Surely you have heard that holiday retail sales were decent for 2016. But the fly in the ointment may be that retailers had to pay a lot to eek out a little.
The final numbers aren’t in yet, but numerous studies indicate that consumers now demand discounts and other promotions (free shipping, for instance) in order for retailers to snag a sale.
In other words, deep discounting might have boosted sales a bit, but they also bite deeply into actual profit.
“Retailers, which typically close their fiscal fourth quarter end of this month or early next month, are expected to see their critical holiday quarter profit decline 1.9 percent on average, according to Retail Metrics, a research firm that tracks Wall Street analysts’ estimates and provides retail industry research and data to institutional investors,” reports eMarketer. “While retail giant Wal-Mart’s expected profit decline (thanks to its technology and other investments) is the key culprit contributing to the sector’s decline, holiday discounting is also partly to blame.”
Retail Metrics president Ken Perkins even suggests that 53 major retailers — about half of the group his firm tracked — are expected to see lower fourth-quarter profit.
“Among the holiday winners, Perkins pointed to retailers including Amazon, beauty products seller Ulta, T.J. Maxx parent TJX, athletic gear retailer Lululemon and electronics chain Best Buy,” notes the report. “Still, he said the firm’s December store checks generally found disappointing in-store traffic and conversions.”
One big takeaway from the holiday? It’s hard to make an actual profit without an omnichannel strategy.
“Almost 70 percent of total holiday related spending occurred in stores with both a physical and online presence as consumers routinely favor shopping with retailers that have a physical location, according to an International Council of Shopping Center’s post-holiday shopper survey,” reports eMarketer. “Among millennials, for instance, the survey showed 77 percent of them said it’s important to buy online from stores that have a physical presence.”
The survey found that 91 percent of holiday shoppers made purchases at physical stores — about the same as holiday 2015.