Major retailers announced preliminary sales numbers for the holiday season, and as anticipated, brick-and-mortar retail was clobbered by e-commerce.
Once mighty stalwarts like Macy’s, Sears and Kohl’s were counting losses, as Wall Street investors sent their stocks tumbling. The department stores’ vast network of brick-and-mortar locations was now a liability rather than a sign of potential consumer impact. Macy’s and Kohl’s, for instance, saw comparable sales decline 2.7 and 2.1 percent respectively compared to 2015.
In contrast, online sales again this season experienced double-digit growth, reaching a total of $91.7 billion nationally, according to Adobe Digital Insights. Online retail behemoth Amazon.com has not yet reported official numbers, but called 2016 its “best-ever season.”
The negative impact was felt in the Sacramento region’s malls and physical stores, despite a projected rise in consumer spending.
Jeffrey Michael, an economist at University of the Pacific in Stockton, visited the Westfield Galleria in Roseville on Dec. 21, three days before Christmas. To his chagrin, he easily found a parking spot and effortlessly completed his shopping list. The mall patrons, he observed, were mainly congregating at the food court and inside restaurants.
“People are spending, but they’re just shifting more and more of it to online,” said Michael. “There’s no sign of the trend reversing itself anytime soon.”
However, lifestyle centers like the Palladio at Broadstone in Folsom reported increased foot traffic and sales. That’s because the 600,000-square-foot outdoor shopping complex has more to offer than just clothing outlets. Palladio, which is 75 percent leased, now boasts two movie theaters, a Whole Foods Market and several restaurants. A few more eateries are under construction, including a Lazy Dog chain.
“We definitely offer a different kind of experience” than traditional malls, said Gloria Wright, general manager of the Palladio.
Foot traffic hit 700,000 people, up from 500,000 in 2015, according to Wright. Some patrons who came to eat at restaurants later ended up shopping at the handful of retail stores, including national brands like Victoria’s Secret and Nordstrom Rack, Wright said.
$91.7 billion 2016 holiday season national online sales
Of the 70 percent of adults who visited a mall this season, a quarter said they did not shop at a store, according to a survey by the International Council of Shopping Centers. Nearly half reported dining at a restaurant.
“We’re not reliant upon a department store,” said Wright, suggesting that tenants like Macy’s or a full-line Nordstrom are no longer needed to draw people.
Pointing to disappointing sales, Macy’s last week announced it was slashing 10,000 jobs and closing 68 stores across the nation. No locations in the Sacramento area were on the chopping block, however.
Wright added that sales are phenomenal at the Nordstrom Rack, a discount store offering goods a deeply discounted prices compared with Nordstrom.
Despite an improving economy, consumers have remained cost-conscious, according to Garrick Brown, vice president of retail research for brokerage firm Cushman & Wakefield. As a result, off-price chains like Nordstrom Rack, T.J. Maxx, Marshalls and Ross are winning a larger share of the pie.
“The race to the bottom on discounting is killing profit margins,” Brown said. “So much of the traffic around the holiday season is about big promotions.”
Black Friday, which marks the beginning of the season, attracted smaller crowds at Sacramento-area malls and stores. The best discounts and promotions were offered online as well, leading many consumers to shop from home.
Nationally, online transactions hit $3.34 billion on Black Friday, second only to Cyber Monday’s $3.45 billion, according to Adobe.
“Black Friday really caught up in terms of the amount of revenue that it drives,” said Becky Tasker, managing analyst at Adobe Digital Insights.