This shift has broader implications for the US economy and jobs.
“Is [Black Friday] the mayhem that it might have been eight or 10 years ago?” Walmart U.S. CEO Greg Foran told the Wall Street Journal. “I think that world is gone.”
According to RetailNext, the number of people visiting brick-and-mortar stores on Thanksgiving and Black Friday declined 4% from last year. According to ShopperTrak, it declined 1.6%.
Yet online sales in the US over those two days surged 18% to a record $7.9 billion, according to Adobe Analytics, which tracks transactions at the largest 100 US online retailers.
As of 10 a.m. EST Monday, Adobe expects Cyber Monday online sales to surge 17% to $6.6 billion, making it the largest online shopping day in US history, with sales from smartphones soaring 41% year-over-year.
The National Retail Federation had estimated earlier that holiday sales – excluding automobiles, gasoline, and restaurants – would rise by up to 4% to $682 billion, from $656 billion in 2016. Most of that growth will come from the surge in online sales. If $108 billion of these sales are online sales, as has been estimated, the remaining $574 billion would be brick-and-mortar sales.
At the high end of the estimate, 4% in growth of holiday sales pencils out to be $27 billion, composed of $17 billion in online sales growth and $10 billion in brick-and-mortar sales growth.
In other words, brick-and-mortar sales would inch up only 1.8% from $564 in 2016 to $574 this year – even as online holiday sales would surge 17% from $91.7 billion in 2016 to $108 billion in 2017.
Even moribund Sears Holdings is trying to jump on the online bandwagon. Today, it announced, among other promotions, free home delivery for the holiday period of all orders over $399 bought online at its Sears and Kmart sites, particularly to encourage purchases of “big-ticket items.”
In the third quarter, e-commerce sales jumped 15.5% from a year ago. But this sales surge comes out of the hide of less than half of brick-and-mortar retail sales, particularly department stores, toy stores, and the like, with the other 54% of brick-and-mortar retail sales being largely online-resistant for now, including new- and used-vehicles (21% of retail), groceries (13% of retail), gasoline (8% of retail), and consumption at restaurants and bars (12% of retail).
Holiday sales fall squarely into the part of sales where brick-and-mortar is under heavy attack from online sales. Hence, every major retailer’s effort to get some excitement going online – because this is where growth is.
This shift has broader implications for the economy and jobs. Employment in the traditional retail sector has been falling all year, shedding about 100,000 jobs (seasonally adjusted) since January, after rising steadily from the trough of the Great Recession, and the first such decline since the Great Recession. Back then, total retail sales were dropping hard. Now total retail sales are rising, but brick-and-mortar operations are closing stores and filing for bankruptcy.
At the same time, retailers are building up their fulfillment centers and supply chains to deal with their online sales. For the holiday period, seasonal hiring was strong in the online sector at fulfillment operations:
- Amazon said it would hire 120,000 workers, spread over 30 states.
- Wal-Mart said it would hire about 5,000 workers for its online operations but none for its brick-and-mortar stores, though it would give current workers more hours.
- Macy said it would hire 18,000 workers at its distribution centers (they serve its stores and fulfill online orders).
These early indications show that online holiday-sales, powered also by surging mobile sales, will do exceedingly well this year, while brick-and-mortar holiday-sales will barely budge from last year, as the weaker players – such as Sears, Kmart, and bankrupt Toys “R” Us – are sinking into deeper trouble. At the same time, supply chains and distribution networks are adjusting rapidly to the changing reality in retail.
But some big retail sectors are still resisting the encroachment of online vendors. Read… Is E-Commerce Really Crushing Brick-and-Mortar Sales?
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IMO, it is too late to control the online move. A few years ago, stores like Macys, Safeway, and Walmart had a chance to see the tsunami headed their way. How did they respond?
They refused to open up the contents of their warehouses and the prices online. Safeway, for example, went the way of issuing cards and tracking your behavior through data mining. It doesn’t seem to have worked out so now they are re-positioning themselves as a delivery store. Macys dabbled a bit and then made big announcements about hiring teams in San Francisco. Target did something similar in India. But their hearts were not in it. The management talked the talk but the rank and file never believed it, it seems.
I was reading this morning about how Walmart may be the last chance to stop Amazon. I think that is just idle prattle. If you look at the mindset of the Walmart executive, he is still living in 1995 and he doesn’t think much will come of Internet. Walmart still is not a software company like Amazon. So they don’t use the data at their disposal the way Amazon does.
