Online sales grew by more than 30% in the fourth quarter, but store sales slid by 6.1% year over year.
What holiday 2012 can teach e-retailers as they prepare for 2013.
Mike Schwarz, founder and CEO of online retailer RibbedTee Designs LLC, didn't wait for Thanksgiving week to launch a big holiday sale last November. Instead, he promoted a 96-hour sale starting Nov. 7, offering 20% to 40% off all items on his site.
"This was a winning strategy for us because it kept us from having to compete for e-mail inbox space with other holiday offers," Schwarz says. RibbedTee's sales for November and December increased 22% compared to 2011, he says.
Schwarz plans to repeat the limited-time sale early in November when the 2013 holiday season rolls around. And other retailers, too, likely will be looking to get an early start on the holiday season, given that this year there will be only 26 days between the day after Thanksgiving, routinely referred to as Black Friday, and Christmas Eve, 19% less than the 32 days in 2012.
That means retailers will have to find ways to increase their daily sales by 23% every shopping day of the 2013 season to match their 2012 sales, says Fiona Dias, chief strategy officer for ShopRunner, a two-day shipping and loyalty program that retailers can offer customers. "That is not a trivial increase in sales," Dias says.
If they're going to increase sales in a shorter season, online retailers will have to closely evaluate the strategies that helped generate a 13.7% year-over-year increase in e-retail sales in November and December 2012 to $42.3 billion, according to web measurement firm comScore Inc. A review of the 2012 season reveals a blockbuster start around the Thanksgiving weekend, and some retailers pushing back shipping deadlines closer to Christmas to capture last-minute purchases. Mobile shopping—both consumers purchasing and researching through smartphones and tablets—was strong throughout.
But there was also a lull in the middle of the 2012 holiday season that likely will have online retailers casting about for ways to keep up the pace of sales in the shorter 2013 season.
Dreary store sales
As online retailers prep for a shorter holiday sales season, at least they can look ahead to 2013 knowing that the 13.7% increase in e-commerce sales in November and December 2012 represented a substantial gain in market share from store-based rivals.
Total retail sales, excluding automotive sales, increased 4.1% on a seasonally adjusted basis for November and December 2012 over the same months a year earlier, to $738.7 billion from $709.7 billion, according to estimates released in January by the U.S. Commerce Department. Taking out purchases at restaurants and bars, the National Retail Federation estimates holiday season sales increased 3.0%, including the web and stores, falling short of its prediction of 4.1%. The retailer trade association blamed consumers' uncertainty over the "fiscal cliff" policy haggling in Washington, D.C., for the shortfall.
Non-store retail sales—mainly sales by online retailers but also merchants that sell through catalogs and TV infomercials—increased 11.9% to $77.2 billion from $69.0 billion, the Commerce Department says. (The Commerce Department reports online retail sales in mid-February.) That made the season bleaker for stores. "I'd estimate that the growth in online sales is taking about one percentage point off store sales growth," says Frank Badillo, senior economist at Kantar Retail, which publishes data on retail traffic and spending.
The disparity in web-versus-store growth showed up in reports from some retail chains. Best Buy Co. Inc., for example, says the web grew 10% over the holidays while comparable-store sales, which include web sales, were flat year over year for the nine-week period ended Jan. 5. Web sales rose to $1.1 billion and comparable-store sales stayed even at $12.8 billion. That means without e-commerce, sales would have been down nearly 1% at stores open for at least one year.
December web sales for clothing retailer American Apparel Inc. meanwhile increased 59% year over year, while total comparable-store growth for the chain's bricks-and-mortar stores only rose 9%. While the apparel retailer, which operates 251 stores, did not provide dollar sales figures for December, based on previously released American Apparel financial data Internet Retailer estimates the web accounted for 48% of same-store sales growth in December, even though it accounted for only about 17% of total retail sales.
The e-commerce advantage showed up in results for Thanksgiving weekend. Many retail chains—including Wal-Mart Stores Inc., Target Corp. and Toys 'R' Us Inc.—decided not to wait until Black Friday to kick off their big promotions, instead opening stores on Thanksgiving night. At the same time, several of them, including Wal-Mart and Macy's, offered shoppers their Black Friday deals online early on Thanksgiving, undercutting their store sales.
The strategy seemed to move more sales to the web than to physical stores. Taking Thanksgiving and the next day together, store sales actually declined 0.18% compared with the same two days in 2011, says payment processor Chase Paymentech, basing the estimate on its retailer clients' sales. While total transactions increased 0.15% in stores, the average ticket declined 0.33%, Chase reports, likely a sign of bargain hunting.
But it was a different story online. For Thanksgiving and Black Friday online retail sales increased 29.3% to $1.675 billion from $1.295 billion in 2011, according to comScore, which makes its estimates by tracking the online activity of a panel of some 1 million U.S. consumers who agree to be tracked.
Online sales for 2012 hit their peak on the Monday after Thanksgiving, or Cyber Monday as it's often called because of the welter of web retailers' promotions. E-retailers pulled in $1.465 billion in sales, making it the biggest online sales day in history, comScore says, and a 17.1% increase from the Monday after Thanksgiving in 2011. Overall, the five-day period from the holiday through the following Monday produced a 21.0% year-over-year increase in online sales, comScore says.