It’s that time of year again. The holiday retail season officially kicked off on “Black Friday,” the Friday after Thanksgiving. Since then, brightly colored lights, festive decorations, and advertisements for the newest toys and gadgets have bombarded consumers like you and me everywhere we turned. In the past three years, the day after Thanksgiving has been one of the most popular holiday shopping days, next to the Saturday before Christmas and the day after Christmas. Most of us actually have the practice of shopping down to an art form. The sights, the sounds, and the general commotion that is the holiday shopping season are quite familiar, but something quite different about holiday shopping this year is the rise of online retail sales.
The traditional holiday shopping season got off to a slower start this year, especially for brick-and-mortar stores. Article after article that I have read this fall all said this would be a good Christmas in terms of retail spending, but not a great one. Early returns on consumer spending released the Monday after Thanksgiving confirmed this. Sales rose just 1.7% compared to a gain of 3.7% in 2003. This news was especially disappointing considering that in October, high hopes for this shopping season were held by national trade associations like the National Retail Federation. The National Retail Federation publicly predicted a 4.5% increase (about $702 per person) in American consumer spending for this winter.
Plausible contributing factors to the decrease in anticipated turnout in holiday retail sales involve such things as volatile gas prices, continued quarter point interest rate increases by Greenspan, slow US job growth, and even a lingering depression upon many shoppers’ psyche after a hotly contested election. Especially surprising about the early turn of events was that no one was immune to the sluggish sales, even big name discount retailers like Wal-Mart. Surprised by the lack of business over one of the year’s typically most profitable weekends, many retailers almost immediately made announcements pledging further reductions in product prices and larger promotions on highly sought after items, such as TVs and other electronics. High-end stores did not report any such disappointment with their after-Thanksgiving sales.
Another part of the sector that has not been disappointed with their holiday sales is E-commerce retailers. Online retail sales for this season have been incredibly strong and do not show any signs of abatement. Sales were up 13% during the first week of Christmas-season business compared to the same time period in 2003. Some estimates have sales during the first full week of December reaching $2.2 billion and an increase in the total volume of sales over the Internet soaring 21% higher than last year.
Shopping online is attractive to consumers for myriad reasons. One is that online-savvy consumers typically begin their Christmas shopping in early October, far earlier than strict brick-and-mortar shoppers do. They also can spend their time and energy researching and reviewing products online before clomping off to stores—ensuring that the end purchase is correct the first time they make it. The rise of online shopping can also be attributed to a generational shift in attitudes regarding the purchase of items from the Internet.
I think of my own brood of teenagers and young adults at home, and I realize that this age group of children is far more comfortable with the point and click of a mouse than with their parents forcibly dragging them to the department store in search of the perfect gift. If I had grown up with digital music players, DVD gaming consoles, and computers connected to high-speed Internet connections, I’d never want to leave the house either! Nevertheless, I digress.
Online shoppers have fueled strong sales this year—even leading to some massive Internet traffic “jams” at popular sites. Although only 6% of the $220 billion holiday sales total, online sales are expected to grow nearly a billion dollars from last year’s total—$12 billion to $13 billion. Typically, the seven-day period before Christmas Day is when online sales slow, giving consumers a chance to receive their gifts. The seven-day period after Christmas contrasts nicely with this phenomena because most consumers are spending gift cards received as gifts or making exchanges. Of course, the seven-day period after Christmas for me will be spent with family, friends, and cherished ones. As well as working off the 10 pounds I will have gained from enjoying too many cookies and slices of pie and cake. This Christmas shopping season looks profitable in varying degrees for both the retailer and the consumer. Happy Holidays!