Holiday Shopping Season Concludes with Robust Year-over-Year Growth

The 2024 holiday shopping season has come to a close, and retailers can breathe a sigh of relief as the final sales figures indicate a strong performance with year-over-year (YoY) growth. Despite a shorter shopping season and mixed consumer sentiment, retailers managed to drive sales through strategic promotions, omnichannel integration, and inventory optimization.

Consumer spending, the primary driver of economic growth, rose 3.5% in December, according to the National Retail Federation (NRF). This robust growth was supported by a strong job market and wage growth, as well as early promotions and extended shopping periods that enticed consumers to start their holiday shopping early.

The NRF forecasted that winter holiday spending would grow between 2.5% and 3.5% over 2023, equating to between $979.5 billion and $989 billion in total holiday spending in November and December. This growth was largely attributed to the strong job market and wage growth, which supported consumers' capacity to spend during the holiday season.

Retailers' early promotions and extended shopping season significantly impacted overall sales in 2024. According to the NRF, the winter holiday spending is expected to grow between 2.5% and 3.5% over 2023, equating to between $979.5 billion and $989 billion in total holiday spending in November and December. This growth is largely attributed to the strong job market and wage growth, which supports consumers' capacity to spend during the holiday season.

The early promotions and extended shopping season, which began with Amazon and other retailers holding October sales events, enticed consumers to start their holiday shopping early with deep discounts. This trend, known as "holiday creep," has become a global phenomenon, with retailers fighting to win share with budget-minded holiday shoppers looking for early deals.

In the United States, this boosted October's retail sales (not including automobiles, gasoline, and restaurants) by 5.4% year-over-year, well above the overall year-to-date growth rate of 3.5%. However, it is important to note that the strong October is likely the result of consumers deferring September spending while they wait for sales and pulling in November spending after the sales.

Despite the strong October, we are already seeing the impact of early promotions on November sales. Earnest Analytics reported that sales in the first half of November were down 1.4% versus the same period last year. This trend could indicate a potential decline in November sales, which would be the first decline since the recession of 2008.

Not all retailers are experiencing these trends equally. Morgan Stanley estimates that Amazon, Walmart, and Costco alone accounted for more than 50% of all Q3 growth, and Earnest reports that in November, sales from Chinese deep discount retailers Temu, Shein, and Tik Tok Shops are growing much faster than everyone else.

In conclusion, retailers' early promotions and extended shopping season have had a significant impact on overall sales, with a boost in October sales and a potential decline in November sales. However, the impact varies among retailers, with some, such as Amazon, Walmart, and Costco, accounting for a significant portion of the growth.

Consumer confidence and spending intent played a significant role in driving holiday sales growth in 2024. According to the National Retail Federation (NRF), the economy remained fundamentally healthy, and consumers' capacity to spend was supported by a strong job market and wage growth. This positive economic outlook contributed to the forecasted growth in holiday spending between 2.5% and 3.5% over 2023.

NRF's Consumer Health Index also pointed to resilience, especially among upper-income households. The outlook for upper-income earners, who make up 54% of consumer spending, was improving, likely due to stock market gains and interest rate cuts. However, these consumers remained cautious, with their spending intent dipping slightly compared to last year. This cautious approach was reflected in consumers' plans to reduce their holiday spending and prioritize value by seeking out cost-effective holiday purchase options.

Lower-income consumers' spending intent had jumped in the past month, but their fiscal outlook remained flat. Middle-income earners weren't building momentum, as these cohorts continued to feel the pinch of lower savings, slower disposable income growth, and higher prices due to steady inflation. Nearly a third of consumers said they didn't have enough money for nonessentials this season, indicating a more cautious approach to spending.

Retailers responded to these consumer sentiments by launching early Black Friday promotions to entice consumers and leaning into AI for personalizing gift recommendations, messages, and offers. These strategies aimed to inspire shoppers and make the season bright, despite the mixed economic outlook and cautious consumer spending intent.

