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Despite losing momentum late, holiday sales surprise to the upside

(Image: Shutterstock)

This is an excerpt from Thursday’s Point of Sale retail supply chain newsletter.

Despite retail sales declining sequentially each of the last three months of the year, the 2020 holiday shopping season was one for the record books. Retail sales during 2020’s November-December holiday season grew an unexpectedly high 8.3% over the same period in 2019. The 8.3% increase was more than double the 3.5% average holiday increase over the previous five years, including 2019’s 4% gain. 

(Chart: National Retail Federation)

The data includes online and other non-stores sales, which were up 23.9% to $209 billion. From November to December, retail sales fell a seasonally-adjusted 1.6%, but were up 8.6% unadjusted year-over-year. That built on a year-over-year gain of 8% in November despite November’s sequential decline of 0.9% from October. As of December, the three-month moving average was up 8.9% over the same period in 2019.

What does this mean? A couple of things: first, it’s further evidence of the resilience of the American consumer. Indeed, the stimulus checks and lack of service spending padded consumers’ wallets this season, but that doesn’t directly equate to increased spending. “Faced with rising transmission of the virus, state restrictions on retailers and heightened political and economic uncertainty, consumers chose to spend on gifts that lifted the spirits of their families and friends and provided a sense of normalcy given the challenging year,” said NRF President and CEO Matthew Shay. 

The other takeaway is retailers’ ability to influence when and how consumers shopped. 

In addition to warning consumers to shop early to avoid potential shipping delays, retailers began running holiday specials earlier this year. Amazon’s postponed Prime Day in October created a “75-day peak season” according to Carson Krieg, co-founder of Convey. 

This year’s growth rate may be an outlier, but the timing may become the new normal. Amazon has consistently shaped consumer expectations and forced competitors to follow suit to keep up. While Amazon has not announced plans to keep Prime Day in October, it is likely that the mid-October period will become a new jump-off point for Amazon’s massive holiday promotions that feed directly into what had been the traditional peak freight cycle. 

According to a recent survey of consumers from Convey, 44% say they will begin their holiday shopping even earlier this year than in 2020. The result is predominantly positive for parcel providers and the freight industry as a whole. An earlier start to the holiday season means a longer, less pronounced peak season. 

Indeed, there were widespread shipping delays and disruptions this year. More than half of Americans (57%) said at least one package arrived later than promised. But according to ShipMatrix, UPS and FedEx posted on-time delivery rates in-line or better than historical averages this holiday season. Much of the reason why parcel networks were able to perform at such a high level was retailers’ ability to encourage early shopping. 

Transportation providers should applaud retailers’ efforts to induce shopping in October or earlier. An elongated peak season means less congestion, fewer delays, better service and more delightful customer experiences.

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