Episode Transcript:
Sara Lebow (00:02):
Hello, listeners. Today is Wednesday, January 15th. Welcome to Behind the Numbers: Reimagining Retail, an eMarketer podcast. This is the show where we talk about how retail collides with every part of our lives. I’m your host, Sara Lebow. Today’s episode is Lessons from the 2024 Holiday Season.
(00:26):
It’s going to be our last talk about these, or the holidays, for a little bit so we’re going to make it count. Before we get into that, here are the guests for today’s episode. Joining me first up is Rachel Wolff.
(00:38):
Hey, Rachel.
Rachel Wolff (00:39):
Hey, there.
Sara Lebow (00:40):
Also with us is Zak Stambor. Hey, Zak.
Zak Stambor (00:43):
Hey, guys.
Sara Lebow (00:44):
Both joining from very cold places, New York and Chicago right now. And I am also joining from a very cold New York. Everyone’s just bundled on this.
Zak Stambor (00:52):
Got our flannel.
Sara Lebow (00:54):
Yeah. All right, let’s learn some lessons from the 2024 holiday shopping season. When we last checked in on this season, Black Friday had just happened. Holiday spend was relatively healthy. And we were eyeing a very short and very funky December holiday season.
(01:13):
Now it’s January. I still haven’t made my returns of the thing I bought that didn’t fit me on Black Friday, and it’s probably too late now. But before we go down that hill, I want to know, did anything change, anything unexpected happen as it relates to what our holiday predictions were?
Zak Stambor (01:30):
Yeah, there were a few interesting trends that I saw that I’m not sure that I expected. One was, if you look at the year-over-year growth, there were two very strong periods. One, the week before Black Friday, so the week before Cyber Week had very strong growth. We saw a lot of retailers launch sales that week. I dubbed it the Cyber Dozen because the sales launched the Thursday before Thanksgiving. There was a real 12-day period pretty steep discounts. We saw that period.
(02:07):
Then we saw another strong growth period the week after the Cyber Week. Which I think is a reflection of the very short window between Thanksgiving and Christmas, because as soon as Thanksgiving was over, it was basically December. People were like, “Uh-oh, I’ve got to buy stuff now to ensure that it gets to my door so I can get it on Christmas or Hanukkah.”
Sara Lebow (02:30):
Yeah. You didn’t have that extra week of padding.
Zak Stambor (02:33):
No, right.
Sara Lebow (02:33):
Where December sneaks up on you.
Zak Stambor (02:34):
I know that certainly happened for me. I was like, “Uh-oh. I’ve got to start buying some stuff.”
Rachel Wolff (02:40):
I think from my perspective, the broader trend lines were pretty much what we saw with Cyber Week. You had ecommerce sales growing pretty strongly. Adobe said it was a record 8.7% growth to 241.1 billion. In terms of of growth, that’s actually pretty close to what we forecast, which was around 9%. That’s just something to call out.
Sara Lebow (02:59):
Yeah. Good work to our forecasting team.
Zak Stambor (03:02):
Yeah. One other thing that I saw was this growing divide between higher and lower, and middle income consumers. You saw it manifest in several different ways. One is just consumer sentiment. The University of Michigan Consumer Sentiment really showed that higher income consumers are far more positive about how things are going than lower and middle income consumers. You saw it at retail stores when retailers, like William Sonoma, were pretty bullish about how things went and were going. They didn’t need to lean too heavily on promotions. Then at the same time, you saw the Dollar Trees and Dollar Generals of the world say that their shoppers are spending pretty cautiously.
(03:51):
Even manufacturers, this was a phenomenon where Newell Brands, which makes Graco strollers, and Oster kitchen appliances, they saw the high end blenders that are $100, or $100-plus, those were selling really well. But the cheaper ones, the $20 ones, just had pretty sluggish sales.
(04:13):
There really is a growing divide between people who feel pretty good, are spending, they’re going out to eat and those who are pinching pennies.
Sara Lebow (04:23):
Yeah. It’s interesting you say going out to eat, because restaurant spending was up too during the season also, right?
Zak Stambor (04:28):
Yeah, it was up 6.3%, which is pretty strong. There has been some inflation. You go out to eat and you get your bill, and you’re a little surprised at how much it was. But still, 6.3% is not nothing. It’s a sign that at least some consumers, probably these higher income consumers, feel pretty decent about spending on something that is purely discretionary.
Sara Lebow (04:56):
Yeah. Higher income consumers being confident as lower income consumers are not feel like the theme of all of Q4 last year. I’m not at all surprised. I feel like it bled into all news that we heard about everything in Q4, and it makes sense that it was thematic during the holidays.
Zak Stambor (05:15):
Totally.
Sara Lebow (05:16):
Zak, last year you mentioned the election as a big factor in this holiday season. Did that change things? Obviously, we can’t know what would have happened either way, but do you feel like it had an impact?
Zak Stambor (05:28):
Yes and no. Yes, it had an impact. No, not in the way that I expected.
