The Holiday Shopping Season: A Retail Reality Check
As the holiday season approaches, conventional wisdom suggests that November and December are make-or-break months for retailers in the United States. The National Retail Federation projects Americans will spend between $979 and $989 billion during these two months, with the average consumer expected to shell out $902 on gifts and holiday-related purchases.
But does this festive shopping spree truly define a retailer's annual success? The answer is nuanced. According to U.S. Census Bureau retail sales figures, the impact of holiday shopping varies dramatically across different retail sectors.
If retail sales were evenly distributed throughout the year, November and December would naturally account for 16.7 percent (or 2/12) of total annual sales. However, the reality is far more complex. Some retailers experience a significant holiday boost, while others see minimal gains—or even potential challenges.
Take hobby, toy, and game stores, for example. These retailers generated an impressive 26.2 percent of their annual sales during the last two months of 2023—a statistic hardly surprising given the popularity of toys and games as Christmas gifts. However, this heightened performance isn't universal across all retail categories.
Surprisingly, across all retail sectors, the holiday season accounted for just 18.4 percent of total U.S. retail sales last year. Some retailers actually view the holiday period with less enthusiasm. Car dealerships, gas stations, office supply stores, and building material suppliers typically don't see the same seasonal bump as other retail segments.
This nuanced landscape reveals that while the holiday season is undoubtedly important, it's not a one-size-fits-all proposition for retailers. The notion of make-or-break holiday sales is more myth than universal truth, with success depending heavily on the specific retail sector and individual business strategies.
After more than two years of high prices, high interest rates, and high economic uncertainty, American consumers would have been excused to cut back on their spending this holiday season. That doesn’t seem to be the case, however, as forecasts point towards new spending records this year.
The National Retail Federation expects consumers in the U.S. to spend an average of $902 on core holiday items including gifts, decorations, food, and other holiday-related purchases this year, up $27 or 3.1 percent from last year's holiday budgets. When it comes to where Americans will be splashing their holiday cash, 57 percent of people said they'd shop online while 46 percent plan to go to a department or grocery store. Discount stores are also a popular shopping destination, perhaps owed to people's need to keep their spending in check.
So while it seems that many Americans like to avoid the crowds and do most of their holiday shopping online, physical stores still have a role to play during the year's busiest shopping season. In terms of getting into the Christmas spirit, shopping for gifts at a nicely decorated store while the store radio plays some holiday classics beats hunting for bargains online every time.
The holiday season really is the season to shop online. While it’s a long-established fact that retail sales move with the seasons, typically spiking in the holiday quarter, e-commerce sales follow the same pattern to an even larger extent. According to data from the U.S. Census Bureau, the share of e-commerce sales in total retail sales is significantly higher in the fourth quarter of each year than it is for the remaining nine months. In Q4 2023, for example, e-commerce sales accounted for 17.1 percent of total retail sales in the U.S. - an all-time record and significantly higher than the average share of 14.7 percent for the remaining three quarters of the year.
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Our chart also illustrates the growing importance of e-commerce overall, with the share of e-commerce sales in total retail sales growing from less than 5 percent in 2010 to more than 15 percent last year. The COVID-19 pandemic has accelerated this shift as online sales uncharacteristically spiked in Q2 2020 and remained at a higher level ever since. Interestingly the holiday season spike in online shopping’s share of total spending is less pronounced now than it was in pre-pandemic times. In 2021, 2022, and 2023 the fourth quarter e-commerce share was 13, 16 and 16 percent above the Q1-Q3 average, respectively. Before the pandemic, the difference was typically 25 to 30 percent, indicating that e-commerce now plays a larger role throughout the year.