Walmart, in Bay Area, has gone through two transitions, at least in the last 10 years. First there was Walmart labs. Their people took over the company. The company was bought out by Walmart because the VC knew people on the board. Walmart labs was founded to sell “socially”. Obviously, it did not pan out. Still Walmart paid some 300M. After the changeover, there were horror stories of zero innovation and games played with employees. This naturally led to the good employees leaving. Then there was talk in the company of bringing in talent, any warm body, from Facebook or Google to save them. Even as this talk was going on, a bunch of new people from Jet.com took over (after Walmart bought Jet.com, the Amazon killer). There was talk about Jet.com culture taking over the company and setting the ship in a new direction. They set out to hire talent. I know from the people who sent in resumes that the news seems to be for PR purposes. In other words, the same incompetent managers who ran the company into the ground so far are still running the place. Walmart seems to have an entrenched swamp problem. This is why I don’t think Walmart can stop itself from committing suicide.
That said, if Chinese retailers can work on building their reputations, there’s no need to have the online sales happen with US retailers alone. They can ship the stuff directly to the ports and the stuff can show up at one’s door.
Incredible to think that Wal-Mart could fail. They were eating America. How tables turn.
Wal-Mart isn’t failing just yet. Its online sales are surging. It has spent a fortune to grow its online business, organically and via acquisitions, including its $3.3 billion acquisition of Jet.com. It’s too soon to write off Wal-Mart :-]
Interesting sales promotion at one of our food chains
Which is a lot closer to the truth, of the “unnecessary consumption” (Consumer fest) they are trying to promote.
Than claiming association with such a badly abuse religious festivity in the December period.
Amazon’s is way too expensive, so many retailers I use beat them hands down on price. Walmart and Costco to name a few. Amazon’s vendor to consumer model is very expensive, no wonder they can’t make any money. The option for store fulfillment is always going to be there. Amazon knows this and they are desperately trying to build more stores, they only have 60 across the US. Only 60! Expect amazon to buy one or more of it brick and mortar competitors. In the future, merchants and vendors will have their own sales websites, selling direct to the consumer. It’s already happening. Amazon will always be a big player but it will be one of hundreds in an increasingly fragmented online retail space.
Agree on Costco. They seem to be evolving nicely with online and store purchase almost evolving one to one. While not everything available in store is online, it mostly works. Plus they have store return policy. Not only that, their return policies are very liberal.
As for Wal-Mart, try searching for items that they do carry. Their search is so 2005. They don’t index their inventory as well as amazon does. This used to be a hard problem some 15 years ago but with the advent of elastic search and solr, this is a fairly straight forward problem. Now, I understand that they have many, many keywords to index but google and amazon have shown that it can be done. That makes me think that there’s no comprehension within Wal-Mart for these kind of problems. A few days ago, I was looking for swimming jammies. They showed me all kinds of swim wear except jammies. Then I did a search for swimwear and manually looked through the items. After wading through 4 pages, I discovered they carried the jammies. I went back and ran the original search with new words from the description they used to describe their jammies. Still no results. That is why I said that Wal-Mart needs to think like a software company. As of now, it treats s/w as a commodity that provides no edge to business. Target had the same problem with its search. Costco’s search is marginally better but they at least drop you into the relevant category (it also helps that Costco’s inventory is way smaller so we can see the list usually on one page).
The searches I described are on laptop. Imagine how painful it is to search on cell phone. Costco is not that painful on mobile. But there’s always a nagging feeling that I haven’t seen everything they have to offer.
I think Amazon has been crapifying it’s search feature with sponsored product posts and Amazon Merchants. It can be very, very frustrating to shop for products in many categories that can be ill-defined. Clothing is probably my most topical example. I’m tall and relatively slim. It’s hard to find clothes that fit online as a result. I find it to be impossible on Amazon.com. But retailers that only deal in clothes mostly have it down pat. Lands End, J. Crew, LL. Bean, Gap, etc., etc. I have bought from all of them because it’s really easy to see what I can buy that might fit. Do I buy clothes from Amazon? Not a chance, it’s a miserable disaster to figure out what they have that might fit. I could name other categories, but my point remains that Amazon has been destroying the ease of shopping to become the everything store to everybody.
