In 2017, retailers posted their best holiday season since 2011. Total retail sales in the US climbed 5.5% in November and December, aided by a 17.8% increase in retail ecommerce sales. eMarketer expects ecommerce will expand at a 15.3% clip in the 2018 holiday season, while total retail sales growth will slow slightly to 3.8%.
WHAT’S IN THIS REPORT? This report includes estimates and analysis of the 2017 holiday season and what it means for retailers as they plan for the 2018 season.
KEY STAT: Total US retail sales climbed 5.5% during the 2017 holiday season, buoyed by a 17.8% jump in retail ecommerce sales. Both levels represented the largest increases since 2011. Growth will slow slightly in 2018, but will remain solid.
Retailers had a reason to smile during the 2017 holiday season. Total retail sales in the US rose 5.5% in November and December, helped by a 17.8% surge in retail ecommerce sales. Both totals surpassed eMarketer’s forecast in August, which predicted a 16.6% increase for ecommerce and 3.1% growth for total retail.
Both growth figures were the highest since 2011. eMarketer expects those rates will slow slightly during the 2018 holiday season, with total retail sales climbing 3.8% and ecommerce sales increasing 15.3%.
Consumer confidence played a big role in retail’s rapid growth. According to the US Bureau of Labor Statistics, unemployment stood at 4.1% in December 2017, its lowest level in 17 years. Just as important, wage growth has started to increase.
That combination contributed to a Conference Board Consumer Confidence Index reading of 129.5 in November and 122.1 in December, its highest levels since 2000.
Some of the highest growth rates within retail occurred in sectors associated with home repair and home improvement. According to the US Department of Commerce, sales of building materials and garden equipment climbed 8.1% in November and December, while sales of furniture and home furnishings increased 7.5%, and sales at electronics and appliance stores grew 6.7%. In addition to consumer confidence, the damage from hurricanes Harvey and Irma forced many people in affected areas to rebuild, which helped drive up sales in home sectors in Q3 and Q4.
Higher gas prices pushed sales by gas stations up 11.0%. This above-average growth rate for gasoline sales was offset by lower growth in automobile-related sectors and food sectors. As a result, core retail sectors grew 5.7%, slightly higher than growth for retail overall.
Growth was more broad-based than in recent years. Sales at general merchandise stores grew 4.3% during the holiday season, while sales at grocery stores increased by 3.7%, and sales at clothing and clothing accessories stores inched up by 2.7%. Even department stores, which had negative growth in Q1 and Q2, posted 1.4% growth. Individual chains, such as Macy’s and Kohl’s, reported solid gains during the season.
eMarketer estimates US retail sales overall grew 4.4% in 2017, the highest increase since 2012.
Retail sales growth was strongest in Q4, increasing by 5.5% year over year, representing the best quarterly gain since Q1 2012.
Despite all of the positive news coming from retail, foot traffic in brick-and-mortar stores continued to fall. According to RetailNext, foot traffic in US retail stores slipped by 7.7% in November and by 7.5% in December (or 7.5% overall during the two-month holiday season). These figures were in line with the decline in foot traffic for most of the second half of 2017, which will likely reinforce retailer efforts to close underperforming stores.
RetailNext also reported that physical store sales in its network fell 9.0% during November and 5.5% during December. Even the good news in holiday sales couldn’t make up for the overall woes in traditional retail.
Still, the fact that total retail sales still grew at a healthy rate indicates that an increasing number of retailers are successfully managing the transition from primarily brick-and-mortar to omnichannel. Data from Slice Intelligence showed Walmart, Best Buy, Kohl’s and Target all had US retail ecommerce sales growth rates exceeding that of Amazon in holiday season 2017, but obviously from a far smaller base. Costco, which has lagged in ecommerce, posted the highest increase, up 62.4% over the same period a year earlier. These results were based on activity on Slice Intelligence’s platform.
Retailers also became better at managing inventory, with shorter ordering lead times and technologies to recommend more intelligent markdowns. “Retailers have done a good job enhancing their supply chain in order to deliver products to their end-consumers,” said Louis DeJianne, director of retail at shipping giant UPS.
In addition to providing better service and offerings for consumers, retailers had less need to cut prices to clear overstocked stores, as well as better software to judge the proper markdown if they needed to go down that route. “Margins did pretty well, which means retailers didn’t have to do a ton of markdowns and clearance,” said Brian Yarbrough, consumer research analyst at financial services firm Edward Jones.
