Despite the claims of well-publicized naysayers over the last few years, the impending “retail Apocalypse” appears to have been overblown. Although the way U.S. consumers shop has evolved over the years, e-commerce has not delivered the predicted death blow to brick-and-mortar retailing. Quite the opposite, in fact.
The steady, gradual growth of e-commerce was dramatically accelerated by the pandemic last year, elevating the value of shopping online in line with levels of in-store activity. However, with vaccination rates still rising and more stores and malls open for business, online sales continue to grow but they are settling back to more typical, pre-pandemic levels. At the same time, physical stores are proving their worth, regaining a near-pre-pandemic share of the retail sales market.
Discretionary Retail by Channel
Dollar Distribution by Month
Source: The NPD Group/Checkout Omnichannel Tracking
Stores are truly more relevant today than they were before the pandemic. Why? Consumers are no longer solely focused on the capabilities offered by online shopping — they are hungry for the experience of in-person shopping. In many cases, the online shopping experience fell short last year. Consumers are no longer as limited in their shopping options and they’re no longer primarily buying out of necessity. Choice has reentered the equation.
Today we see the importance of that choice, and stores’ relevance is further endorsed by online platforms and more pure-play retailers are creating their own physical footprints. These retailers have recognized they can no longer be one-dimensional sellers. But even beyond having both an online and physical presence, retail industry leaders need to find ways to strengthen their connections with their customers. The first step is learning to make these two entities not just coexist, but interconnect.
A Retail Minute with Marshal – Holiday Update
NPD Chief Retail Industry Advisor, Marshal Cohen, dispels rumors about the impending death of the in-store retail. Consumers are once again shopping in stores for the holidays. As online sales growth slows, in-store sales are once again rising dramatically over 2020 – and even 2019 – levels. Plus, Super Saturday is a full week before Christmas this year, so be on the look-out for a late surge in holiday spending.
Online shopping saved the holidays for many last year, but consumers are once again looking forward to the in-person experience. After the less-than-traditional 2020 holiday season, when most of the country was sheltering at home and many brick-and-mortar stores were shuttered, consumers want to get back to more typical activities this year.
A recent survey conducted by NPD asked U.S. consumers about the holiday traditions they missed most last year that they hoped to return to this year – including visiting Santa at the mall (15%). Here’s what we found …
Holiday Shopping Activities
Which holiday traditions do you hope to return to this year?
Source: The NPD Group/Omnibus Survey, October 2021.
82% of consumers say they will shop both online and in stores over the holidays
Getting products immediately, and the ability to touch and feel gifts before buying, topped the list of reasons for shopping in stores. Convenience, finding the best prices, and saving time were the main reasons cited for shopping online.
52% expect to face supply issues that mean they can’t buy the products they want
But most are prepared to buy alternative products and shop earlier (or online) to find what they want.
Nearly three-quarters anticipate taking advantage of holiday sales and promotions this year
Only 7% expect them to be better than they were last year; 19% expect them to be worse.
Source: The NPD Group, Checkout Holiday Survey, November 2021.
Experiential Spending Growth — Good News for Retailers
Retail sales growth, during the holidays and beyond, is no longer a result of the lack of experiential spending, as it was earlier in the pandemic period. Data gleaned from credit- and debit-card information from over 4 million U.S. consumers reveals a clear movement back to spending on travel, entertainment, and other experiences. But we are not seeing a pull-back on consumers’ interest in spending on holiday gifts and other tangible goods. At least, not yet.
Experiential spending increases so far this year, when compared to 2019, have happened slower than many expected. The growth varies based on the activities themselves and pricing shifts. Easing back into spending on experiences is a benefit to the retail industry and the activities that are closest to pre-pandemic levels, like lodging and event tickets, are also a positive. Consumers who attend events and take trips are likely to look for products to supplement those activities.
Secondary experiential purchases provide a boost for the items that were less important during the peak of the pandemic last year when people spent much of their time at home — items like luggage and accessories, apparel, footwear, and beauty products. These industries have begun to enjoy year-over-year growth.
Experiential Spending by Activity
Dollar Spend % Change vs. 2019
Source: The NPD Group/Innovation Lab
Vertical Holiday Views
Moving from the general to the specific, vertical industries also feed into the themes NPD is tracking in the larger retail environment. Here are some top-line holiday viewpoints that reveal subtle variations and shifts in what various industries can expect during the holidays this year.
Vice President, Industry Advisor
Smells Like Christmas!
