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Higher prices played a role in online sales hitting record $204 billion over the holidays

A worker moves boxes of goods to be scanned and sent to delivery trucks during operations on Cyber Monday at Amazon’s fulfillment center in Robbinsville, New Jersey, November 29, 2021.
Mike Segar | Reuters

Sales online during the holiday season rose nearly 9% to a record $204.5 billion, Adobe Analytics said on Wednesday, as consumers opened up their wallets to spend on gifts for family, friends and for themselves.

But the uptick in sales was driven, in part, by higher prices on goods from apparel to groceries to appliances, said Adobe, which analyzes 1 trillion visits to retailers’ website.

Online prices increased 3.1% in December compared with the prior year and rose 0.8% month over month. That marked the 20th consecutive month of online inflation on a year-over-year basis, and followed a record year-over-year spike in prices of 3.5% in November, Adobe said.

“It’s definitely a key contributor to the growth but it’s not the totality of the growth,” said Vivek Pandya, lead analyst at Adobe Digital Insights, about the continued inflation. “There’s a level of just innate growth happening in overall retail sales … and we’re viewing the inflation as one of the explanatory factors.”

Consumers have also been buying into more expensive categories, such as jewelry, which could be another factor contributing to the retail sales growth, he noted.

Uptick in items out of stock

And sales might have been even higher if consumers didn’t find so many items online out of stock. Retailers have been tackling supply chain hurdles in recent months, leaving shipments of merchandise delayed during key shopping days. Companies are also grappling with how to work through another surge in Covid cases in the U.S., fueled by the highly contagious omicron variant, that has left many of their workers sick and on the sidelines.

Apparel companies Lululemon and Abercrombie & Fitch said this week that their fiscal fourth-quarter sales will come in lower than previously expected due to some of these constraints. Urban Outfitters said it struggled to keep an assortment of home goods in stock, whereas it could use air freight to bring clothing from overseas.

Consumers saw more than 6 billion out-of-stock messages on retailers’ websites during the holiday period, which runs from Nov. 1 to Dec. 31, according to Adobe. That’s up 10% from year-ago levels and up a whopping 253% compared with the 2019 holiday season, Adobe said.

Still, the stock-out messages might have just pushed consumers to other retailers’ websites in search of sought-after goods.

“The thing about online is you have a bit more flexibility in choice, where if an item it out of stock on one site, you can open up another window browser and look at another site,” said Pandya.

A separate analysis by Salesforce found retailers’ holiday inventories shrank 2% compared with 2020 levels due to lingering supply chain issues.

Shoppers find fewer discounts

As retailers faced higher prices on everything from transportation to labor, and inventory levels were constrained in many categories, that meant discounts were largely less prevalent this holiday season, too. Markdowns of electronics were for 8%, on average, compared with for 21% in 2020, Adobe found. Sporting goods were discounted by 6%, compared with 14% a year ago. Consumer did see greater promotions for apparel and toys, however.

The cadence of shopping also evolved this past holiday season. Retailers were touting Black Friday-type deals as early as October, hoping to spread sales out amid the supply chain pressures and avoid running into a last-minute dash among consumers for presents.

In the weeks leading up to Thanksgiving, from Nov. 1 to Nov. 24, sales online grew 19.2% year over year, Adobe said. Over the five days between Thanksgiving and Cyber Monday, sales fell 1.4%, it said. And from Nov. 30 to Dec. 31, sales on the web grew 5.6% from prior-year levels, as procrastinators looked for last-minute options and shoppers used their gift cards in the days after Christmas.

But some consumers started even sooner, in October. Data from Placer.ai showed visits to Best Buy locations in the U.S. climbed 10.2% that month compared with 2019 levels, while they rose 16.7% at Target, and jumped 14.7% at Dick’s Sporting Goods.

Meantime, Black Friday — the day after Thanksgiving — has been losing its luster as a day for shoppers to flock to malls before sunrise in search of doorbusters.

Placer.ai tracked shopper visits to department stores on Black Friday tumbled across the board versus 2019. Traffic at Macy’s fell 18%, while visits to Nordstrom were down 18.6%, it said. Traffic to Neiman Marcus dropped 20.3%, at Kohl’s traffic dropped 23.1%, and at Dillard’s visits were down 27.3%, according to Placer.ai.

The National Retail Federation, the retail industry’s leading trade group, is expected to release its highly anticipated, final holiday sales results on Friday.

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