After several years of inventory surpluses late in the season, retailers have shrunk the time between ordering and delivery in stores. “All retailers are looking at ways to buy closer to customer need,” Yarbrough said. “They’re buying more in-season and doing less of what we call ‘futures business,’ and they’re trying to close that gap with all kinds of technologies. Some of them are trying to move more manufacturing to the States or places a lot closer than China so that it doesn’t take so long.”
US retail ecommerce sales growth of 17.8% during the holiday season was the highest since 2011. It fell a bit short of 19.5% growth in 2010, but that was when the economy was recovering from the effects of the Great Recession. This most recent growth is even more impressive considering the larger size of ecommerce today, which accounted for 11.3% of total retail sales during the holiday season. In addition, November and December accounted for 23.6% of full-year ecommerce sales.
US retail ecommerce sales growth for last year's holiday season
As usual, US retail ecommerce sales in Q4 2017 exceeded those in any other quarter by a large margin. However, the 18.0% growth rate during the quarter was more noticeable. It represented the highest year-over-year growth for a quarter since Q4 2011. Growth should return to a level more consistent with previous quarters in Q1 2018. eMarketer does not foresee any major slowdown in year-over-year quarterly growth for the remainder of 2018.
Overall, US retail ecommerce sales increased 16.3% to $454.91 billion in 2017, the highest growth rate since 2011. eMarketer estimates ecommerce sales will grow 15.6% in 2018. With this additional growth, ecommerce will reach $526 billion in 2018 and reach 10.0% of total retail sales for the first time.
The heavy ecommerce volumes clearly surprised some retailers. Many couldn’t immediately process the traffic to their ecommerce sites. Accenture found that 25% of retail websites that it visited had a “waiting room” to keep sites from crashing from the influx of visitors. That compared with less than 10% in previous years. “This points to the fact that volumes were significantly higher than expected,” said Steve Osburn, managing director at Kurt Salmon, a division of Accenture Strategy.
All retailers are looking at ways to buy closer to customer need. They’re buying more in-season and doing less of what we call ‘futures business,’ and they’re trying to close that gap with all kinds of technologies.
Amazon remains the undisputed ecommerce champion of the holiday season. According to Slice Intelligence, Amazon’s market share for online orders was nearly 32% in November 2017. This represented a low for the year, but that share increased following Thanksgiving. For December, Amazon captured 40.6% of online sales.
These numbers contributed to a strong holiday season for Amazon, which reported sales in Q4 2017 rose 38% year over year. This was the highest holiday season growth rate for Amazon in eight years. eMarketer estimates 56.4 million households, or 45.5% of total US households, will hold a Prime membership in 2018, so Amazon’s dominance shows no signs of abating.
According to Adobe, nearly 45% of US holiday season retail ecommerce site visits on its platform in 2017 came via search (organic or paid). More than a quarter went directly to the site, while email accounted for 20.0% of visits. Display ads and social networks ranked at the bottom.
Even so, social networks continue to play an influential role in holiday shopping. A Verto Analytics survey of US digital shoppers in December 2017 found that Facebook was the most likely app to consult during a digital shopping session, cited by 7.8% of respondents.
Mobile social media and search also play a big role in influencing in-store shopping. Both Google and Facebook have been improving local advertising options and online-to-offline measurement as they respond to (and shape) consumer behavior. “You’ll see behaviors like consumers carrying their phone with them into the store and price checking and doing extra product research before and even during and after they’re in the store to make sure they’re getting the best deal,” said Gabriel Francis, team lead and product marketing manager for offline sales at Facebook. “What we’re trying to do is bridge that gap and harness that new type of consumer behavior to make ads more relevant.”
Beyond just influencing store purchases, mobile continues to be one of the major components of ecommerce growth. The 2016 holiday season was a pivotal moment for mcommerce, and the 2017 season continued the trend of expanded mobile traffic and—even more importantly—increased mobile conversions.
comScore estimated US retail sales via mobile devices jumped from $22.7 billion in Q4 2016 to $31.8 billion in Q4 2017, an increase of 40.1%. During the same timeframe, sales via desktop grew 14.8% to reach $99.4 billion. Overall, retail ecommerce sales climbed 20% year over year in Q4 2017.
