Eight in 10 brick-and-mortar retailers throughout Hampton Roads are heading into the holiday season expecting to increase their sales during this Q.4 make-or-break shopping period.
The results of the Retail Pulse survey, conducted annually by Retail Alliance, the Hampton Roads’ retail merchants association, gathers local stores’ holiday expectations with questions predicting increases or decreases in retail sales; growth of online sales; consumer marketing; and biggest holiday challenges.
“With continuing low unemployment and strong consumer confidence, our retail members are cautiously optimistic about this holiday season,” said Ray Mattes, president and CEO of Retail Alliance. “This local retail confidence also reflects the National Retail Federation’s forecasted holiday sales increase of between 3.8% and 4.2%.”
Overall, the majority of retailers are confident of an increase in sales this holiday season (86% compared to 80% in 2018) but are conservative with their expectations. Only 24% of retailers expect a modest 1-4% sales increase (compared to 8% in 2018). This may be a reaction to the 2018 holiday sales. In our survey last year, 80% of respondents expected an increase in sales, but only 58% actually reported such an increase.
Of the merchants included in the 2019 survey, 60% own a brick and mortar store and 22% own both a brick and mortar and ecommerce store.
The highest number (33%) expect an increase of 5-9% (vs 30% in 2018). 11% of respondents forecast a 10-14% hike in consumer buying (a significant decrease from 24% in 2018); and 17% are looking for growth of 15% or more (similar to the 18% in 2018).
Of the retailers with e-commerce stores, online sales make up 23% of their overall sales. Growth of their online sales has varied from flat (25%) to increases of 15+% (13%). Overall, 75% of the stores that have an e-commerce element had positive growth in the last 12 months.
The Retail Pulse results found that the biggest challenges that local merchants expected throughout the holiday period are:
- Limited advertising and marketing budgets (49% vs 38% of respondents in 2018)
- Staffing (20% in 2019 vs 12% in 2018)
- Big box competition (27% vs 14% in 2018)
- Consumers’ lack of awareness of locally owned or franchised stores (38% of survey respondents vs 50% in 2018);
- Increase of online shopping (35% of survey respondents vs 38% in 2018);
“The main challenge is exposure. Once we have a customer visit, we know they will experience the difference in both cost and service we offer. It is hard to combat the large marketing budgets of the box stores and larger chains.” Survey Respondent
Nationally, 90% of retail sales are still conducted in brick and mortar stores and although online sales as a percentage of total sales is growing, it is happening slowly and unevenly.
“To succeed in this slowly changing retail environment, retailers will need to evolve to accommodate a greater range of customer behavior. Success will depend on how well a retailer facilitates its customers shopping experience, both online and off,” Mattes remarked.
When asked how they would engage with their existing customers to entice them into their store during the holiday period, 98% of retailers use social media, 58% do email promotions, 35% say they hope customers remember them, 31% have created instore classes/workshops/experiences, 19% do direct mail marketing, and 8% make telephone calls.
PRESSURE OF COMPETITION
When asked if they feel pressure to compete with online and big box stores, answers swing between feeling no pressure (55%) to feeling pressure constantly (44%). When delving a little deeper, it was evident that there were many elements involved beyond a clear cut yes and no. Some retailers stated that they will price match, others sell products or services that are completely unique or can’t be found online. The majority focus on offering customer experiences and superior customer service to separate them from big boxes and online stores.
LESS TIME IN SEASON AND COMBATING IT
With 1 less week than last year between Thanksgiving and Christmas, 39% of retailers are not sure how this will impact their business. A third (33%) feel certain that it will affect it in some way and 28% did not think they would be impacted.
Of those that thought they would be impacted and those that weren’t sure, 41% said they will run deals earlier this year, 28% will call out the shortened timeframe in advertising, and 18% said they will offer deeper discounts than they normally do.
The national predictions, along with the confidence of local retailers, are good signs that the local retail performance will remain positive this holiday season. The retail landscape may be transforming with increasing online sales and changing consumer shopping habits, but local merchants are confident in their ability to increase sales, albeit on a more moderate scale.