Agree that Amazon is usually too expensive. About the only items we find cheaper on Amazon are cosmetics and occasionally some clothing. Example: we shopped for tables lamps for the living room. Found them on Amazon. Also found the same on Home Depot for 25% less. I rarely find Amazon with the lowest price. Just wonder why so many shop there? Must be the convenience and having no other options?
Amazon is at it’s peak, I think.
The problems are that Amazon is too expensive for “daily use of generic goods” where the margins are small, there is far too much of the useless China-to-Landfill novelty-tat drowning out the quality goods. This is diluting the brand and sabotaging the search engine.
The Brick and Mortars are catching up quickly, apart from “the internet thing” which one can buy as a service today, they know their business well and can execute. I’d say that almost every store here in Sweden has an Internet shop.
Most people use the internet part to stake out the goods before bothering going to the shop – if one is buying a pair of 250 USD headphones, of course one want to try them in the shop.
If one is buying groceries – not at all. But Amazon is too expensive for groceries and he locals can deliver much cheaper.
Amazon is losing cheap product too. To expensive on commissions to sell anything under 6 bucks.
The used pawn market imho was the real amazon trump card. They are spending to much to afford that now and wish or someone else will take it. Economist don’t discuss it but used was a big faucet that brick and mortar never had.
That’s what got ebay. Shipping cost manipulation.
Hmh, a big hurdle to Wallmart is its name. It’s like selling Oldsmobile to online shoppers.
Unless the management comes to that realization, and buy some catchy sounding brand, they are in trouble.
I am not going to be wallmarting on the internet.
For yuppies, yes I would agree Walmart has a marketing problem. But for the 80% of Americans, give or take, who get by paycheck to paycheck I would have to disagree. For them its all about price, price price, and many of them do not shop online for now. All Walmart has to do is undercut Amazon where and when it can and they will succeed in growing their business. In many respects, Amazon and Walmart cater to different income classes of consumers. The former’s takeover of Whole Foods kind of alludes to that point. There is more to retail than just a slick website. Amazon is really good at what it does, but it is not invincible, although it seems that way because of it’s stock valuation.
Go visit a Wal-Mart or two.
And visit a dollar store or two.
You will see another side of America that doesn’t get much press.
There are many people hurting.
Just yesterday, I saw a guy buy a few dozen cans of dog food at a dollar store. It wasn’t for his pet.
@off the street, I ran your comment by my favorite Ivy League economist and he took time off from his port and caviar break to verify the claim. While smoking expensive cigars, he wrote down some integrals and ran some computer models. The model concluded that everybody has more jobs than they can handle and we are all flush with cash and we all are eating caviar. He will publish this news next week and he expects to be nominated to the Fed if not a Nobel. He told me that dollar stores, people eating canned foot are figments of my imagination. Those cans probably had caviar in them.
“Just yesterday, I saw a guy buy a few dozen cans of dog food at a dollar store. It wasn’t for his pet.”
Yes it sad and its happening in many places.
the interesting thing is that dog food is frequently better for you than Corporate full of poisons marketed to human food .
But Dog food is not prepared to human hygiene standards.
Mall-Wart has a culture problem. They’re based in northwest Arkansas, a place very few outsiders want to move to, so very little new blood is entering the top ranks. They have a cheap-labor mentality, with a reputation for treating their employees like dirt. Not a great profile for attracting tech talent.
You obviously have never been to Bentonville.
It’s not the dirt street town you imagine it to be.
I’ve been ordering Safeway groceries delivery online for last 3 years at least. pretty good service. On the other hand I can’t remember last time I ordered anything on Amazon, and what I did order was really poor quality with few exceptions.
Was looking for a classic two-sided spring mattress for few months, the only place I finally found it is Sam’s Club online (which is of course Walmart).
This whole story with Amazon taking over is greatly exaggerated IMO (unless one is looking for a bluetooth speaker or a slightly smaller bluetooth speaker).
I’ve ordered a few things thru AliExpress ( part of Alibaba ).
If they ever hire some decent UX and search technology people, Amazon is in big trouble.
I’m willing to put up with slow delivery times to save 80%.
I have odd hobbies (Laser show projection systems, self-assembled LED video walls) and have ordered direct from China a number of times. Shipping can be expensive for larger items but you will never find similar parts from US vendors (affordable.)
Friend and myself are working on a order that involves a 20′ cargo container. It’s about $2500 in shipping to get a full connex box. Way cheaper than DHL by plane of course.