(05:36):
What was surprising was the election, we knew the results of the election much sooner than I thought we would. I thought there was going to be a lot of stuff going on that was just going to distract people for quite some time after election day. But low and behold, we knew the results on election night. But once we knew those results, that’s when there was an effect because Trump won.
(06:04):
Once Trump won, people started paying attention to his economic agenda and they started to get worried about inflation again. They started spending because they figured, “I might as well buy the car today before tariffs drive up the price. I might as well buy the TV today. I might as well buy appliances.” They spent on these big ticket items that, in other circumstances, they might had held off.
Rachel Wolff (06:35):
Yeah. I think it’s a bit of both. I think on the one hand, yes, you do have people who are doom spending to get ahead of potential tariffs and higher prices this year. But there’s also a segment that’s just more confident. They see the economy heading in a more positive direction now that Trump is president, and I think that may have also unlocked additional spending during the holiday season.
Zak Stambor (06:54):
I think that’s a good point.
Sara Lebow (06:54):
Yeah. Isn’t it true that the number one indicator of how people feel about the economy is whether or not the party they support is in office? That might be anecdotal. I think that might be true, though.
Zak Stambor (07:04):
No, it’s true. It’s true. It’s supported by evidence.
Sara Lebow (07:08):
It makes sense that there would be, at a minimum, a shift where a bunch of people maybe are pulling back, but a bunch of people are spending. Even the ones who might be pulling back, they’re probably the ones that are paying the most attention to those tariffs and making sure that they get the spending in before tariffs set in.
Rachel Wolff (07:27):
Right. They’re buying not just big ticket items, but toilet paper, household essentials, all of these things that they’re stockpiling just in anticipation of what will come next.
Sara Lebow (07:37):
Yeah. Stockpiling toilet paper hasn’t historically worked, so hopefully people aren’t doing that again.
(07:44):
Something I did mention at the start of the show is that I have not made my returns from Black Friday. What’s happening with returns? It sounds like this is a pretty crazy return season this January.
Zak Stambor (07:57):
It is. Salesforce reports a 28% jump year-over-year. That’s a lot.
Sara Lebow (08:02):
That’s crazy because a year ago, on this podcast, we were talking about how high returns are. If we’re up more than 25% from that, this is going to become a problem if it isn’t already for retailers.
Rachel Wolff (08:16):
I wonder how much of that is because it was a shorter holiday season. People are just buying up whatever they think they’ll need, and then you’re just making a decision later on to send back what you don’t want. I think that just might be a lingering effect.
Zak Stambor (08:30):
I think that’s right. I think it’s the growth of ecommerce is one factor. In line with that, the growth of show-rooming and people just being like, “Okay, well, I don’t know if I’m an eight, a 10, or a 12, so I’m just going to buy them all and see what works.”
Sara Lebow (08:47):
Yeah.
Zak Stambor (08:48):
Then eventually, hopefully, you do return it. And it’s not just sitting in your bedroom, like I have a whole lot of stuff in my bedroom I need to return.
(08:57):
But apparently, a lot of people did not take their time.
Sara Lebow (09:00):
Good for them.
Zak Stambor (09:00):
They rushed to the store. Or to the post office, or whatnot, to return it.
Sara Lebow (09:05):
Yeah. We’ve talked about returns on the pod before, I’m sure we’ll do it again. But the eight, 10, or 12 conversation also has to do with all retailer sizing is bogus right now. None of it is consistent. There’s been a move away from softer clothing toward harder return to office clothing, hard pants as we call them, which is harder to size. I think that also is driving up returns.
Zak Stambor (09:29):
That’s so true. I was just buying a pair of shoes. The range of shoe sizes that fit me was all over the map. It was a full size-and-a-half span.
Sara Lebow (09:42):
Yeah.
Zak Stambor (09:43):
It’s just frustrating.
Sara Lebow (09:44):
I am a loyal Adidas customer for shoes, not because I think their shoes are inherently better or even spectacular, but because I know my size in Adidas sneakers. Even though I’m mostly not an ecommerce consumer, once my sneakers get holes in them, I just want a new pair and that’s the only reason.
Zak Stambor (10:00):
Yeah. But it does force you to do engage in this behavior, because otherwise you’re just going back and forth, and back and forth. That’s a really bad experience, too.
Sara Lebow (10:09):
Okay. Before we get too off-topic with my not amazing ecommerce habits, what is the biggest takeaway from this holiday season from each of you? Rachel, why don’t you go first?
Rachel Wolff (10:19):
I think for me, the biggest takeaway is just that customers are deal conscious, and it looks like they’re going to be that way for some time. Especially now, with all this uncertainty over what tariffs will mean for everything from grocery prices to car prices.
Sara Lebow (10:33):
Zak?
