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How Thanksgiving Weekend Illustrates the State of US Retail

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December 3rd, 2016

In the US, the national holiday, Thanksgiving, falls on the 3rd Thursday of every November, kicking off a weekend of shopping in anticipation of the Christmas holiday in December. The shopping weekend in 2016 serves as a microcosm for the state of retail in the US: the importance of mobile, the consumer preference for value, and the questionable future of the brick and mortar store with its challenge of becoming omnichannel.

Mobile’s moment

According to Adobe Digital Insights, mobile sales accounted for 36% and 35% of online sales for Black Friday and Cyber Monday respectively. Both days also saw over US$1 billion in total online sales—a rare feat. Black Friday, in fact, hit a new record for mobile sales in the US. Euromonitor International expects that mobile will account for 31% of total online sales in 2016, growing to 45% in 2021.

Retailers made many of their promotions online and on mobile, which helped drive online sales. Some promotions were only available through the retailer’s mobile apps to drive downloads. But there are larger factors at play in driving mobile sales. High penetration rates for the smart phones and tablets. The smartphones are bigger and easier to use. And retailers and technology companies are investing to improve the mobile shopping experience, such as launching in-app payments. For example, Wal-Mart reported that 60% of sales on Black Friday were mobile.

For many households, smartphones are the sole way of access the internet, especially in low income households.

internet-access-by-household-income

Source: US Census Bureau

Value is king for the consumer

Every year the National Retail Federation (NRF) surveys shoppers during the weekend to understand their shopping habits. In 2016, 36% of shoppers bought 100% of their purchases on sale, up from 32.5% in 2015. Discount stores were the second most popular channel for shopping behind department stores, which has been stable.

US consumers are more value conscious than ever before. According to Euromonitor International, discounters in the grocery channel outperformed other channels in the past five years, growing by 20% between 2011 to 2016. This is compared to 9% for overall grocery. Off-price retailers in apparel and footwear and department stores have done the same, growing by 42% over the past five years compared to the 4% growth experienced by the overall channels. This trend is expected to continue over the next five years because consumers have become more frugal following the recession.

What is the future of the store?

The holiday weekend saw the continuation of traffic declines to stores according to ShopperTrak. NRF’s survey data also confirms this. 40% of shoppers went to the store in 2016, compared to 42% in 2015. On the other hand, 44% of shoppers shopped online in 2016, up from 42% in 2015. According to NRF’s 2015 survey, the most cited reason for going to the store was the unbeatable promotions. But as more of these deals are available digitally, what will drive shoppers to the stores? What’s even more concerning is that the core demographic for holiday shopping, those between the ages of 18 and 34, shopped more online in 2016 than they did in 2015. The digitally native generation may bypass the stores in greater numbers in the future if the promotions are available online and there’s no other compelling reason to shop in stores.

Retailers still striving for omnichannel proficiency

The holiday weekend illustrated that retailers are still struggling to be omnichannel. Macy’s online and mobile websites crashed for most of Black Friday due to the heavy traffic. Victoria’s Secret and Williams Sonoma both had their websites slow down, taking 30 and 25 seconds to load according to industry sources. When digital commerce is the growth engine for retailers, it is imperative not to have IT issues on the biggest shopping days of the year. Retailers are still struggling to upgrade their IT, running on legacy private data centers with complicated technology stacks and too many integration points. CIOs are reluctant to move to the cloud or a hybrid solution, which would help alleviate these issues.

Another issue is that stores have not perfected in-store pick up. According to StellaService, a company that helps retailers with improving customer service, failure rates of in-store pick up transactions dropped from 20% in holiday season 2015 to 8% in this holiday weekend. Anecdotally, though, even if the transaction did go through the experience of picking up products could be inconsistent. Some retailers have separate counters for pick up while others combine it at the traditional point-of-sales. Employees may not be aware of the program or not have the proper resources to fulfil these orders in a timely manner. While some corporate offices may be pushing in-store pick up as means to drive traffic to stores and compete with speedy delivery, the message and the resources aren’t getting to the store level. Retailers must be mindful to appropriately train and incentivize their in-store staff to offer the highest level of service even if the sale is originating online.

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Michelle Grant

Michelle Grant is the Head of Retailing at Euromonitor International. She has a degree in economics and finance from Washington University in St. Louis and extensive experience in global market research. She helps global organizations build the future of their business based on actionable insights.