After a year of headlines hammering on about a retail “E-pocalpyse” (including in this publication) and claims that consumers are trending away from buying things to acquiring experiences, the retail industry came roaring back at the end of the year.
Earlier this month the National Retail Federation projected that retail industry sales in 2018 will grow between 3.8 and 4.4% over 2017. NRF also expects online and other non-store sales – which are included in the overall number – will increase between 10 and 12%.
“A robust holiday season for retail sales is just one of many barometers that points to consumers that are clearly feeling positive about their financial health,” said NRF President Matthew Shay.
“Despite headlines to the contrary, the retail industry is strong, growing and meeting consumer demand with the products they want, at the prices they expect and the shopping experience they want to have, online or in store.”
Retail sales grew 3.9% in 2017 over 2016, totaling $3.53 trillion, according to the U.S. Census Bureau’s preliminary estimate. Although subject to revision, the number exceeded NRF’s forecast for growth in 2017 of between 3.2 and 3.8%.
The federation includes in its projections the positive impact of tax reform on consumers’ willingness to spend. In fact, January retail sales were up a health 5.4%, NRF reported.
“The underpinnings of the economy are very good and consumer spending is at the center of our outlook,” NRF Chief Economist Jack Kleinhenz said, noting that the country has experienced 88 straight months of wage increases.
“The push and pull of forces both external and internal to the U.S. economy will continue to provide challenges, but on balance we expect a good year,” he added.
He also observed that as the retail industry continues to transform, retailers will leverage the tax reform in order to invest more in their employees, stores and new formats to attract evolving and demanding consumers.
NRF President Matthew Shay noted that the Wharton School of Business estimates a total $175 billion in tax savings for retail industry. Kleinhenz expects that unemployment will drop to 3.9% by the end of the year and the Gross Domestic Product will grow between 2.5 to 3%.
The retail resurgence was fueled in part by bricks-and-mortar retailers learning to embrace ecommerce and how to exploit multiple media channels. In addition, ecommerce merchants saw greater value in having physical stores and retail locations as a new sales channel, not just as a way to market their online businesses.
What retailers are learning is that American consumers want the same things, whether they are perusing the shelves of stores at their local malls or are searching for something they want to buy on the Internet.
What Shoppers Really Want
This was reinforced by the federation’s Consumer View quarterly research report released at the NRF 2018 Big Show retail exposition held in New York in January.
When consumers shop, whether in stores or online, they usually are looking for something specific and want to be able to find it easily, NRF said. When consumers choose to shop online, they also expect to have their purchases delivered quickly and for free.
“Consumers today want what they want when they want it and they don’t expect to pay a premium to get it fast,” says Mark Mathews, the retail federation’s vice president for research development and industry analysis.
“When they walk into a store they want to find their item, and find it easily, especially if they’ve researched it online beforehand. And whether it’s next-day or pickup-in-store, quick delivery of online purchases at little or no extra charge is growing so fast that it’s something shoppers are coming to expect.”
Whether they are shopping in-store or online, NRF stresses consumers are typically seeking to buy a certain item rather than just browsing, with 73% surveyed saying that’s the case with stores and 54% saying it is true of their online shopping, according to the research.
In either situation, 58% rated being able to find what they want quickly and easily as their top factor in determining where to shop.
Shopping “just to browse” has shifted to being more popular online (done by 46% of the consumers who were surveyed) than in stores (27%).
Among those shopping online, 68% expect free shipping even on purchases of less than $50, with 47% saying they typically back out if shipping isn’t free. And 38% expect two-day shipping to be free while 24% expect free same-day shipping.
Matthews says, “Retailers are literally racing to consumers’ doorsteps to meet rising expectations.”
The quality of customer service is also a top factor in deciding where to shop, cited by 44%, along with speed and simplicity of checkout (42%) and the ability to try out products (20%).
Consumers said their overall experience with a brand or retailer is important in determining which to buy from and how often (79% each) and how loyal or connected they feel (77%).
The survey found 59% of consumers are interested in special events retailers hold to draw customers into stores or onto websites, including the ability to try out products, exclusive access to sales, demonstrations and product tutorials.
Millennials are particularly enthusiastic about special events – 44% said they were “very interested” compared with 25% of consumers overall. And Millennial men (60%) were more likely to be “very” interested than Millennial women (28%).
Gaining a Media Edge
The report said fewer than a third of consumers were aware of technological innovations such as 3D printing or making purchases through social media (29% each), in-app store navigation (28%), in-store digital displays (25%) or retail messaging apps and online chat (24%).
However, among those that were, messaging apps and chat were the technology that had most often been tried (65%) while in-app store navigation was most-cited as improving the shopping experience (63%.), NRF revealed.
What remains to be seen is if the industry’s unpredicted 5.5% jump in holiday sales at the end of 2017 truly is an indicator of strength to come.
A sign that this might be the case was the report that the retail industry added 11,100 jobs in January over December. The January numbers contrast with a monthly loss of 24,600 jobs in December, which reversed an increase of 23,100 jobs in November.
Kleinhenz observes, “There’s always a loss of jobs after the holidays, but this year at least some of the extra staffing has carried over. We expect spending to continue to be strong this year, and that’s good for retail jobs.”