For more information on local advertising, see eMarketer's February 2018 report, "Location Intelligence 2018: Consumer Behavior, Data Quality and Targeting Tips."
Facebook IQ also noted a large increase in mobile conversions on its managed accounts. On Black Friday 2017, 74% of online conversions from Facebook referrals in the US were on a mobile device, compared with 53% in 2016, with similar growth the rest of Cyber Weekend.
Overall, mobile shoppers used apps to buy at a much higher rate than in previous years. AppsFlyer data showed US and UK consumers made 65% more purchases in shopping apps during Cyber Weekend 2017 compared with the same period in 2016, and there were 62% more buyers on apps. The highest growth rate was on Thanksgiving Day, when the number of app users who bought something increased 73%. The highest overall revenue from shopping apps was on Black Friday.
Mcommerce penetration rates vary by category. NetElixir found the majority of US conversions for apparel and cosmetics on its platform occurred via mobile during the 2017 holiday season. Even so, a large majority of online electronics and food purchases still occurred on desktop, with little sign of an imminent shift to mobile.
eMarketer expects mcommerce sales in the US will continue to grow rapidly in 2018, climbing 32.7% to $208.29 billion and accounting for 39.6% of retail ecommerce sales. By 2022, this share will rise to 57.5% on $512.77 billion in sales.
Smartphones will be responsible for most of that growth. eMarketer estimates commerce via smartphones will increase 37.5% in 2018, making up 75.9% of total retail mcommerce sales in the US. As recently as 2015, tablets accounted for more than half the total, but the rapid improvement in mobile commerce interfaces (and likely the steadily increasing screen sizes) have made the buying experience on phones much better.
Naturally, that means more consumers are turning to their phones to purchase items. eMarketer predicts 2018 will be the first year in which over 100 million US consumers will buy something on their smartphone, representing 42.1% of all internet users.
For years, the big trends in holiday shopping have involved lots of “more”: more ecommerce, more mobile shopping, longer seasons and better integrations between online and offline shopping. Those trends continued in 2017.
According to a Prosper Insights & Analytics survey of US internet users for National Retail Federation (NRF), more than half of respondents had started their holiday shopping by mid-November, and (a very organized) 2.3% had actually completed their shopping.
Adobe reported that its online revenues in the first half of November rose 19.7% year over year, and 17.9% between November 1 and November 21. “Retailers are beginning to move ‘get it by Christmas’ promotions further into November,” said DeJianne.
Even so, the five shopping days starting on Thanksgiving Day and continuing through Cyber Monday remain huge. Even with the shift to earlier buying, the share of online spending during those days actually increased last year. According to Salesforce Commerce Cloud (formerly Demandware), 32% of all online holiday revenues occurred during that span in 2017, up from 29% in 2016.
Online sales grew rapidly throughout the Thanksgiving weekend. Adobe reported US retail ecommerce sales on its platform surged 16.9% year over year on Black Friday 2017, to $5.03 billion, while sales on Thanksgiving jumped 18.3% to $2.87 billion. Cyber Monday remained the largest online shopping day of the year, pulling in $6.59 billion, a bump of 16.8%. Also notable was the increase on the day before Thanksgiving, when ecommerce sales climbed 17.7% to $1.82 billion.
comScore found a similar pattern, but showed even higher year-over-year growth on Cyber Monday (26%), likely because comScore data includes only sales on desktop/laptop. Altogether, comScore estimated US retail ecommerce sales for the five-day shopping weekend reached $10.21 billion, up 21% over 2016.
The heavy surge in online buying in November created some short-term delays in delivery following Cyber Weekend. Although a small delay at this time of the season is less of a consumer disaster than it would be closer to Christmas, it is still an area that retailers will need to address for 2018. “If volumes continue to increase at the rate they are, it’ll be harder for retailers to keep up with the volume on Black Friday and Cyber Monday and be able to deliver the high levels of service they deliver the rest of the year,” said Osburn. “As long as they’re proactive about it and communicate with the customer, it won’t be a big deal.”
Retailers have to be prepared for the returns. The reverse logistics are just as important as the outbound logistics. You have to be prepared for those packages coming back to your fulfillment center as much as the ones going out.
