Holiday 2017 wrap-up: late season surges, an Amazon Prime Now killer, new hope for brick and mortar (and it’s not just click-and-carry)

If you were to believe the media coverage, you’d think the online holiday season starts on Black Friday and ends on Cyber Monday, with breathless reporting on manic crowds poised to burst into stores that won’t open for hours while minimum-wage employees pound Red Bull and prepare for the inevitable siege. Sort of like the Alamo, except they’re selling the furniture to the marauders rather than using it to barricade the doors. And Cyber Monday is touted as the respite from the insanity, with deals that can’t be beat. 

The reality, though, is that Cyber Week – the Tuesday before Thanksgiving through Cyber Monday–only represents 21 percent of the holiday season. In 2017 we saw a continuation of the trend where consumers are spreading their online holiday purchasing early and late in the season.

Sales for the early portion of the holiday period, from November 1 through the Monday before Thanksgiving, were up 24 percent in 2017.  Sales for the holiday week were up a more modest 19 percent.  And sales from the Tuesday after Cyber Monday through December 31^st were up 26 percent. The final stage of the online holiday season accounted for 54 percent of 2017 sales, compared with 53 percent in 2016 and 52 percent in 2015. 

This broad trend is driven by two factors: Consumers increasingly trust that retailers will deliver on time close to Christmas.  Secondarily, brick and mortar retailers with click & carry capabilities are able to push sales right up to the last minute. This was an important advantage during the late holiday season. Let’s look at an aggregate of retailers with mature click & carry operations (Best Buy, Home Depot, JCPenney, Macy’s, Target, Toys R Us and Walmart) to illustrate this point. In the November 1 – 17 time period, click & carry accounted for 25 percent of total sales. In the week of December 18-25 click & carry accounted for 42 percent of sales.  Target went from 18 percent to 37 percent. Best Buy went from 36 percent to a whopping 57 percent. 

Brick and mortar retailers have ten months to tighten up their click & carry operations before the next holiday season (which in my own personal experience is about as smooth as chunky peanut butter – there are smooth parts mixed in with the lumps). Accurate real-time inventory availability probably represents the biggest opportunity for improvement, ensuring that a consumer that orders something to pick up today will be able to do so. However, the location of those in-store pick up spots represents a giant opportunity as well. 

The old layaway desk just isn’t going to cut it anymore. Drive-through pickup will soon be the standard that consumers expect – retailers need to aggressively reconfigure stores now to get there before Amazon does (and they’re already close). Brick and mortar retailers: you have 10 months to improve and expand your employee training to ensure that as many people in the store as possible can troubleshoot inevitable problems. 

Finally, brick and mortar retailers ought to look very closely at Target, which shipped 70 percent of online orders from stores in 2017 – a mind boggling accomplishment for a company that we used to view as an online laggard. While this likely drove cost improvements for Target, it certainly didn’t hurt the topline, with Target.com holiday sales growing by, wait for it, 54 percent. The other thing about Target that we will watch closely in 2018 is the impact of its acquisition of Shipt and the clear opportunity that it presents to leverage in-store inventory for same day delivery. This combination could be an Amazon Prime Now killer.

The biggest surprise to me during Holiday 2017 was the fact that half of online sales growth came from an increase in the number of holiday shoppers. Online sales grew by 24 percent, propelled by a 12 percent increase in the number of shoppers and a (less surprising) 11 percent growth in the holiday season spend per person. This is a great reminder of the fact that while all of us, and everyone we know, does most, if not all of their holiday shopping online, there remains a lot of market yet to shift online. Remember that, according to the U.S. Census Bureau, online sales represent less than 10 percent of consumer spending. 

Don’t assume that the only online opportunities are in tapping the affluent shopper that is already heavily buying online – there remains the whole rest of America. 

Amazon’s dominance of the online retail channel is truly awe inspiring. And Amazon had a great holiday season, with sales up 25 percent compared with overall channel growth of 24 percent (for a .5% share increase). However, November is actually Amazon’s weakest point of the year in terms of market share. Amazon’s share January through October of 2017 was 37 percent, compared with 32 percent during November. The strategic focus, promotions, and advertising that we see each year from Amazon’s brick and mortar competitors allows them to collectively claw back market share from Amazon – 5 points of market share in 2017.

While it might be easy to dismiss this away; ‘oh, people are just in the habit of buying from Walmart, Target and Macy’s during the holiday season’ I think that this difference is material and ought to serve as rallying point for brick and mortar retailers coming into 2018. Brick and mortar retailers have got to put the focus that they put into winning during the Holiday season into winning every other day.

Holiday 2017 was a terrific season for mass merchants and mass-oriented department stores, with Target.com up 54 percent, Walmart (including Walmart Grocery) up 43 percent, Kohl’s up 41 percent and JCPenney up 43 percent. 

Are we seeing the benefits of the cash that was diverted to e-commerce by closing poorly performing stores? It’s too early to say, but given the size of the e-commerce channel and the relatively slow starts that most brick and mortar retailers got relative to Amazon, we should have a few years of strong growth to look forward to from these guys, now that they’re appropriately focused. Back to a point that I made earlier – not everyone in the US is rich, although it might seem that way to those of us that live in our bubbles. There is a critical place for retailers that sell lower priced goods targeted at people for whom $100 for a Prime Membership is a big deal. 

With a panel of 5 million online shoppers, Slice Intelligence gives the most detailed, and accurate digital commerce data available, and is reported daily.

Slice Intelligence is the only service to measure digital commerce directly from the consumer, across all retailers, at the item level, and over time. Our retailer-independent methodology precisely measures commerce as it happens. By extracting detailed information from hundreds of millions of aggregated and anonymized e-receipts, Slice can map the entire Purchase Graph, connecting each and every consumer to all their purchases.

Slice gets its data from e-receipts – not a browser, app or software installed by the end-user – so its measurement reflects comprehensive shopping behavior across multiple devices, over time which are key in an increasingly omnichannel retail world. Slice Intelligence is the exclusive e-commerce data provider for the NPD’s Checkout Tracking e-commerce service.