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Retail Newsline: 2015: An E-Commerce Christmas

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By Garrick Brown, Vice President of Retail Research, Americas

UPS is expecting to deliver 36 million packages… today. Yes, that’s right. Today.

UPS delivered 26 million packages on December 14th… which was, until today, the busiest day in the delivery service’s storied and long history.

The 36 million packages that UPS will process today is roughly double their normal volume. You may have noticed their trucks delivering packages this past Sunday in your neighborhood. They were joined by FedEx and US Postal Service fleets that were all out and about in force. The US Postal Service is reporting that their package volume is up 15% over last year. UPS went into the season expecting a 10.3% bump in demand over 2014, but those numbers may prove to be far too conservative. Good weather is helping, but all of the major parcel services are stretched to the limit trying to keep up with the surge in demand for their services.

It is too soon to tell where the numbers will fall for this year’s holiday shopping season.

U.S. retail sales demonstrated year-over-year growth of 4.1% last year. We technically still have nine days left in the season; two more pre-Christmas sales days and then the post-holiday week which cannot be written off. December 26th has always been one of the top days of the year for American retailers. In fact, the 26th (Boxing Day) has traditionally been the top retail day of the year in Canada. This year will be no different. In fact, I would venture to say this year’s post-Christmas week is likely to be exceptionally strong. This surge in activity will be partially driven by some good things (strong gift card sales and decent weather conditions in most of the country). But it will also be driven by one great big bad thing for retailers; extreme markdowns.

Again, numbers aren’t available but I’m hearing plenty of anecdotes from bricks and mortar retailers and most of them are not good. The unseasonably warm weather in most of the country has effectively cheated apparel retailers out of a fall and winter season so far. I strolled through a couple of malls this past weekend and though there were a few barren spots on the shelves for some hot items, there was an awful lot of merchandise still on the racks. And a lot of 50% off signs that, come day after Christmas, will likely be 70% off signs.

But before I kill you all with gloom, most of the bad news has been limited to apparel. It appears most other sectors are benefiting somewhat from the warm weather. I have heard from a few mall operators in the Northeast who have told me that foot traffic is better than they have seen in a couple of years. I’m hearing that appliances, electronics and large purchases are up. Sporting goods are up. Books, toys and hobbies are up. And apparently nothing says Christmas to Americans like a loaded Glock because gun sales are through the roof.

But how will we fare overall? Will the U.S. retail sector match last year’s level of growth? I certainly hope so, since I forecast 4.1% growth a couple of months back based on a number of positive economic indicators and the fact that this year’s holiday sales season was actually longer than last years.

But if you asked this question to bricks-and-mortar apparel players today, they would almost certainly tell you, “No way.” I would expect this would be the response from most bricks-and-mortar retailers. Even those that have said they are doing fairly well are not expecting growth to come in at the same level as last year… at least for their physical stores. But those growth numbers aren’t just about physical store locations… they also include e-commerce.

For the last five years or so, e-commerce sales have grown by a rate of roughly 15% annually each year. Meanwhile, bricks and mortar retail sales have expanded by anywhere from 3% to 4% annually during that time. We won’t have final e-commerce statistics from the Commerce Department for a few more months. But just as the anecdotes are mostly negative from the bricks-and-mortar retailers, they are overwhelmingly positive from the logistics guys. Enough so, that I expect a major surge in those e-commerce growth numbers this year… I would anticipate that instead of something in the 15% range, we may be dealing with growth well above the 17.5% range.

All of this illustrates perfectly the reason for retail’s obsession with building over the past few years with building e-commerce platforms and omni-channel capabilities. Barring a few categories and outside of the experiential retailers and concepts on the far fringes of the economic spectrum that seem to be immune from online competition, the reality now for many is omni-channel or death.

I suspect that the 2015 holiday sales season will go down as a record breaker in terms of e-commerce activity. And if we do match last year’s level of growth (4.1%), this year it will have been done largely on the shoulders of e-commerce.

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 garrick.brown@cushwake.com.

garrick-brownGarrick 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.

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