Retailers face an additional problem with earlier online sales: earlier returns. In 2017, retailers saw a flood of early returns just as they were dealing with their peak ordering season, taxing both the shipping networks and their own fulfillment operations. “Going forward, retailers have to be prepared for the returns,” said DeJianne. “The reverse logistics is just as important as the outbound logistics. You have to be prepared for those packages coming back to your fulfillment center as much as the ones going out.”
Better fulfillment operations have also extended the online shopping season. According to MasterCard, the second largest weekly growth rate in US retail ecommerce sales during the 2017 holiday season occurred the week of December 17, when sales increased 23.7%. Only the week of November 5, when retailers were rolling out early deals, had higher year-over-year growth. December 23, which was a Saturday, was the second highest shopping day of the year, according to MasterCard.
A large part of this late-season growth can be attributed to two factors: better fulfillment operations and buy online, pick up in-store (BOPUS). As people trust that they can receive items in time for the holidays, they will turn to online services for even last-minute purchases. “It’s been five years of retailers focusing intensely on how to make the omnichannel experience better,” said Osburn. “Every year customers get a little better of an experience and a little more capabilities offered to them. I expect the trend to continue.”
According to Slice Intelligence, BOPUS played a significant role toward the end of the 2017 holiday season. The research firm analyzed ecommerce sales of retailers with mature BOPUS operations, including Best Buy, The Home Depot, JCPenney, Macy’s, Target, Toys “R” Us and Walmart, and found that 25% of sales between November 1 and November 17 were for BOPUS. That figure rose to 42% during the week of December 18 to 25. For Best Buy, the percentage jumped from 36% to 57%. “The good news is we saw more retailers offering this service, but performance during the peak shopping season is still pretty spotty,” Osburn said. “Consumers wait in long lines at the store, and they don’t necessarily get their order when the retailer says they’ll get it.”
The International Council of Shopping Centers estimated that 40% of US shoppers used click and collect during the 2017 holiday season. In addition, 90% of those using click and collect bought more items once they picked up their order. “Retailers need to continue to focus on being better omnichannel retailers,” said Yarbrough. “They need to be able to efficiently ship items directly to people, ship items from their stores and help people buy online, pick up in store.”
eMarketer's Holiday Forecast Methodology
Our forecasting methodology for retail ecommerce sales is based on the analysis of over 6,500 metrics from 114 sources, including year-to-date quarterly retail ecommerce sales data from the US Census Bureau, estimates from third-party research sources, retail industry sources and government releases covering macro-level economic conditions, and incorporates revenues as reported by major online retailers. We also incorporate relevant consumer buying trends and mobile device adoption, which play a large role in the uptake of ecommerce shopping.
We benchmark our retail ecommerce sales figures against US Department of Commerce data, for which the last full year measured was 2016.
The increased use of BOPUS reflects retailers’ efforts to make the experience better. Most retailers have moved the BOPUS pickup counter to the front of the store instead of keeping it at the rear, according to DeJianne. Some retailers have designated special parking spots for customers who bought online and are picking up in the store. “This provides extra layers of convenience for the consumer,” he said, adding that retailers are also improving ship-to-store services or providing alternate locations as a growing alternative to home delivery.
As retailers offer guaranteed delivery closer to Christmas, they need to improve integration between the ecommerce team and the supply chain. “We saw more retailers relax a bit [on holiday promotions] to curb the volume so that they didn’t promise things they couldn’t deliver and get themselves in trouble,” said Osburn. “Internal communication is one of the areas retailers still need to improve, but some retailers hit it out of the park. They made sure not to make promises they can’t keep.”
We include the following consumer categories in our definition of retail ecommerce sales: retail ecommerce sales include the sale of products and related services ordered using the internet, regardless of fulfillment method: motor vehicle and parts; furniture; electronics and appliance; building materials and garden equipment; food and beverage; health and personal care; gasoline; clothing and accessories; sporting goods, hobby, books and physical music; general merchandise; miscellaneous; nonstore sales (i.e., pure-play ecommerce platforms, mail order, etc.).
We exclude following consumer categories are from our definition of retail ecommerce sales: food services and drinking places (including restaurant sales and restaurant delivery ordered online); travel; event tickets; payments, such as bill pay, taxes or money transfers; gambling and other vice goods.