What will propel the beauty industry’s growth this holiday season? In a word, fragrance. The fragrance category has been the standout winner in beauty all year, posting sales gains that are triple that of makeup and skincare. And with over 40% of annual fragrance sales happening during the fourth quarter, it is a top choice for consumers looking for that perfectly indulgent beauty gift. While there has been a general decline in the percentage of consumers who shop late in the season, fragrances are notoriously last-minute gifts. Fragrance sales in December comprise over 60% of the category’s fourth quarter, and revenue during Christmas week can be anywhere from 25%, to over 100%, higher than any week prior.
Executive Director, Industry Analyst
Comfy and Cozy … With a Twist!
Pre-pandemic demand for hot footwear brands and other items intensified over the past year, and this momentum will continue through the holiday season. Athleisure styles and other casual bestsellers, as well as slippers, continue to be popularized on social media and resonate with consumers of all ages, who have proven willing to pay full price for the footwear they want. The desire for comfy-cozy products remains – and has been taken up a notch. These elements have moved beyond winter boots and slippers, and are now being incorporated into fashion shoes, boots, sneakers, and even sandals. Across these categories, footwear that contains visible fur-like features outperformed fur-free styles, from January through September, according to NPD Retail Tracking data. With higher average prices, high demand for these trends, and tight inventory, footwear is forecasted to achieve double-digit growth this holiday season, compared to 2019, per our Future of Footwear findings.
Director, Industry Analyst
The Joy of Comfort
Apparel maintains its ranking as the top category consumers plan to buy during the holiday season, according to the annual NPD U.S. Holiday Purchase Intentions Report. With so many options, ranging from various brands and styles, coupled with a much-needed update to our winter wardrobes, the apparel industry has a clear opportunity to shine during the holidays this year.
Today’s comfort dressing is a continuation of the lifestyle that the pandemic accelerated, and consumers are not turning back. Looser fitting denim, oversized shackets, and the return of tracksuits are just some of the items accentuating our desire for comfort that are expected to sell well this holiday season. The definition of “dressy” has evolved, especially as we ease back into in-person work and social gatherings. We’ll mix and match elements that look put together, while adapting functionality, fabrics, and fits for less structured wardrobe offerings.
Global Industry Analyst, Toys
A World of Toys
The current demand for toys is very strong. The toys market in the G13 is up 12% in value year to date through the end of September (compared to last year); and compared to two years ago, sales are up 27%. Factories have been running night and day to try to cope with demand, and to ship everything in time for Christmas. With all this pent-up demand, we are seeing tensions on the supply side, but I anticipate stock will remain strong. Retailers won’t be left with empty shelves due to supply chain issues, and there is no need for consumers to begin panic buying.
The top sellers this year will be a mishmash of hot trends from unboxing to licensing, led by video games IP’s and the emergence of top SVOD programs. Collectibles, building sets, and doll accessories will be big, too. Toys with a strong focus on sharing and playing, as well as toys with a hint of nostalgia and sustainability, should be attractive to consumers as well.
Vice President, Industry Advisor
Products, Pricing, and Promotions in Flux
The consumer technology industry has had another strong year from a revenue standpoint, and we expect to close out the year 7% above last year’s historic sales numbers. Despite years of industry efforts, consumer holiday purchases in 2019 were increasingly concentrated on the week of Thanksgiving and Cyber Monday. The 2020 holiday season disrupted that tradition, but consumers (and the industry) are likely to return to those old habits this year. With fewer stores opening on Thanksgiving, online shopping will once again be center stage. More than ever before online retail, buy-online-pick-up-in-store (BOPUS), and integrated promotion will combine to provide transaction convenience and possession options.
Products, pricing, and promotional activities will be in flux this holiday as manufacturers, retailers, and consumers respond to ever changing conditions. After almost two years of unprecedented sales volumes, the 2021 holiday season is likely the last time that the confluence of demand, lifestyle needs, installed base growth, and product refreshes all come together to produce the robust demand we have been experiencing. If you can’t win now it will be a couple of years before these opportunities come back again.
Vice President, Industry Advisor
Gifts That Keep on Giving
Consumers surveyed for our U.S. Holiday Purchase Intentions report said they expected to spend an average of $785 this year on gifts, and 31% of respondents said they planned to buy home products as holiday gifts this year. Home products are typically on the annual top holiday gifts lists and this year robotic vacuums, air fryers, single-serve brewing systems, massaging appliances, and electric toothbrushes (often purchased as a last-minute gift item) will be on the lists.
Home has always been our command central and, during the pandemic, it also became our sanctuary. This season our homes will give new meaning to the classic song lyrics, “there’s no place like home for the holidays,” and will be a place to celebrate and gather with family and friends. From my home to yours, have an extra special holiday season.