It’s early—maybe too early—to predict how retail business will be for this holiday season, but I’m going to do it anyway.
It won’t be that good. There are lots of ways to say that.
“Sales will be below expectations.”
“It’ll be below 2018 actuals.”
Who Am I to Make Predictions?
After a career spent in the retail environment, I recently wrote a book about the five laws that govern everything we sell. I didn’t create or invent these laws—I simply discovered them embedded in the histories and stories of retailers over centuries. The Five Laws of Retail: How the Most Successful Businesses Have Mastered Them and How You Should Too provide a useful filter through which past retail performance or predictions of the future can be understood and explained. These five laws are:
- People First
- Turn Is Magic
- The Power of Product
- It’s About the Retail Price, Not the Cost
- Protect Your Downside
Three Reasons to Worry
Retailers are by nature an optimistic tribe. There’s always next season or the next line of goods, and they tend to plan that way also.
But my advice is to plan Holiday 2019 very conservatively because there is a strong chance it will be below last year’s actual sales and below what the current plans might be.
Why do I say that?
The absolute worst possible year for holiday business is 2019.
For purposes of this discussion, I am defining holiday as the period of time between Thanksgiving and Christmas. Sometimes holiday is used to include the whole month of November and even through New Year’s Day, or all of the fourth quarter. But Thanksgiving through Christmas offers comparative consistency.
In 2018 there were exactly 32 days between those two holidays. This year, 2019, there are just 26 days. That means nearly an entire week’s worth of shopping days will be outside of what is considered one of the most important timeframes for retailers.
Why does this matter? According to the National Retail Federation, “last year holiday sales represented nearly 20 percent of total retail industry sales,” and “For some retailers, the holiday season can represent as much as 30 percent of annual sales with hobby, toy and game stores reporting the highest percentage.”
Fewer available shopping days means that the business volume will be more compressed, but you can only compress it so much.
In addition, Christmas Day is on a Wednesday this year. From a retail perspective, this is arguably the worst possible day of the week for the holiday to fall on. The actual Christmas Eve shopping day is historically slower with fewer sales compared to the last few days before it.
So when the holiday falls on a Tuesday, Monday is slower, but the weekend will be huge revenue days (as they were last year). If it falls on a weekend, a similar pattern emerges where the end of the previous week offers major volume opportunities. But Wednesday: not so good.
Increased Import Taxes
The import taxes imposed in 2018 had no immediate effect last year because they did not apply to the merchandise already here. This year, however, those taxes imposed last year will be reflected in higher retail prices for the consumer on several categories of merchandise. Higher retail prices will not enhance sales revenue, especially because it is doubtful that the consumer will perceive any increased value or benefit. (see the Fourth Law of Retail: It’s About the Retail Price, Not the Cost).
Broader Macro Environment
The current global economic environment is absolutely not healthy. Uncertainty, unease, and trepidation about the future have infected consumer confidence not only in the United States but also in the global community. The current environment does not encourage consumers to spend their resources on luxury or discretionary goods and services. Cars, clothing, footwear, electronics—everything will be affected.
In addition, the economic growth and expansion that began in 2009 is now ancient by economic cycles. In particular, retail business has enjoyed very strong increase the last four years in a row. It is historically difficult to expand such a cycle further past this stage.
This inevitable slowdown is already happening, but it’s not demonstrating a huge impact yet. The holiday shopping period is an intense retail event, and whatever trends are developing now will be magnified during that time.
So my advice to retailers as we look toward the end of the year and the important Q4 holiday season is to be very cautious and plan your downside (The Fifth Law of Retail).
Any one of the conditions I mention above would constitute increased risk to sales volume:
- a disadvantageous calendar
- higher prices
- a broader environment of uncertainty and unease.
Put them all together and you have a trifecta of influences and conditions that affect sales volume potential in a negative way. Sorry to be the bearer of such news, but it’s better to evaluate the reality as honestly as possible.
George Troy is a widely read blogger, author, and retail consultant. He has enjoyed decades of real-life experience as a senior executive for some of the best-known and most successful retail companies in the US and globally. A specialist in apparel, footwear, sporting goods, cookware, and home furnishings, Troy has led the retail divisions of Decker Outdoor (UGG Boots) and outlet divisions of Williams-Sonoma and Pottery Barn.