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Experts Break Down What Happened Over the Holidays and What’s Next for Stores and Malls

The 2020 holiday season exceeded overall sales expectations, with the industry seeing 8.3 percent growth over the same period a year earlier, according to the National Retail Federation (NRF). This represented the highest holiday growth rate going back to 2002, beating the 6.8 percent jump in 2004.

The growth was unsurprisingly powered by online and other non-store sales, which were up 23.9 percent to $209 billion, compared with 14.7 percent growth in 2019. E-commerce sales represented 26.5 percent of total sales during the holiday season.

“Household emotions likely played into holiday economic decisions as consumers wanting to offset the anxiety and stress experienced during 2020 spent on gifts to enjoy a better-than-normal holiday,” National Retail Federation chief economist Jack Kleinhenz said in a statement. “This was clearly a year when animal spirits outweighed conventional wisdom.”

In total, the holiday growth more than doubled the 3.5 percent average of the previous five years, including 2019’s 4 percent gain, NRF said.

“This was not a typical holiday season and it took place amid an unprecedented shopping landscape,” Kleinhenz said. “When we assembled our 2020 holiday forecast, we knew one scenario was that results could come in high and that sales might exceed the forecast.”

The results easily exceeded NRF’s initial holiday forecast, which cited economic indicators such as growing employment and wages to predict that holiday sales would increase between 3.6 percent and 5.2 percent over 2019 to between $755.3 billion and $766.7 billion. The numbers exclude automobile dealers, gasoline stations and restaurants to focus on core retail.

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Black Friday, step aside: Super Saturday tops holiday store traffic

Kleinhenz was certainly right about it not being a typical holiday season, and it was especially notable once Thanksgiving week hit. While the narrative that Black Friday is in decline may have been exaggerated in recent years, the Covid-driven shopping habits of the season revealed that the store’s role in both the annual shopping event and the days after is diminishing.

Placer.ai data presented during the recent NRF Big Show indicated that Super Saturday weekend, which took place from Dec. 18-20, was actually a much more significant traffic driver among mass merchants, department stores and off-price retailers compared to Black Friday weekend, Nov. 27-29.

Target saw an 18.1 percent increase in traffic and Walmart’s visits jumped 12.9 percent, while Macy’s saw a 21.8 percent spike. Even JCPenney got a 13.8 percent pickup in foot traffic.

Off-price retailers were by far the biggest beneficiary of the Super Saturday weekend push, with Ross (42.3 percent traffic increase), Marshalls (38.8 percent) and T.J. Maxx (37.1 percent) all seeing major boosts. Dollar General and Kohl’s had the smallest uptick at 8.5 percent and 7.5 percent, respectively, and Best Buy was the only major retailer highlighted that saw a harsh decrease at 20 percent.

Combined, the  highlighted brands saw an 18.1 percent traffic increase in Super Saturday weekend over Black Friday weekend, a major jump compared to last year, when the uptick between weekends was a mere 1.1 percent.

Deborah Weinswig, CEO and co-founder of Coresight Research, noted that the 2020 Black Friday season didn’t typically have the doorbuster deals of seasons’ past, thus keeping people from shopping between the typical early bird hours of 5 a.m. and 10 a.m. While conversion rates were higher than usual, according to Weinswig, distancing and capacity measures in stores also made it tougher for retailers to take advantage of what is traditionally a busy weekend.

As more shoppers moved from urban to suburban areas throughout the pandemic, the longer-term ramifications of this shift are yet to be felt. In one trend shared by Ethan Chernofsky, vice president of marketing at Placer.ai, 32 percent of residents in New York’s City’s Upper East Side had moved out by May. This number jumped to 42 percent by August, putting stores in the area at a disadvantage even after opening back up. In cases such as this, many retailers in highly populated areas have shuttered their stores for good, while others have been able to reduce their footprint but shift most of their business online.

“Many of these retailers have realized what they can do online, and if you look at much of the data, stores have been used as fulfillment centers, micro-fulfillment centers, pickup hubs,” Weinswig said, adding her belief that “stores are more than stores.”

“I’ve been impressed by how retailers have used their physical footprint, and for those who haven’t been able to do that, do we see some of them like Stein Mart pop back up online?” she continued. “That will be really interesting as we consider the future.”

Weinswig says that this shift is also pushing retailers to move away from the “flagship” model that was so prevalent as a way to capture new audiences and serve as an offline marketing strategy.

“If I were to make one prediction for 2021, is that we see a significant backing away from flagships,” said Weinswig. “Their four walls are not cash-on-cash positive at this point, and the halo, in terms of people passing by, is not there either.”

Top-tier malls have solid chance to bounce back

Both Weinswig and Chernofsky were more bullish on the prospects of another traditional retail venue that has taken hits in recent years—malls—due to the prior success of their highest performers. In the two months before the advent of the pandemic in the U.S, Tier 1 malls, which were classified as the 16 top-performing malls, according to Placer.ai, actually saw traffic grow 7.2 percent year over year. As more of these malls continue to redefine themselves with the inclusion of co-working spaces and fitness chains, these locations are setting themselves up for even more success depending on the timing and speed of vaccine distributions.

“Even when we were looking at the data throughout the pandemic, there was this clear uptick of recovery, where businesses were going increasingly toward normal, until mid-November when those Covid cases surged,” Chernofsky said. “We watched it drop again then, but even into late December, we watched those visits start rising again. The expectation is that this year is going to be very good for that sector.”

As far as right-sizing the number of stores, more brands with a physical presence are expected to pick their spots more carefully so they don’t overstep their own budgetary boundaries.

Chernofsky believes that many brands will focus on a sweet spot of 50 to 100 stores, as opposed to aiming for a nationwide 800 to 1,000+ locations.

“That means something very positive for the wider retail landscape, because it says that different shopping centers and different malls don’t have to be direct competitors,” Chernofsky said. “If we start having more types of retailers with [fewer] overall locations, by definition we’re going to get a more diverse mix within malls. You can go to one mall one weekend, and then another mall next weekend and have a fundamentally different experience.”

This dynamic would also allow mall operators to think different about who they are targeting, and take into consideration the types of retailers and entertainment they see as a fit for their experience.

Outdoor brands are best positioned for future success

For 2021, Weinswig highlighted that the outdoor retail sector appears to be best poised to take advantage of the changing retail environment. She specifically highlighted brands including Dick’s Sporting Goods, Orvis, Columbia Sportswear, The North Face, Patagonia and REI not just because they’ve been in stock for the customer during the pandemic, but also because they learned how to take care of the customer through great service.

On the other hand, department stores that are reliant on other brands to succeed are a bit more challenged going ahead, especially as their vendors are pulling back. Now, the department stores are tasked with finding new ways to awe and inspire from a digital perspective and “create what’s fantasy” in a different way that they did 20 years ago.

“We forget that the department store sector, as much as it has this very clear association with names like Nordstrom or Macy’s, the concept is working incredibly well today,” said Chernofsky. “I don’t think Target is not a department store, when you think about the experience you’re getting there. I think there’s elements of this that are successful.”