I think you also have to look at the perks Amazon gets. Just today I bought a small item, a tortilla warmer. Both Walmart and Amazon had. One issue was Walmart was collecting sales tax on it, Amazon wasn’t. The second was shippting, $3.99. Amazon still benefits from the Post Office giving them a sweet heart deal where they lose money (not sure if that has changed). This item was sold by third party vender in both instances. Until the shipping and sales tax issues get resolved, Walmart will face an uphill battle.
Anyone has data on total numbers yet? So far it’s looking like American debt slaves have way more money than people thought they had.
The Thanksgiving holidays are great for shopping. Especially when a GM inventory glut is involved. I saved a lot.
The GM purchase was planned for this date a couple of months ago when I first read about GM inventory glut problems … December-ish with a glut is a car buyers market. I bought a new 2017 for 30% below MSRP (cash) and got a fair trade in value (researched beforehand). To the really good, I think I bought the loss leader car they advertised on the internet that was intended to drive traffic and never be sold … just my guess. Bless their hearts.
I bought 1 lb of tea for 1/2 off. Highly rated English Breakfast from Amazon on a flash sale. It was pulled forward from when I would otherwise need it later. Bless their hearts.
Finally, bought a 4k TV for an abnormally low price, also a sale pulled forward. I needed / watned a replacement for another TV (they will haul away the old one) and, having followed priced for a long time, today was a gift. Purchased over the internet from a brick and mortar store.
Everything I bought I would have bought otherwise. The holidays just offered some really low prices. Bless their hearts.
The comedy on Black Friday was the propaganda that “you’re missing out, the deals are so good that peeps are killing each other.” Point and click and tomorrow its in my driveway & I can check inventory… no b.s. of getting to the store and finding that they only had 5 big screens at the loss-leader price.
After years of stores egging on the media for cheap publicity by promoting Black Friday as a gladiatorial stampede and freakshow of hard-to-hand combat, consumers have decided they prefer to shop online and avoid the chaos. Go figure.
Um, aren’t these numbers meaningless unless they are adjusted for inflation, and do we really have a handle on how much inflation has taken place since last year?
Well, inflation on an item-by-item basis for the “holiday sales” basket can get quirky because some items got more expensive and others got cheaper (such as many electronics).
Adobe publishes estimates on price changes online via its Digital Price Index (link below). It has been showing “deflation” for items sold online. This has in part to do with competition, and how easy it is for consumers to comparison-shop. I have my doubts about how accurate this index is so I have not written about it. But I think it’s valid to say it’s hard to raise prices online and get away with it.
Trust me, you do not want to live in a world where only Google, Facebook and Amazon exist. I use every opportunity to level the playing field. Spread your money around. Do not only support the monopolists.
I am not surprised but I am depressed that people seem so concerned over saving a few bucks on daily purchases. I’m not talking about large items (e.g. cars, cameras, computers where obviously one wants to shop around). But to save a few bucks by using Amazon whilst watching the local high street (mom and pop) shops go out of business… what’s the bloody point? We’ve all seen people browse brick-and–mortar shops and then order from Amazon. Have we no humanity?
Americans only care about one thing and one thing only. Buying the item they want at the cheapest possible price. Doesn’t matter if it will put mom and pop stores out of business or if it was made by a child slave in a sweat shop. This is bc Americans are kept poor and brainwashed to consume. It’s ingrained in our culture and society over many decades.
Jon: I couldn’t agree more with you. The average American doesn’t have enough liquid cash to even afford a $400 emergency, and yet rather than pay down debts, fund their kid’s college fund or fully fund their 401k, they’ll be lined up outside the nearest Apple store or Best Buy to save a few percent on the latest electronic toy they don’t need…
On the other hand, a lot of those mom and pop shops now sell on Amazon too. Amazon makes it easy for them to have an online presence.
We have a small local shop nearby selling handmade artisan chocolates. The owners are incredibly hard working and the store is their dream. Now they also sell on Amazon and have opened up a whole new market for themselves. Pretty cool.
Yep lots of mom’n’pop book shops and sellers of all sorts of thing on The River.
I may someday sell on Amazon myself. The Amazon warehouses sound terrible but there are a lot of laid-back sellers on Amazon and on Ebay too.
Amazon cruses the mom and pops though. It’s like eBay. 15% goes to Amazon/eBay for a simple database entry, meanwhile the M&P does all the work of shipping, and carries a decent chunk of the risk if fraud.