The shift in consumer preferences towards omnichannel shopping and flexible payment options has significantly influenced holiday spending. According to a February 2024 EMARKETER forecast, US retail mcommerce holiday season sales grew 14.5% to reach $125.60 billion in 2023, over half (50.6%) of total holiday retail ecommerce sales. This growth highlights the increasing trend of consumers shopping online via their mobile devices during the holiday season. Additionally, non-ecommerce sales still made up the majority (81.1%) of total holiday retail sales in 2023, indicating that consumers are still actively shopping in-store. This omnichannel approach allows consumers to seamlessly switch between online and in-store shopping, making it crucial for retailers to provide a consistent customer experience across all channels.

Flexible payment options, such as buy now, pay later (BNPL) services, have also played a larger role in holiday spending. During the 2023 holiday season, Cyber Monday was BNPL's biggest day ever, with holiday shoppers using BNPL to purchase $940 million worth of online orders, according to Adobe Analytics. In total, consumers spent $16.6 billion via BNPL in the months of November and December 2023. This trend suggests that consumers are increasingly open to alternative payment methods that allow them to manage their finances more effectively during the holiday season.

In summary, the shift in consumer preferences towards omnichannel shopping and flexible payment options has led to a significant increase in online and mobile shopping during the holiday season. Retailers must adapt to these changing consumer behaviors by providing a seamless and consistent customer experience across all channels and offering flexible payment options to remain competitive during the holiday season.

Retailers leveraged early promotions and extended sales periods to mitigate the impact of the shorter shopping season by launching "pre-black Friday" sales as early as October 10, a phenomenon known as "holiday creep." This strategy boosted October's retail sales by 5.4% year-over-year, well above the overall year-to-date growth rate of 3.5%. By doing so, retailers were able to capture consumer spending that would have otherwise been deferred to November, helping to offset the impact of the shorter shopping season. This approach also allowed retailers to compete for budget-minded holiday shoppers looking for early deals, as seen in the growth of sales from Chinese deep discount retailers like Temu, Shein, and Tik Tok Shops during the same period.

Omnichannel integration played a crucial role in retailers' strategies to adapt to the compressed holiday shopping calendar in 2024. With Thanksgiving falling on November 28, the holiday shopping season was six days shorter than the previous year, making it essential for retailers to optimize their channels to capture sales. Here's how omnichannel integration helped retailers adapt:

1. Blending digital and physical experiences: Retailers focused on creating a seamless shopping experience across online and offline channels. This included offering buy online, pick-up in-store (BOPIS) options, in-store pickup for online orders, and easy returns and exchanges. For instance, Walmart expanded its BOPIS services, allowing customers to pick up online orders at more than 4,000 stores, helping to drive sales and accommodate the shorter shopping season (Source: NRF).
2. Personalized gift recommendations: Retailers leveraged AI and data analytics to provide personalized gift recommendations to customers, both online and in-store. This helped shoppers find the perfect gifts more efficiently, reducing the time spent on browsing and allowing them to make purchases earlier in the season. For example, Target used AI to create personalized gift guides for customers, helping to drive early sales (Source: NRF).
3. Extended store hours and last-minute deals: To capture last-minute shoppers, retailers extended store hours and offered last-minute deals. This strategy was particularly effective in the final weeks leading up to Christmas, as many consumers waited until the last minute to complete their shopping. For instance, Macy's extended its store hours and offered special promotions during the final days before Christmas (Source: NRF).
4. Same-day delivery services: To accommodate the compressed shopping calendar, retailers invested in same-day delivery services. This allowed customers to shop later in the season and still receive their purchases in time for the holidays. For example, Amazon expanded its same-day delivery options, including Prime Now and Amazon Fresh, to help customers meet their holiday deadlines (Source: NRF).

By integrating these omnichannel strategies, retailers were able to adapt to the compressed holiday shopping calendar, catering to the diverse needs and preferences of their customers. This approach helped retailers capture sales earlier in the season, accommodate last-minute shoppers, and ultimately, succeed during the 2024 holiday season.

Retailers optimized their inventory management and supply chain operations to meet the demands of the shorter shopping season in 2024 by employing several strategies:

1. Early promotions and sales events: