News & Politics

A Very Merry Christmas for Retailers

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Mastercard reported that shoppers spent a record $800 billion during the Christmas season. They attribute the strong spending to “growing consumer confidence, rising employment and early discounts.”

Reuters:

The report said holiday sales in stores and online between Nov 1 and Dec 24 rose 4.9 percent, the fastest year-on-year pace of increase since 2011. Mastercard, which tracks spending by combining sales activity in its payments network with estimates of cash and other payment forms, excluded automobile sales from its figures.

Most U.S. retail stocks have tumbled this year as they continued to lose sales to online stores, mainly Amazon.com Inc. Traditional players have also been hurt by heavy investments in technology and discounting, made to keep up with online and off-price competition.

Shares in J.C. Penney Co Inc rose 7.6 percent on Tuesday, while Kohl’s Corp shares were up 5.8 percent, Macy’s Inc rose 5.1 percent and Nordstrom Inc increased 2.8 percent.

SpendingPulse said the moderate sales increases seen in apparel and department stores were particularly impressive given this year’s slew of store closures.

Online sales rose 18.1 percent during the holiday season, thanks to a late rally in sales, according to Mastercard.

“But that’s probably only 11 or 12 percent of total retail sales … the bulk of sales still is very much in stores,” said Quinlan.

“There’s growth, don’t get me wrong, but we still love that experience of being in store.”

The biggest winner of the holiday season was likely to be Amazon.com once again, however, according to a Reuters/Ipsos opinion poll conducted this month.

Amazon.com said on Tuesday that it had topped its worldwide holiday sales record this year, with more than 4 million people opting to trial Amazon Prime in one week during the period.

Sign of a renaissance? Or the last gasps of a dying industry?

Brick and mortar department stores are in roughly the same position that blacksmiths, wheelwrights, and mom and pop grocery stores found themselves in at various times in the 20th century: dead but they don’t realize it yet. There may yet be some hope for freestanding specialty stores, but traditional department stores, living as they do on very small margins, cannot afford the loss in customers. Sales volume is tanking, which has cut profits to the bone, leading to layoffs and bankruptcy.

The move made by traditional department stores to join the internet revolution has largely failed to revive the industry. It turns out the number of customers is not much larger when combining online and on-site sales. They are trying to appeal to a dwindling number of customers who can easily search for better deals on the same product elsewhere online.

Like the media, the retail industry never knew what hit them. The world has changed and continues to change in ways that elude managers in old-line industries. This is bad news for J.C. Penney and other retailers, but great news for Amazon, which will likely become even more of a dominant force in retail unless Washington decides they need to be cut down to size.