US stores finishing the holidays on a high note


  • Retail Premium
  • Monday, 24 Dec 2018

RETAILERS wrapped up one of the strongest holiday seasons in years, with Americans crowding stores for last-minute Christmas gifts and delivery companies so far able to keep up with the surge in online orders.

Stores have met the lofty sales expectations set by analysts and industry groups, according to early data, showing that many chains continue to reap the benefits of a strong U.S. economy and rising consumer confidence, as well as company investments to boost their online business and clean up stores.

Total U.S. retail sales, excluding automobiles, rose 5.2% from Nov. 1 through Dec. 19 compared with last year, according to Mastercard SpendingPulse, which tracks both online and in-store spending with all forms of payment.

As in recent years, online sales continued to grow faster than sales overall, rising 18.3% during that time and accounting for 13% of total sales, the highest percentage ever recorded by Mastercard. In-store sales grew 4.3% during the same period. Another tracking firm, Adobe Analytics, found that a record $110.6 billion was spent online during the same period measured by Mastercard, a 17.8% increase compared with last year.

The delivery backbone of the online economy has held up so far during the holiday season, with United Parcel Service Inc. averting hiccups that plagued it last year as new automated processing facilities increased the number of packages it can handle.

UPS delivered 98.3% of packages on time through the four weeks since Thanksgiving, up from 94.1% last year when the carrier struggled with too many parcels at times, according to ShipMatrix Inc., a software provider that analyzes shipping data.

A UPS spokesman said the extra capacity and technology that can reroute packages around problem spots have resulted in service levels that are similar to those during a nonpeak season.

On-time performance for FedEx Corp. and the U.S. Postal Service came in at 96.9% and 98%, respectively, roughly the same as last year, according to ShipMatrix.

On Saturday, many shoppers still expected more packages to be delivered, but also headed to stores for last-minute gifts. “My husband, he didn’t do his shopping so I’m out shopping for him,” said Liz Roberts, a 37-year-old nurse who lives in Chelsea, Mich., shopping at a Best Buy store near her home. “We also have some last online orders coming Christmas Eve,” she said. “So far everything has arrived on time.”

Although foot traffic to traditional stores fell during the Black Friday weekend, overall retail sales rose, thanks in large part to a surge in online shopping, which jumped 26% from a year earlier, according to Adobe.

Retailers had the calendar working against them. With Thanksgiving falling especially early, stores had a harder time maintaining momentum beyond the November holiday as buying slowed in the first part of December, analysts and consultants said.

“This year, we clearly saw a dramatic shift in holiday in both cadence and consumer response,” as retailers offered big deals over Thanksgiving, then sales fell, said Marshal Cohen, chief retail industry adviser at the NPD Group.

But spending has picked up, and so far declines in the stock market and a partial shutdown of the U.S. government largely haven’t caused shoppers to pull back, said Craig Johnson, president of Customer Growth Partners, a retail research and consulting firm. Lower gas prices in recent weeks may help spur spending this week, he said.

“In terms of accounting, it all counts for the fourth quarter,” the period when retailers make up a significant percentage of sales, said Mr. Johnson.

Many retailers continued to rely on promotions throughout the season to drive sales, eating into margins, said Steve Barr, leader of the retail and consumer sector at consulting firm PwC. With a strong economy, “I think many hoped to head into holiday season looking to pull back on promotions,” said Mr. Barr. “They didn’t.”

Some chains have extended deadlines for delivering online orders by Christmas to maximize sales.

Many retailers with stores also touted a buy-online, pick-up-in-store option available through Christmas Eve to fulfill last-minute gift needs. Overall, sales in that category grew 47% from Nov. 1 to Dec. 19, according to Adobe.

At a Walmart store in Saline, Mich., Roderick Tucker on Saturday bought presents for his family, including a Family Feud game and Zoomer Playful Pup, but also planned to pick up online orders later that day at Target and Kohl’s . “I’m a last-minute shopper,” said Mr. Tucker, who works as an operations manager at a warehouse. “I wish I would have gone online and purchased everything in time, but every year I wait too long.”

Christmas Eve falls on Monday this year, creating one more crucial test for delivery companies that in some cases don’t deliver on Sunday.

UPS doesn’t deliver most packages on Sunday, but over the weekend was sorting and flying Christmas shipments for Monday delivery. The Postal Service was expanding its Sunday delivery operations in some locations with high package volumes, and has said it expected to deliver eight million packages each Sunday this holiday season.

One tool that FedEx FDX -1.08% and UPS have pushed more this season to ease the burden is diverting deliveries to stores. Doing so reduces costs, since drivers can drop off multiple packages during one stop and avoid having to visit all of the individual homes.

Neither carrier is in the clear. Citi Research transportation analyst Christian Wetherbee said FedEx and UPS usually have the weakest performance during the final week before Christmas. “We see no reason for that to change this year, given the expected last-minute rush,” he said. - WSJ

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