The US Department of Commerce’s December retail sales data was released in mid-January. A narrative quickly emerged. Industry veterans blamed December’s sales drop of 1.9% compared to the previous month. They also accused the changing holiday season and successfully encouraged retailers to shop earlier. This resulted in late December sales being extended into November and October. Second, consumer confidence was declining due to inflation and the Omicron surge.
This analysis is valid, but it’s wrong in one important way. These assumptions significantly hinder retailers who plan their 2022 holiday season based on them.
First, data from the US Department of Commerce. December retail sales were $642 billion, compared to November’s $580 billion. You may be wondering how $62 billion more December sales than November could translate into a 1.9% drop in sales. This confusion is because the US Census Bureau summarizes the data using “seasonally adjusted” numbers. These estimates are adjusted to account for historical trends, seasonal variation, holiday and trading-day differences, but not inflation to normalize sales from different months. It is challenging to make seasonal adjustments under ideal circumstances. They are more susceptible to errors when other factors, such as atypical inflation or shopping patterns, are involved. In retail, it is not helpful or helpful to compare sales month-over-month. Comparing sales year-over-year is much more beneficial.
Holiday 2021 sales (sales starting in November and December) saw 16.1% more sales than 2020. This is almost twice the growth of any holiday season over the past 30 years. Are shoppers starting holiday shopping earlier? It’s interesting to note that October sales in 2020 were higher than in November. This is due in part to the 2020 promotional season. Amazon Prime Day, a major sales event, usually takes place in the summer. However, in 2020, Covid-19 Amazon moved Prime Day to mid-October, which allowed for a much earlier start to the shopping season. However, Prime Day in 2021 was moved back to the Summertime slot. This resulted in October 2021 sales being 13% higher than in previous years, which was the lowest growth rate over the past six months. Except for 2020, which was heavily affected by the pandemic, holiday sales in 2021 were very similar to previous years. These sales data suggest that Covid significantly impacted holiday shopping behavior in 2020 and has essentially returned to normal by 2021.
The US Department of Commerce sales data instrument is just one of many tools to help us understand our customers’ shopping habits. Similarweb tracks consumer behavior across millions of websites and mobile apps. They provide daily website traffic data for the US’ top 100 eCommerce sites for the core 57 holiday periods for 2019 and 2021. Similarweb data showed that US shopping site traffic increased by 13% between 2019 and 2021. However, traffic on the busiest days of the holiday season, Black Friday and Cyber Monday, is only 6%. Except for the holiday peak days, which are likely to be impacted by the law of large numbers, the shape of holiday web traffic hasn’t changed much from before the pandemic.
It is also worth looking at the in-store traffic during the holiday season. Placer.AI provides data from millions of mobile users, accurately determining customer foot traffic. We can see that the foot traffic in US retail stores during the holiday period between 2019-2020 was higher than in 2019, especially before Thanksgiving. However, the foot traffic on Black Friday 2021 was lower than in 2019.
The total sales data, foot traffic, and web traffic all tell the story of an American consumer whose shopping habits after almost two years of a pandemic are very similar to those before. Although the biggest shopping days (Black Friday, Cyber Monday, and Black Friday) are less popular than they used to be, this is only a minor issue.
Holiday’s 2022 future is the most uncertain. This is because of consumer expectations regarding pricing and promotions. Due to economic un-certainty and supply chain shortages, retailers offer fewer and less moderate deals in 2021 than in 2020. Salesforce reported holiday discount rates in 2021 to be two percent lower than those of 2020. Adobe said similar trends. Will retailers maintain lower margins and sales at lower prices in 2022, or will they have to offer aggressive discounts to generate sales comparable to 2021’s record sales? There will be uncertainty for retailers as they enter the holiday season in 2022, but it would be foolish to accept that the pandemic has changed the holiday shopping landscape fundamentally.