Solid But Not Spectacular Holiday Shopping Season Underway

This year's holiday shopping season has so far been holding its ground with consumers, and industry stakeholders are sounding satisfied.

Amid the many bankruptcies and store closings that plagued much of the retail sector this year, all eyes are on the all-important November to January shopping season. Thus far, it's shaping up to be a solid showing.

“We haven’t seen a decrease in traffic, and it’s about the same as last year, and I would say that most retailers and developers would say the exact same thing,” HSA Commercial Real Estate Executive Vice President Tim Blum said.

The Chicago-based developers have created more than 1M SF of retail space in the region, including the redevelopment of west suburban Orland Park Place, a traditional mall first developed in 1980. They also tackled the 400K SF Mayfair Collection in Southeast Wisconsin, a former industrial site now occupied by Nordstrom Rack, Saks Off 5th, Dick’s Sporting Goods, Old Navy and others.

“I’m hesitant to say there is going to be much growth, but I’m happy to stay on par with last year’s success,” Blum added.

That caution comes from what Blum sees happening in the national economy. Although consumer confidence is strong, he said he worries about trends that will hit the pocketbooks of the many middle-income shoppers that frequent HSA properties like Mayfair.

“Healthcare, education and housing, all of these costs are going up significantly, but incomes are not necessarily keeping pace, and that’s not a recipe for significant growth in retail sales,” he said.

According to The Confidence Board, an independent research organization, the U.S. consumer confidence index stood at 125.1 in Q3, well above the 90 points which indicates a stable economy.

McMillanDoolittle Senior Partner Neil Stern, a Chicago-based retail analyst, said the strongest portions of the retail sector this season are discount retailers, including Target, Walmart, Costco, TJ Maxx, and those targeting the middle, including Macy’s and JC Penney.

How all this shakes out for the Chicago region remains to be seen.

“It’s hard to get truly localized data,” Stern said.   

A true picture of how robust holiday sales have been isn’t necessarily apparent after the first weekend, he added, as shoppers increasingly make internet purchases throughout the season, instead of on peak days like Black Friday or Cyber Monday.

“Cyber Monday is not really Cyber Monday anymore,” he said.

According to the National Retail Federation, this year was the first time Black Friday recorded more online shoppers than Cyber Monday, bringing in 93.2 million buyers compared with 83.3 million last year.

The NRF did see a significant pickup in total national sales over last year: 189.6 million U.S. consumers shopped from Thanksgiving Day through Cyber Monday, a 14% increase over last year. Holiday shoppers spent an average of nearly $362 over the five days, up 16% from the same period in 2018.

That doesn’t mean the final tally after Christmas will show similar increases.

The NRF said consumers began making purchases earlier than ever this year, partly due to the ease of buying gifts online, but also because this year the gap between Thanksgiving and Christmas is one week shorter than last year.

“Even those who typically wait until the last minute to purchase gifts turned out in record numbers all weekend long,” NRF President and CEO Matthew Shay said.

In late October, JLL released its forecast for the holiday shopping season, and based on consumer surveys, it said it believes holiday sales will increase between 4.5% and 5% over last year.

“Nothing we saw during the first week has changed our opinion,” JLL Retail President and CEO Greg Maloney said.

That includes the Chicago region, which also looked healthy, he added.

“The weather was not ideal, but the indications show that did not diminish the traffic,” he said.

That modest increase won’t provide much solace for brick-and-mortar retailers. According to Coresight Research, more than 5,800 stores across the U.S. closed in 2018, and that number may increase to about 12,000 by the end of this year, although some retailers are expected to open new outlets.

Still, Maloney sees many reasons for optimism. This year has seen many more retailers start making their store environments more welcoming, and allowing potential buyers to handle merchandise in ways not possible online.

Toys R Us, for example, is now emerging from bankruptcy in partnership with Target, and recently opened several stores that feature large interactive play areas, rather than stacks of inventory.

"I think retailers have learned that the days of just putting it on the rack are over,"  he said. "As long as the weather holds up, I think this will be a great season."