of very intelligent retail professionals examine a massive amount of painstakingly gathered data to inform their analyses and final forecasts. But, as analysts and observers who have been doing this for some time can attest, seasonal numbers can surprise you. Caveats aside, the National Retail Federation (NRF) predicts that the 2015 holiday shopping season will see sales bump up 3.7% over last year. That strikes me as a reasonable forecast, and my own numbers are similarly optimistic — if perhaps a bit more modestly so: an increase of between 2% and 3%.

I think it is interesting that this is one of the first years that my own holiday forecast has been closely aligned with the NRF numbers, although I am not certain that correlation is particularly meaningful. I also agree with the NRF that there are several noteworthy positives and negatives that will likely affect this holiday season (some of which NRF has touched on in breaking down its forecast, and others that it does not mention). Exploring those pluses and minuses, and considering their potential influence in the context of a complex stew of economic pressures, social and political influences, retail dynamics and industry trends can be an interesting and informative exercise. Because while the specific numbers get a lot of media attention, these holiday predictions have the most value as a kind of jumping off point — a framework for a larger discussion about the forces shaping the retail industry. With that in mind, here is a closer look at some of the reasons for both optimism and pessimism for the 2015 holiday season:

Positives:

Strong Halloween sales
Encouraging early Halloween numbers (along with the expectation of continued strong sales through the holiday) are expected by some to serve as a precursor to strong holiday sales.

Holiday promotions starting early
Holiday sales seem to start earlier every year, and with many retailers rolling out — and publicizing — their holiday sales and programs as early as September, the hope is that consumers will get an early start working on their holiday shopping.

Low gas prices
As the NRF itself points out, “Americans remain somewhat torn between their desire and their ability to spend”. But while obstacles remain (more on those shortly), consistently low gas prices and low-to-modest inflation have put a little more spending money in many families’ pockets in 2015.

Doorbusters
Doorbusters continue to become an increasingly prominent feature on the holiday shopping landscape. Expect them to be front and center beginning Nov. 1, a factor that, along with the strong promotion and publicity they tend to generate, could boost sales — especially during the weeks prior to Thanksgiving.

A fast start
November sales will likely be stronger than last year, given the fact that Hanukah is in early December (instead of late December as in 2014). While this might bring December numbers down slightly, it is always encouraging to get the season off to a quick start, and it does seem to play into a general trend that has seen stronger Novembers and weaker Decembers for a few years now. In fact, the weeks between Black Friday weekend and the week or two prior to Christmas can be comparatively underwhelming.

Negatives:

Uncertainty
Uncertainty and volatility in the public markets continues to make headlines and drive storylines in 2015. With conflicting economic indicators and more economists starting to make uneasy noises about what the future holds, any market volatility can be particularly unnerving and erode consumer confidence while heightening a general sense of uneasiness.

Omnichannel inexperience
While omnichannel retailing holds great promise and potential, retailers are still trying to navigate these new frontiers and are still trying to work out how to maximize multichannel distribution for the holidays. That process of trial and error will ultimately bear fruit, but may lead to some less-than-optimal outcomes in the meantime.

Price sensitivity
More and more shoppers have become more price sensitive when it comes to holiday shopping; four out of five will price-compare for their holiday gifts this year. Another issue is that wages are still low for most consumers, who have not seen the same kind of economic recovery that has been evident on Wall Street and in the corporate sector.

Sagging September
Disappointing September sales have helped to keep expectations modest. As an Oct. 8 article in Chain Store Age reported, “Sales declined a disappointing 8.7% on a year-over-year basis, and transactions dropped 9.6%.” Those numbers are even more disheartening considering the fact that many analysts had predicted that September sales would be positive — even strong. I’m not convinced that the easy explanations for the drop (such as weather disruptions) are particularly credible. I think it is more likely that sluggish September sales are an indication that confidence in the economy remains somewhat lukewarm. The economic recovery is continuing, but it remains slow. As the saying goes, the turtle may be moving forward, but it is still a turtle.

Trend lines and storylines
Something else to watch for this holiday season is the evolving impact of Black Friday, which continues to transform from a single-day phenomenon to a multi-day event. The impact of Black Friday has been sapped from both sides thanks to aggressive Thanksgiving Day sales, Shop Local Saturday (which has only been around for two years, but has really caught on quickly) and Cyber Monday. The result is that sales are now spread over five full days. This inevitably makes it less of a novelty and decreases consumer urgency. But while the distribution has changed, I suspect the overall impact will still be comparable.

That same dynamic can be seen across the whole holiday season, which has become noticeably less discrete in recent years. Because the season is starting earlier, we see the same amount of sales spread over a longer period. The impact of that is twofold: it makes seasonal sales numbers harder to quantify than they used to be, and it potentially suppresses November/December sales.

Industry professionals will no doubt be keeping a close eye on doorbuster sales. Some analysts, myself among them, suspect that these loss-leaders are actually “teaching” consumers to shop more for value and to shop earlier. There are some big questions about whether that is a good thing for retailers in the long run, and also about how well the doorbuster strategy is working in the first place. Anecdotally at least, I have seen and heard about more shoppers coming in for a doorbuster and then leaving without making any additional purchases. This was a particularly noticeable issue last year around Thanksgiving. While we will not see concrete numbers until January, there is plenty to watch for before then, as 2015 is already shaping up to be an active and fascinating holiday shopping season.



Jeff Green, president and CEO of Jeff Green Partners, combines more than 30 years of retail industry experience to provide comprehensive consulting services to national retailers, developers, shopping centers and health care facilities. The firm specializes in shopping center feasibility, distressed center repositioning, retail real estate planning and investing, medical retail consulting, retail expansion planning, location analysis, commercial land use and urban redevelopment. To learn more, visit Jeffgreenpartners.com or connect with Jeff at [email protected].

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