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Holiday sales on pace for biggest gain since 2005

December 27, 2016

Holiday shoppers abandoned their early reluctance and boosted spending as the season wore on, pushing U.S. sales to the biggest increase in more than a decade, according to research firm Customer Growth Partners.

On Tuesday, the firm raised its holiday sales estimate to a 4.9 percent gain over last year, to $637 billion. That would be the biggest increase since 2005. Customer Growth had previously predicted a 4.1 percent advance.

Online sales grew an estimated 15 percent, up more than a percentage point from the firm’s previous forecast. Sellers of consumer electronics, home-improvement goods, beauty products, and toys saw robust sales and minimal markdowns, according to Craig Johnson, Customer Growth’s president. Low unemployment and fuel prices, as well as real disposable income gains, boosted spending.

Then there was clothing. “You saw rampant discounting,” with 40 percent off required to even get customers in the door and half off to get them to buy, he said.

“If your name is Home Depot, your margins are going to be great,” Johnson said in an interview. For clothing and department-store chains, “you’re going to have trouble.”

Election, weather

Pre-election jitters and unseasonably warm weather produced a slow October that bled into a similarly wan November—until the middle of the month, when spending came back, Johnson said. Even the normal early-December slowdown, when shoppers take a break between Thanksgiving sales and last-minute deal frenzies, was shallower than normal, he said. The firm’s forecast excludes sales from autos, auto parts, fuel and restaurants.

The post-Christmas week is shaping up strong, Johnson said, helped by a variety of factors including most workers getting Dec. 26 off. Retailers in recent years have increasingly seen the week after the holiday, when customers make returns and exchanges, as a chance to lure them with a new selection of full-price merchandise.

“Instead of just being a neutral or a negative, it’s a plus,” he said.

Amazon's best season

Amazon.com Inc. said it had its best holiday season yet, having shipped more than 1 billion items through its Prime and Fulfillment services, and receiving a record number of orders for its own Alexa devices.

Sales for Echo speakers based on Alexa’s voice-recognition software were nine times more than the 2015 holiday season, Amazon said in a statement Tuesday. The Seattle-based company had trouble keeping them in stock despite “ramped-up production,” said Jeff Wilke, chief executive officer worldwide consumer.

Gauging demand for a product is difficult. Retailers risk losing money by overstocking or missing sales and disappointing shoppers by not having enough items available. Amazon actually sold out of its Echo speakers in mid-December. The Echo shortage shows voice-activated assistants are resonating with shoppers. Consumers can use voice commands on the gadget to order pizza, check homework, play music, among other tasks.

“Echo and Echo Dot were the best-selling products across Amazon this year, and we’re thrilled that millions of new customers will be introduced to Alexa as a result,” Wilke said.

More than 70 percent of Amazon users shopped using a mobile device during the holiday, Amazon said.

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