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E-commerce Gains Drive Holiday Spending in the Right Direction

Retail is on track to deliver on upbeat holiday forecasts.

Retail sales in November were up by 6 percent over last year, according to the National Retail Federation. Chief economist Jack Kleinhenz said the positive job and wage outlook coupled with modest inflation and strong consumer confidence produced “an impressive start to the holiday season.”

That positive sentiment was echoed by Sarah Quinlan, SVP of market insights for Mastercard.

The payment company’s SpendingPulse, which tracked holiday spending from Nov. 1 to Dec. 9, recorded a 3.6% lift in sales overall and a 16.3% boost in e-commerce.

Cyber Week wins

Mastercard reported a 5 percent sales increase on Cyber Monday, helped by a 10 percent boost in e-commerce purchases specifically.

Market research company NPD Group confirmed the strong online performance during the week after Thanksgiving. The firm noted a 43 percent buyer penetration for online sales during Cyber Week, which represents a 7-point increase over 2016. While buyer penetration was highest on Cyber Monday, shoppers actually spent more on Tuesday and Friday. Further, buyers spent an average of $248 during the week, an 8 percent boost over the prior year period. Ultimately though, shoppers spent 1 percent less per order—averaging $67—this year, spreading their purchases over an average of three orders. This shift in behavior shows retailers are facing increased competition.

“While there is a definite increase in online activity, the growth in online spending does not translate into overall retail growth,” said Marshal Cohen, NPD’s chief industry advisor. “We continue to see a redirection of holiday spending driven by promotions, rather than an increase in spending that is product driven.”

Early-bird strategy success

With retailers starting their holiday campaigns earlier, Cyber Week wasn’t the only key timeframe this year. Mastercard found that sales in early November were robust, coming in between 4 percent and 5 percent higher than the prior-year period. Digital sales during this timeframe also showed healthy gains, increasing just below 30 percent during the second week.

NPD’s Holiday Shopping Bag 2017 report honed in on the week of Nov. 13, which it said saw the biggest spike at 9 percent year on year.

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Driven by early promotions, all categories grew, according to Mastercard. Electronics, home improvement and jewelry proved to be the biggest winners. The report found that consumers are in nesting mode, boosting home improvement up 11.6% and furniture and furnishings up 3.5%.

Mid-holiday happenings

Looking specifically at the first week of December, NPD noted a 1 percent uptick year on year, led by small home appliances, prestige beauty and technology.

“Leading segments are struggling to make up for aggressive promotions that counteract positive product movement in others,” said Cohen. “The final weeks of this holiday season will be critical as delivery deadlines approach and consumers are driven back to the stores to complete their shopping.”