Each year, more deals and promotions seem to enter the marketplace in hopes of enticing holiday shoppers to spend more, or even to get them to actually come to the store itself. Expectations on how major retailers will perform and notifications regarding the level of confidence consumers have with the economy are rampant throughout the holiday season. You may wonder sometimes why there is so much attention spent on such a basic activity, but gauging the performance of retail as a whole is particularly helpful for us in analyzing the performance and outlook of the economy. Retail is the nation’s largest private sector employer and contributes $2.6 trillion to annual GDP. Thus, it is clear to see why the industry is a daily barometer for the nation’s economy.
According to the National Retail Federation (NRF), holiday sales in 2015 increased 3.2 percent over the previous year. For 2016, it expects sales in November and December, excluding autos, gas and restaurant sales, to increase a solid 3.6 percent to $655.8 billion — significantly higher than the 10-year average of 2.5 percent. Despite any skepticism of these projections, these expectations make sense given the recent rise in consumer confidence. “The post-election surge in optimism for the economy, jobs and income prospects, as well as for stock prices which reached a 13-year high, was most pronounced among older consumers”, Lynn Franco, Director of Economic Indicators at The Conference Board said in a press release. This sentiment certainly boosted consumer spending throughout, but now more than ever consumers are choosing to skip the physical stores for the holidays.
With the advent of online and now mobile shopping, physical retailers have been taking a big hit from competitors such as Amazon. Coincidentally, Amazon had its best holiday season ever, shipping more than 1 billion items worldwide. The NRF projects online sales to increase at an even more rapid rate of between 7 and 10 percent to as much as $117 billion. Additionally, mobile commerce has surged significantly as retailers have optimized websites and apps to allow for a more efficient shopping experience. This change in the ways consumers shop has certainly been reflected these holidays, as mobile device sales accounted for 31 percent of all retail sales. It is clear that given the changes in the consumer spending environment and positive outlook that many share on the economy, we have had yet another year of successful spending this holiday season.