Four Ways Holiday 2019 Spending Will Impact Retail Real Estate


Four Ways Holiday 2019 Spending Will Impact Retail Real Estate

March 9, 2020

Though Black Friday, Hanukkah, Christmas, and New Year’s Eve seem like distant memories now that spring is nearly upon us, the holiday season is ever-present for retailers — it accounts for roughly 40% of most retailers’ annual sales. The time between late October and the end of the calendar year can make or break retail opportunities and inform us about what to expect in the upcoming year.

The Effect of a Shorter Holiday Season

Before diving into the facts and figures about 2019 holiday spending, there are a few factors to identify that frame our perception. Most importantly, there were six fewer days between Black Friday and Christmas in 2019 compared to 2018, meaning retailers lost six days of sales opportunities. A major snowstorm in the Northeast that prevented shoppers from accessing retail stores, though it was also unseasonably warm throughout most of the United States. Political unrest and trade threats affected distribution opportunities and prices, but wages rising faster than inflation and low unemployment rates made for high consumer confidence — all macroeconomic elements that impacted sales for all retailers across the country.

Year-Over-Year Increase In Sales

From Black Friday to the end of 2019, retail sales in the United States reached $730 million — a 3.4% increase from 2018’s holiday sales. While the 2019 figures look good on the surface, there’s more to unpack. We saw a 5.1% growth from 2017 to 2018, so while there was growth in spending in 2019’s holiday season, it wasn’t growth at the same rate as before. Online shopping is, of course, one of the biggest stories in this holiday shopping season — online shopping did increase from last year and accounted for almost entirely the 3.4% increase in overall holiday spend, meaning same-store sales remained stagnant. Sales were up 1.4% in general merchandise stores (think big-box retailers like Target and Walmart while department store sales, like Macy’s and Saks Fifth Avenue) were down.

Four Key Predictions Going Forward

From looking at the results of 2019’s holiday season, we can speculate about what’s to come in the retail and real estate industries for 2020 and beyond.

+ Expedient shipping has become the standard for online retailers and was especially relevant for this year’s truncated holiday season. According to The Motley Fool, brands that can’t offer two- to three-day shipping, a standard set by Amazon, will face extremely steep (and potentially prohibitive) competition in the online sales world.

+ It’s getting harder and harder to measure in-store sales. As the lines between in-store and online sales are blurred, many retailers have stopped reporting separate in-store and online sales numbers entirely. The physical and digital shopping avenues are merging: as evidenced by the fact that, before an in-store purchase, 82% of consumers consult their phones and 45% read online product reviews, according to Forbes. Brands will aim to create those omnichannel experiences that result in seamless sales opportunities. 

+ It’s nearly impossible to determine which sales are coming from stores versus online, as the two so fluidly impact one another in today’s consumer journey. This, in turn, is having a serious effect on retail rent costs. Traditionally, retail rent costs were developed using a sales-per-square-foot model, but the omnichannel nature of the industry has made that obsolete. While retail store sales will continue to be part of the equation that determines retail rents, other factors will contribute to this calculation — such as pedestrian footfall and online sales purchased by customers with frequent exposure to the storefront.

  • As the function of in-store retail transforms to fit the modern world, we will see more and more experimental retail including hybrid tenants (combining dissimilar concepts into retail mash-ups) and pop-up spaces.
By Heather Arnold, Principal, Research + Analysis