TOPICS > Economy

Holiday Shopping

January 2, 2004 at 12:00 AM EDT


JEFFREY BROWN: Last year’s holiday season was, by all accounts, dismal. So this year’s, after recent signs suggesting growth in the U.S. economy, was much anticipated. To assess how consumers have responded and stores have faired we’re joined by Kurt Barnard, president of Retail Forecasting, a company that tracks the retail industry, and Patti Freeman Evans, a retail analyst at Jupiter Research, a company that tracks interstate based commerce. Welcome to both of you.

I’d like to start with a quick overall assessment of this holiday season. Mr. Barnard, could you start?

KURT BARNARD: Be very happy to, yes. This holiday sales season was a very strange one, full of contradictions. And I must tell you it was also a very nerve-racking one from many points of view and retailers were literally tearing their hair out until up until just a few days ago. The last few days seems to have helped a lot of retailers.

JEFFREY BROWN: Miss Freeman Evans, how it look to you?

PATTI FREEMAN EVANS: Well, the online retail industry has been strong over the last few years and this year was no exception.

We are seeing growth of up to $16.8 billion of online holiday sales this year, that’s a 21 percent increase over last year. And most of that is coming from new people shopping online, people who haven’t shopped online before, so it’s very positive news for online.

JEFFREY BROWN: Okay, let’s try to walk through this more, starting with you, Mr. Barnard. You said it was full of contradictions. Who did well, and who did not?

KURT BARNARD: Well, this is a very interesting point you are raising. Who did well? Upscale stores did very well for the most part. As a matter of fact, they did exceptionally well. And on the other hand, we find that discount stores and low price stores generally also did very well, but in between, the stores in between really sort of lagged behind a little bit.

What we find this time to be true is that consumers were very cautious, certainly those who live on a paycheck to paycheck basis, and these are the consumers of course, who are in the vast majority and they are the ones who go to buy at Wal- mart, at Target, maybe at Kohl’s, maybe in specialty stores. But by and large, they were extremely cautious consumers and they were very worried about jobs.

JEFFREY BROWN: Except at the higher end you’re saying?

KURT BARNARD: Except the higher end. We also found, Mr. Brown, that as far as the higher end is concerned, there are a lot of people around who have six figure salaries and have absolutely no problem about going into a store and dropping thousands of dollars for Christmas gifts, which is exactly what they have done.

JEFFREY BROWN: A kind of two-tiered economy almost?

KURT BARNARD: Yes, that is absolutely correct. The one where you find that people with means and not having to worry about where their paycheck comes from or whether a paycheck is due, these are the ones who supported the big stores such as Neiman Marcus, Saks Fifth Avenue and others like that.

On the other hand, we find also that people who live on a paycheck to paycheck basis are the ones who are very cautious in spending and very concerned about jobs.

JEFFREY BROWN: You also said that until a few days ago everyone had been quite jittery. What are we seeing post-Christmas? Are we seeing a lot of sales to make the season come out as well as it can?

KURT BARNARD: Sales are rampant, and have been rampant now for at least since Christmas. We found that up until very recently, just a few days ago, retailers were hoping to be able to get by without lowering the prices dramatically, drastically, the way they had to do a year ago. This time around it was much easier for them simply because they did not have as much inventory on hand as they did last year.

Last year they had counted on a very strong holiday sales season which never materialized, which never developed. This time around, they played it closer to the vest.

JEFFREY BROWN: Miss Freeman Evans, the online side sounds a little clearer, pretty clear growth there.

PATTI FREEMAN EVANS: Clear growth, absolutely, although we do see many similar issues that we were just talking about, retailers did play it very close to the chest as far as inventory was concerned, and may have experienced some lost sales based on that.

They were hesitant online to offer discounts too early in the season; however, free shipping was a ubiquitous promotion this year. It is the most effective promotion online that retailers have. Consumers react to it better than they do a discounted promotion. So that worked very well for retailers this year.

Plus, we also saw that consumers were shopping later and later online. Typically, the online sales for holiday dry up pretty much about the middle of December. And, in fact, they slow down after this period. This year we saw more and more retailers accepting orders all the way up to the Dec. 23rd for delivery the next day — for holiday. So they were trying to do everything they could to capture those last minute orders this year.

JEFFREY BROWN: And what kind of products and what stores did well?

PATTI FREEMAN EVANS: Right, well this, year we saw traditional holiday products being the top sellers this year, like apparel. We see toys. We see books, music. Also the $30 DVD player and digital camcorder and digital cameras are also big sellers.

Consumers traditionally moving from the traditional cameras and VCR’s, to digital media, were buying a lot of that online this year.

Mostly, we also see women account for more of the apparel and toy purchases as well as the home store merchandise, and men more of the electronics, PC’s and those kinds of products which is very similar to the offline world.

JEFFREY BROWN: I’m curious about other changes in the trends you might be seeing. In the past, we heard about people’s fears about security. We heard about people that weren’t so comfortable with the technology, which might be holding back some of the potential sales. Do you see things like that changing?

PATTI FREEMAN EVANS: Right. We have seen a change in that over time where consumers across the board are less concerned about all of those issues online. They’re less concerned about fraud issues or giving their credit card information.

They’re less concerned about shipping charges, less concerned about having a bad experience or having heard of a bad experience or less concerned about problems with returns. So they’re much more comfortable with shopping online. And a lot of that is due to experience. They’ve been online longer.

They’ve been using other resources like e-mail and researching products or information online. And they’ve had better experiences and their own empiric experience has helped them to become more comfortable with finally pulling the trigger and shopping. Mostly the reason when they shop online is because of convenience. They can shop when they want to. They can shop when the stores are closed. They can shop in their jammies if they want to.

But they can also save time and find products that are not in their local markets, which is a nice thing for smaller retailers to expand their reach to new consumers, and consumers feel that they can find products online easier than they can by traipsing around the malls or shopping district. So the convenience factor has really helped people to embrace online shopping this year.

JEFFREY BROWN: I’m curious about one other thing. When people shop online, does that replace shopping they would have done in stores? In other words, is it a zero sum game, or does it add to the total of shopping that takes place?

PATTI FREEMAN EVANS: Predominantly, we see that most of the shift is coming from catalog to online rather than from stores to online. But the other important thing to remember about online is that consumers are researching products online.

They’re finding out where to buy them, what price to pay, what the features are, which is the right brand for them. And then they’re taking that information and they’re going into the stores and they’re making their purchases in the stores.

So even if it is channel shift or even if people are replacing purchases from one to another, the impact of online is being felt offline in a greater way that we had anticipated.

JEFFREY BROWN: Kurt Barnard and Patti Freeman Evans, thank you very much for joining us.

PATTI FREEMAN EVANS: You’re welcome. Thank you.