Zak Stambor (10:34):
Yeah. On the surface, I think this looks like a solid close to a solid year. But if you look a little bit closer, you see a growing split on the haves and have-nots within retailers. Just in the final days of the holiday season, you saw both Container Store and Party City file for bankruptcy protection. You saw Nordstrom go private to avoid the glare-
Sara Lebow (10:56):
Which Suzy accurately predicted on this podcast. Good work, Suzy.
Zak Stambor (11:00):
Good work. It also wasn’t fully unexpected, but they did want to avoid the glare of the public markets. Some retailers are doing quite well, but it’s not the rising tide lifts all boats. It really is a more nuanced situation than that.
Sara Lebow (11:17):
Yeah. It sounds like the haves and have-nots are really maybe going to be the water we’re all swimming in as we enter this new year.
(11:24):
Okay. Now that we’ve discussed the 2024 holiday season, I want to make you guys predict things that you can’t possibly predict. I have asked you each to come with an outrageously early prediction for the 2025 holiday season. To reiterate, it is January 15th, you cannot possibly know what will happen, but we know what’s going on this year kind of. Already, we’re in a year of chaos, so maybe the prediction is just chaos. But I want to hear your outrageously early predictions for next holiday season.
(11:55):
Zak, what is your 2025 holiday season prediction?
Zak Stambor (12:00):
I think we will see inflation this year pick up. I think Trump’s economic policies, however they actually manifest, will lead to inflation. I think it’ll lead to a somewhat lackluster holiday season. Sales might look strong because of inflation, but actual results will be flat to down in terms of real number.
Sara Lebow (12:26):
So the opposite of what happened this year?
Zak Stambor (12:27):
Yeah.
Sara Lebow (12:29):
We just talked about how the best indicator of how you feel about the economy is if your party is in office or not. Do you think that consumer confidence will actually drop with Trump? Or do you think that people who support Trump will feel the confidence of seeing him back in office?
Zak Stambor (12:46):
I think it depends on what unfolds.
Sara Lebow (12:48):
Yeah.
Zak Stambor (12:48):
And so much is uncertain. We really have no idea. It’s a very uncertain world.
Sara Lebow (12:54):
It comes back to the most predictable thing about Trump being that he’s unpredictable.
Zak Stambor (12:59):
Absolutely. One thing that could give consumers some confidence, or at least some segment of consumers confidence, is if the tax bill passes. And consumers feel like, “Hey, I’m going to have some more money in my pocket so I can spend that money.” Last time around, that was very heavily weighted toward the more affluent, so we might just see a further divide in terms of the haves and have-nots. Although, a lot of people felt good about the Trump tax cuts, even if it didn’t actually result in them getting a big benefit from it.
Sara Lebow (13:36):
Okay. That makes sense. I don’t know if it makes sense, but it sounds like a sound prediction to me.
(13:43):
Rachel, what is your prediction?
Rachel Wolff (13:45):
My prediction is that gen AI shopping assistants and chatbots are going to play a much larger role in holiday sales this year. It still feels weird to say this year. My instinct is to say next year. I know we’re in 2025. But we saw, at least according to Salesforce, a pretty sizeable number of people are already using gen AI in some way in their shopping journey, whether it’s just to help with product discovery or product research, or finding deals, or even just using AI customer service. But I think that this year, people will be a lot more intentional about using it for those purposes.
Zak Stambor (14:21):
Well, I think it’s going to grow whether they intend to or not.
Sara Lebow (14:24):
Yeah.
Rachel Wolff (14:24):
That’s true.
Zak Stambor (14:25):
Because it’s there.
Rachel Wolff (14:25):
Right.
Zak Stambor (14:26):
I think a lot of the data that we’ve seen is that people don’t even know that they’re using it, but they happen to be using it and it’s delivering some sort of benefit. I think it’s a sure-fire prediction that will come true.
Sara Lebow (14:40):
I can say with pretty much certainty that if I were not a retail analyst, I would not notice that a chatbot is what’s delivering me my results. I think I would just think I was getting results and not really think about it. The only lens from which I think about this is from my analytical lens, and if I didn’t have that on I’d just be like you type things in, a result happens, the result might have changed formats, but I wouldn’t register it as gen AI.
Zak Stambor (15:04):
That’s totally fine. You don’t need to know what’s behind the technology that you’re engaging with.
Sara Lebow (15:09):
Well, I do.
Zak Stambor (15:11):
Right. But the average consumer does not need to know why what they’re using works in the way that it does. They just need to know that it delivers the results that they’re seeking.
Sara Lebow (15:21):
Yeah. Our search behaviors, I’m going to get ahead of myself on gen AI search. But our search behaviors have completely changed over the past 10 years even, from Boolean search terms to plain-text search. It makes sense that this evolution will just keep happening without us realizing, and will specifically happen in retail.
(15:40):
Okay. Well, that is all we have time for today. Thank you to our listeners, and to our podcast team who edits the podcast. We’ll be back next Wednesday with another episode of Reimagining Retail, an eMarketer podcast. Friday, join Marcus for another episode of Behind the Numbers, an eMarketer podcast.