Tom: What’s expected for the retail sector during this holiday shopping season?
Mellody: That is the big question, Tom. Overall, the retail sector has had a tough fall, with sluggish sales numbers emerging in recent months, and inventories building up as a result. But, people have already been shopping and are expected to spend more than they did in 2014.
The National Retail Federation’s latest survey on holiday spending found that holiday shoppers plan to spend an average of $463 on family members, up from $458 last year and the highest in survey history. Average spending per person is expected to reach $805. So it does look like it will be a good season.
One thing that we can be certain of – online shopping is emerging as the story of this season. The same NRF survey found that Americans plan to do almost half of their holiday shopping online this year, and one in five of those who own smartphones will use them to purchase holiday merchandise, the highest since NRF first asked in 2011. This could very well be the year that online retail becomes the dominant first option for American holiday shoppers.
Tom: With all of this online shopping, online retailers like Amazon are poised to see a big season, right?
Mellody: If 2015 is the year that online shopping emerges as the primary story in holiday sales, it may also be the year that Amazon becomes the dominant company of the season’s retailers. According to a recent Reuters/Ipsos poll, a majority of U.S. consumers plan to go to Amazon.com for most of their online holiday shopping.
The survey found that 51 percent plan to do most of their online shopping at Amazon this holiday season, compared to 16 percent at Wal-Mart, 3 percent at Target and 2 percent at Macy’s. Not only does this underscore how synonymous Amazon has become with online shopping here in the U.S, but it also shows what an uphill climb traditional retailers are facing when it comes to e-commerce. While e-commerce still represents a small percentage of retail overall, Amazon is clearly outpacing everyone else, and this holiday season will be no different.
Tom: What does the shift to online mean for traditional retailers?
Mellody: Companies are really trying to keep up with the move to online, and I have talked about some of the shift to omni-channel retail before. Yet some businesses have been more successful than others, and it can mean success or failure in the holiday shopping season. For some retailers, like small businesses, the holiday shopping season continues to be the period that makes or breaks their whole year. But this is also true for some larger, traditional retailers this year. Who are they? One group that falls into this category is the department stores.
The sector has seen a very volatile period on the stock market since the August selloff, and many companies like Macy’s and Dillard’s have seen stock prices fall over 45% from their 2015 highs due to weak earnings and increasingly tough competition from online retailers. Other large traditional retailers, such as Staples, also need to perform well this season to improve their fortunes, as do luxury brands such as Coach.
Beyond the competition from online retailers, many of these companies are faced with shifting consumption patterns in the past year, as consumers have been spending money on cars, home improvements, and electronics. Because of this, many companies need a good holiday season to improve their fortunes, and investor confidence.
Tom: What should shoppers keep in mind during the shopping season?
Mellody: This time of year brings celebration, shopping, and unfortunately, scams. This is particularly true with the move toward online shopping, tom. Here are a few things that consumers should be cautious of when doing your holiday shopping. First, be careful when you are on your mobile devices, particularly if you are using retail apps. Fake apps have become more and more common and they are very dangerous because they gain access to all of the information on your phone, not just your financial info. So before you download anything, check the reviews and make sure they are legitimate.
Also, take caution as you look for deals on the web. As more and more shoppers move online, retailers are working to interact with you, sponsoring pop-ups touting their deals and promotions. The problem? Scammers are doing the same thing. So, if you want to visit a site, type the address into your browser yourself, do not click on any links. And check the reviews of smaller retail websites, and make sure they have a physical address and phone number listed.
Finally, remember that fraud can be quiet and longer term. While you may catch a fraudulent charge on your card, you also need to keep track of your credit report. Everyone has access to one free credit report per year from each of the big three firms. Definitely check use one of those free reports to check your credit history in late December or early in the new year. That way, you will catch any things that don’t immediately emerge on your radar as you are in shopping mode!