By Garrick Brown, Vice President of Retail Research, Americas
I gave a live webcast yesterday that I hope you will find interesting and entertaining. In 16 Retail Trends to Watch in 2016 I discuss the major trends that I think will shape the year ahead for retail and retail real estate in the United States. You can listen to the recording of the webcast and watch the slideshow at your convenience. The webcast itself lasted about 50 minutes with about 10 minutes of Q&A from our audience. And, if you would like a copy of the slide show itself, just drop me a line and I will send you a PDF.
Additionally, we’ve wrapped up our retail stats at the national level and I will be releasing a new national shopping center report in the days ahead. Of course, I will be sharing this with our Retail Newsline subscribers. Additionally, our local offices have already begun to release a fresh crop of reports on all commercial real estate property types. To check out the Cushman & Wakefield Research Website just click here. You will find everything from local to national and global research reports on a wide range of property types, as well as a library of white papers, specialty reports and infographics covering commercial real estate, the economy and a slew of other pertinent topics. And certainly feel free to reach out to me if I can ever be of assistance in helping you find what you need.
The final numbers for Holiday Season 2015 are in and they aren’t quite what we had hoped for. Christmas 2015 turned out to be a relatively disappointing one for bricks-and-mortar retail. The good news is that overall sales grew by 3.1%. Over the past ten years, the U.S. economy has averaged annual sales growth of 2.6%. But overall sales largely failed to meet expectations. They certainly didn’t meet my forecast of 4.1% growth. This was the level of growth that we had recorded last year and my expectation that we would maintain (but not exceed) that level of growth.
The rationale behind my forecast was pretty simple… though there have been plenty of Wall Street jitters as of late, there has been a lot on Main Street to be optimistic about. First off, there were 2.9 million jobs added in the U.S. last year. In fact, December turned out to be one of the strongest job creation months of 2015 with 292,000 jobs added in just last month. But the job market had been building momentum before then. One telling statistic is that over the course of December, while adding 292,000 jobs the actual unemployment rate stayed firm at 5.0%. This is because more people are being drawn back into the workforce. In fact, the labor force participation rate rose to 62.6% in December, its highest reading since July. While underemployment and sluggish wage growth remain issues, the economy appears to finally be building some pressure on both fronts. Average hourly earnings were up 2.5% from December 2014, matching the level of gains posted in October as being the largest that the economy has recorded in more than six years. All of these trends were already starting to play out heading into the final two months of the year and pointed towards the same thing… consumers being in a better place than they had been a year earlier.
Likewise, gas savings continued to be a major story. Though you wouldn’t know it from Wall Street’s response as of the last few days, falling energy prices are more of a net positive to our economy than a net negative (my apologies to Houston and those select local U.S. economies that are energy industry driven). Regardless, we estimate that average gas savings to U.S. consumers in 2015 equated to about $500 per person. This was another reason to expect that consumers would at least drive the same level of growth that they had in 2014.
Additionally, there were a few other reasons for optimism… the trend of holiday promotions starting earlier and earlier (some retailers began holiday sales as early as November 1st this year) basically meant a longer holiday shopping season. But even if early promotions didn’t bring customers in, the actual calendar season between Black Friday and Christmas Eve was longer (it was 28 days as opposed to 2014’s 27 day calendar period).
This is not to say that the 3.1% sales growth that occurred was shabby. It was well above the ten-year average of 2.6% annual growth. But the disappointment in those numbers comes not just from the fact that they failed to live up to expectations of most analysts (myself included). It comes because those “decent” numbers mask a few things that made this year’s holiday shopping season particularly rough for a few key bricks-and-mortar retail sectors.
It’s a sad irony to say today (as much of the Eastern Seaboard girds itself for a blizzard of historic proportions) that warm weather throughout much of the country turned out to be a spoiler… but it did. Warm weather trends from September until January effectively cheated apparel and department store chains out of a fall and winter clothing season.
But the biggest concern for bricks-and-mortar players (particularly those without much of an omnichannel presence) has to be the fact that those “decent” overall sales growth numbers were driven to a large degree by e-commerce. E-commerce sales growth surged in 2015. Final numbers from the Commerce Department will not be available until March. However, MasterCard Advisors reports that their tracking of e-commerce transactions indicate a 20% jump this holiday season. Overall e-commerce growth from 2010 through 2014 had consistently fallen in the 15% range.
Worse yet for bricks-and-mortar players is that despite the good weather that was prevalent for much of the country, foot traffic was sluggish until late in the holiday shopping season. Crowds surged in the week before, and after, Christmas. Unfortunately this meant that heaviest shopper traffic fell at a time when discounts were at their peak so retailer margins were pinched in 2015.
I could go on at great length describing how this is going to impact things in the months ahead… but then you would have even more material to read. Instead, just check out my webinar forecast 16 Retail Trends to Watch in 2016.
This post is commentary from the latest weekly edition of our Cushman & Wakefield Retail Newsline, which you can subscribe to for free by e-mailing firstname.lastname@example.org.
Garrick serves as Vice President of Retail Research for the Americas. He speaks frequently at industry events and has been a keynote speaker at symposiums, conferences and market forecasting events for groups like the Appraisal Institute, Urban Land Institute, CREW, ICSC and PRSM. He is also a member of Lambda Alpha International, an invitation-only land use society for those who are involved in the ownership, management, regulation and conservation of land, but also those who are involved in its development, redevelopment and preservation.