No lines in the living room: 2015 race to Christmas has begun, and online is winning

With Black Friday and Cyber Monday come and gone, we’ve taken stock of the retail industry as Americans head into the remainder of the 2015 holiday shopping season.

What We Expected

Let’s first review our expectations for the 2015 holiday season:

• Another big season: Consumer confidence is high, unemployment rates are low, and consumers are spending again due in part to the extra cash in their pockets from falling gas prices. All of this goodness points to another blockbuster holiday season with retail sales for November and December estimated to reach $700 billion, up 3.4% over 2014.
• More shoppers: Nearly everyone (89%) plans to buy gifts for others. Gift cards, clothing and footwear, toys and games, and electronics were expected to be popular.
• Online shopping will rule: Roughly seven out of 10 survey participants planned to do as least half of their holiday shopping online. More than one third of older Millennials plan to do all shopping online.
• It’s mobile’s year: Mobile traffic and sales are slated to grow substantially this season due in part to consumers buying bigger phones with easier-to-see screens and marketers improving their mobile sites and apps.
• Starting earlier: Some 76% of adults planned to begin shopping before or during Thanksgiving week. One quarter planned to do a majority of shopping on Black Friday; 8% on Cyber Monday.

More US consumers holiday shopped online than in-stores during opening weekend

What We’re Seeing

Reports on the weekend have been mixed, but we think the momentum is positive and will continue (barring any unforeseen circumstances). Here’s what you need to know:

• Did people shop? Per a National Retail Federation (NRF) survey conducted November 27-28 among 4,281 consumers, 151 million people (62%) went shopping which is 11% higher than the 136 million expected. Average spending hovered around $300 with more than three quarters allocated for gifts.
• How did they shop? One million more people shopped online than did in stores (103 million versus 102 million respectively). Ecommerce sales rose 19% between Thanksgiving and Saturday to hit $6.1 billion. Notably, 58% of shoppers used their mobile devices to browse and buy.
• What did they buy? Popular items so far include apparel (52%), electronics, and toys (one third each). Anything Star Wars is hot. Target reported its top-selling items included Xbox One 500 GB Gears of War: Ultimate Edition bundle, the 48” Samsung 4K Ultra HD TV, Apple iPad Air 2, Graco 4Ever all-in-one car seat, Barbie Dream House and Nest learning thermostat.
• Favored retailers: More than half shopping in stores went to a department store which is good news for this struggling channel. Other visited discount stores (37%), clothing stores (32%), and electronics stores (35%).
• Off to the races: As of November 28^th, 78% of people said they at least started their holiday shopping.

Despite these figures, “a bust” is how some analysts are referring to Thanksgiving Day shopping. Analysts at SunTrust described more people browsing than seemingly buying, and tame crowds overall at malls. RetailNext reported in-store sales fell 1.5% on Thanksgiving and Black Friday. Forbes expects online sales to pull up the whole boat to a gain of about 3% in total overall Friday-Sunday.

Cyber Monday became Cyber Sunday as many retailers started promoting sales a day earlier. While this takes away from the significance of the event day itself, this is a smart move as it allows shoppers who are still in weekend mode – and therefore who may have more leisure time – to pay closer attention to deals. The NRF anticipated 121 million shoppers will shop on Cyber Monday, down from 126.9 million who planned to shop on this day last year. Adobe estimated $3 billion in sales or 12% more than 2014, with 41% being made on smartphones. If both companies are correct, then the average basket price per customer will have increased.

What It Means (and Doesn’t Mean)

It’s important to keep in mind that just because shoppers are turning online to a greater degree, this does not mean that ecommerce is outpacing in-store sales. Physical stores still account for 85-90% of sales, and 2 in 5 consumers will shop online first and then buy in the store after they see and touch the desired item to make sure it fits their needs.

Although consumer spending is on the rise, it does not mean there is a tolerance for paying more than what consumers think items are worth. Price still matters. People will shop around to make sure they get the best deal. Extending promotions beyond their designated days may actually be hurting retailers because it teaches consumers they don’t have to shop on Black Friday (for example) to get a good deal. They can wait as evidenced by the 69% who planned to avoid the crowds on Black Friday altogether and shop at another time during the “season of deals.”

The shift towards online and mobile shopping is outstanding, but not surprising. Why worry about getting to the store before it closes, scramble to get a parking spot, and wait in long lines when you can shop from the couch at the always-open, hassle-free “online store?”

Diana Smith is a Senior Retail and Apparel Analyst at Mintel. She brings a unique background and perspective having previously spent her career growing up in advertising agencies, specializing in media planning and strategy.