By Garrick Brown, Vice President, Retail Research for the Americas
GDP is the total dollar value of all of the Online Shoppinggoods and services produced by an entire nation over the course of a given time period. And so when it comes to annual GDP, $3.0 billion or so isn’t really all that much. GDP for the U.S. last year was something close to $17.9 TRILLION. But there are a few nations in the world where GDP hovers near the $3.0 billion level; Gambia, Cape Verde, Andorra, Liechtenstein, Andorra, Curacao and Belize all have annual GDP hovering near that level. So why do I mention it? Because U.S. consumers spent that much money online (actually about $3.1 billion) on Cyber Monday. In your face, Liechenstein!
Internet retail activity was so high that at one point, Target’s site crashed for some users. This setback didn’t last long and didn’t impact all regions. Target has yet to release actual figures, but apparently none of the challenges they faced Monday were enough to keep them from breaking their previous record for single-day internet sales. That long-standing record was set last Thursday on Thanksgiving.
With news like that, you might find yourself seeing a headline like Black Friday, Cyber Monday Lose Some Luster (this ran in the San Jose Mercury Press on 11/30) and wondering what’s going on? Or, does the media even know what they are talking about? And actually the answer is yes. George Avalos in that article actually spells out exactly what is happening; which is that the actual days of Black Friday and Cyber Monday are much less important now simply because so many retailers have begun launching the season earlier and earlier. Last week I discussed how the various pronouncements that Black Friday is dead are jumping the gun. Cyber Monday’s performance certainly indicates that such claims are extremely premature when it comes to online sales. But one also has to wonder. It is absolutely true that more consumers are shopping online earlier than Cyber Monday. Is it possible that Monday’s performance, as strong as it was, may be overshadowed by the overall gains this sector will make this holiday sales season?
According to IBM Watson Trend (which tracks millions of transactions on retail websites), online sales increased by 17.8% on Cyber Monday. According to Forrester Research, total e-commerce sales increased by an average of about 15% annually over the last five years. Most of us have assumed that e-commerce sales would increase by even more this year and judging by Monday’s performance they will. But are they about to surge? Instead of a 16% or 17% increase (most of the forecasts I have seen) are we looking at one of 18% or more?
Well, that’s the good news for retailers, at least for those who have strong omni-channel capabilities. What’s it mean for bricks and mortar players? It means the shift is on…
Just as you might expect, the surge in online sales is about shifting shopping patterns and e-commerce’s gains are at the expense of bricks and mortar retail. According to ShopperTrak, retail sales at physical locations fell slightly on Brown Thursday (Thanksgiving) and Black Friday this year.
Black Friday sales were down from $11.6 billion a year ago to $10.4 billion this year. Thanksgiving sales fell from $2.0 billion to $1.8 billion this year. All told it looks like bricks and mortar sales were down this past holiday weekend by somewhere between 5.0% and 10.0% (depends on the sources and what they specifically track), while online sales were up somewhere between 15.0% and 20.0% (again, depends on the sources and what they specifically track). This doesn’t mean that retailers won’t be having a strong holiday sales season this year. The National Retail Federation confirms that they stick with their forecast of 3.7% growth for the sector (includes retail sales both online and at bricks and mortar locations). I still stick with mine of 4.1% (same growth rate as last year), though I am not without some concerns. The ongoing events today in San Bernardino are of particular concern. Regardless, despite all the seemingly contradictory reports, it appears that retailers are going to have a strong holiday sales season—but that online transactions are going to be accounting for an even larger slice of the pie than ever before.
One last thing, if you are going to be at ICSC New York come see me Sunday, December 6th at 10 AM at the Sheraton Times Square. The events are FREE with continental breakfast included. I will be a panelist on a group that is discussing the increasing role of data and technology in retail and retail real estate. In “The Great Retail Shakeup,” we will be covering the topic of innovation… Here’s the brochure blurb; “Frictionless commerce is the holy grail of the retail industry. An expert panel explores the data and technologies used to bridge the gap between online and in-store shopping to create the ultimate experience. From social media to e-commerce and virtual dressing rooms to robots, learn how to stay ahead of the curve in a rapidly changing retail environment.” If this sounds dry to you then you especially better come to this event, because the topic is anything but dry. This is going to be a lively and enlightening discussing of new technologies that are radically changing both how retailers do business and how those of us in retail real estate will be doing business in the next few years. And I will probably be grinding my axe about the fine line between convenient and creepy that retailers will have to walk with some of these technologies that could potentially boost sales or that might short circuit on them.
Hope to see you at the event.
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 joined Cushman & Wakefield (formerly DTZ / Cassidy Turley) in October 2010. He 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.