Holiday Sales Miss Expectations: What the Latest Numbers Mean for Retailers and Designers

Retail sales during the holiday season came out looking less than stellar. Here's what that means for the economy in 2019.

Alison Martin
02/15/2019
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Photo: Pexels

The U.S. Census Bureau released some startling numbers on the recent holiday season shopping numbers, and they didn't provide a lot of optimism for economists and the stock market. The bureau found that there was a 1.2 percent drop in sales in December from November, a month usually bolstered by holiday shopping. December sales were up 2.3 percent over December 2017, but still much lower than economists previously predicted.

But not everyone is sure how to process these numbers and understand what they mean, including the National Retail Federation (NRF). In a press release, Chief Economist Jack Kleinhenz said, “Today’s numbers are truly a surprise and in contradiction to the consumer spending trends we were seeing, especially after such strong October and November spending."

And for furniture and home furnishings stores? The NRF found that year-over-year changes in November and December in furniture and home furnishings stores were unchanged at $22.6 billion. 

Furniture and lighting retailers and interior designers should be paying close attention to these reports, but there's a lot being said right now. Here's a rundown of the Census Bureau and NRF's reports and what it all means for the home design business.

Unpacking the reports

As mentioned, retail sales did grow by 2.3 percent over last December, and total sales for the 12 months of 2018 were up 5 percent over the previous year. For reference, the NRF predicted holiday sales in November and December in 2018 would increase between 4.3 and 4.8 over the previous year.

On Thursday, The Wall Street Journal reported that the 1.2 percent drop between November and December was actually the largest month-to-month drop since September 2009. This was also startling to economists because the holiday shopping season in December usually bolstered sales for the month. A drop at a time when nearly everyone should be spending is concerning.

The reason for some of the confusion surrounding the Census Bureau's numbers comes from the collection method. The Census Bureau could not collect data during the government shutdown last month, which lasted for over a month. Additionally, earnings reports from retailers, while not bullish, weren't too disappointing. With all this in mind, some economists and industry experts wondered if the Bureau had processed numbers and figures too quickly, though the Commerce Department says surveys were returned as expected.

“All signs during the holidays seemed to show that consumers remained confident about the economy,” NRF President and CEO Matthew Shay said in a released statement. “However, it appears that worries over the trade war and turmoil in the stock markets impacted consumer behavior more than we expected. There’s also a question of whether the government shutdown and resulting delay in collecting data might have made the results less reliable."

In short, economists just aren't sure how to read these numbers and couple them with other happenings and reports. The stock market, for example, has been volatile these last few months, but unemployment remains low. Trade tensions also may have convinced consumers to save more and spend less.

"It’s very disappointing that clearly avoidable actions by the government influenced consumer confidence and unnecessarily depressed December retail sales,” Shay concluded.

What this means and what to do

Although experts might be skeptical about the numbers, there's no denying that they don't look good for the economy as a whole. As an industry that mainly relies on discretionary spending, furniture and lighting retailers, as well as interior designers, should be watching closely.

Though unemployment remains low, consumers may be holding onto more money than usual to save it in case tariffs begin affecting products they use every day (and the 25 percent will definitely hit consumers in their wallets at the grocery store and elsewhere). As holiday bonuses came out, there's also the chance that consumers chose to throw that money at bigger expenses — health bills, student loans or expensive necessities like home repairs.

Retailers and designers do not need to panic about the economy just yet. The NRF is anticipating a slowdown in growth in 2019 compared to 2018, and the uncertainties regarding the U.S.-China trade war aren't helping matters. In fact, the uncertainty of it all is what's causing more problems than anything.

So if you shouldn't panic, what should you be doing to anticipate any slowdowns and tariff concerns in the market?

- Stay updated on economic news. Whether you prefer The Wall Street Journal, Bloomberg, NPR or any other business-centric publication, subscribe and keep yourself informed. There are also a number of great economic business podcasts if you need news on the go.

- Monitor your sales data from the last year closely. Look at what products are selling well and what's not. Analyze trends in color, finishes and fabrics that may be popular with your customers. 

- Develop a strong niche for your business that makes it stand out from your local and online competition. It's not enough that your business has great customer service and products. What is it that your business does extremely well and makes it worth it for consumers to leave their homes and visit your store?

- Start developing a plan for High Point Market in April or the upcoming summer markets. Reach out to your manufacturers and reps to find out how they're planning to handle tariffs if the 25 percent goes into effect. It is not realistic to expect manufacturers to shoulder the whole cost, so think about how you might handle tariffs and where you might increase prices.

 

Retailers and designers: tell us! How are you thinking about the economy for 2019? Share with us in the comments!

Photo: Pexels

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