I knew a book seller and he had some horror stories when it came to selling on Amazon.
I only use Amazon to find the product I want. I can check competitive products, accessories, and reviews. Once I know exactly what I want, I buy it from a different site at a lower price. Every time.
Amazon has a price problem. But they are convenient.
GSH- Only a few winners can survive this squeeze on profit margins. going forward everyday will be “black friday” . No reason to get caught in this season’s melee. also look at the return rate of online items. Gee some offer free returns. Hmm i wonder where all these returns will end up?
Back In Stock! What else are they supposed to do!?
One of the 3 large “Brick and Mortar and Internet”-shops here in Scandinavia is renowned for their Zero-Fucks-Given policy of re-packaging and re-selling returns, even faulty / damaged goods. Sometimes with the last unhappy customers DIY pr0n still on the device.
Eventually these turdlets ends up in Sales, which solves the problem in a way: They are not obliged to offer any refunds on sales items here.
Also, it is well-known that the large retailers offering “price guarantees” – “If you get this cheaper, we pay the diff” – all use custom product numbers for identical (ell, one can hope, but …) brand-name products to avoid losing their bets.
With all that scheming, skimming and scamming going on, my household does not “enjoy” to participate in sales for products more complicated than woolly socks!
Are there better discounts after Christmas.?
There will be a Going Out of Business sale at Sears and/or K-mart.
Not really on point, but I noticed something on Friday that I had never seen before. I try to avoid malls and big box stores on Black Friday, but I did have to go to the grocery store to buy a couple of things, but I had never seen it so empty. The lot was mostly empty and only a quarter of the checkout lines were open. I think this was mostly because most people who were shopping went to the places I avoid and the last thing that they want to do the day after Thanksgiving is think about buying more food.
Given that most grocery sales are still made at brick-and-mortar stores and they represent the largest share of any category of stores, the plight of traditional retail might be even worse.
You’re pretty spot on with the grocery store observation on Black Friday, as not only are people just finished digesting the previous day’s Thanksgiving dinner, but most supermarkets don’t have their usual weekly sales going on the weekend after Thanksgiving. Some may have a little 3 day sale until the next weekly circular comes out the following Wednesday or Thursday, but for the most part there are no sales at the supermarket for shoppers to go to.
My local Target store had, a year or so ago, one of those tents like you see at craft fairs set up, with a POS terminal and people there, so people could order their items at home and then come by and pick them up. It was quietly taken down after a while …
It sounds like a good idea, but in reality, if I’m going to Target I might as well go inside and shop, because there will be things I forgot, or I want to look at / feel the items in person, or I was planning to buy X at Safeway later but here it is 1/3 cheaper (routine for Target) or Hey, I didn’t know they carried Windex refills, and here I was buying them at the hardware store …
Since Amazon and Mall-Wart and so on have presences in California, I’m not saving on taxes.
Basically I’m using Amazon Prime to buy things that are either very hard to get or unobtainable here, or a big savings in price. For a ton of routine things, Target is much cheaper.
I think Amazon and Tesla are kind of in the same position – as in the old guard companies that actually generate a profit are catching up. Wal-Mart and other major retailers have really upped their game.
Spent the last 8 months touring the west in our RV. Have been struck by the sheer mass of walmart. Have ordered items for store pick-up, for delivery to grandkids, for direct shipment to us. If the item is not right (for whatever reason) we return it to the nearest store. Am convinced that they will win. Bought the stock – up 25%.
Sears said, Walmart said, Target said they will hire hundreds of thousands of workers! They will “temp” workers through Temp agencies at 7 bucks/hour! Lol!
I agree with JD.
Walmart has done a remarkable makeover to combine online access and brick and mortar store availability. I find their search function fine, and local store delivery to be a money saver.
Is quite easy, if you go to a store during a sale day like Black Friday you suffer. If you order online you don’t.
Never understimate people wish to be lazy and comfortable.
Actually, is scary how much customers are like cats.
Looking at my Amazon buying history, only two items pop up for 2017. Concerning, W-M, I’m typically there every few days, stocking up. I like seeing the merchandise before I buy it. I’m not embarrassed about going to W-M. When the local W-M doesn’t have something, I check to see if it’s available from walmart.com, which doesn’t charge for delivery to their store. For Jet.com, it’s only dog food at $50 a bag. The local pet food store charges $60 a bag. I don’t want a ton of cardboard boxes to recycle every week.