Brick-and-Mortar Channels Dominate Holidays

Yes, you read that headline right. Brick-and-mortar sales channels represented 78% of retail sales this past holiday shopping season, according to a company that tracks sales for 900,000 stores in the US.

The problem for brick-and-mortar retailers, though, is that their share of holiday sales is shrinking. eCommerce is taking over.

Let’s talk about numbers. Credit card processor First Data analyzed spending from the end of October to Christmas.

Its data show that holiday spending increased overall by 3.6% over the same time-frame in 2015,

But eCommerce saw a 12% increase in sales. In-store spending only rose by 1.6%.

Online shopping is still far from bumping physical retail altogether, but it is taking a bigger piece of the retail pie with every Christmas shopping season. Online transactions accounted for 15.4% of retail sales in the 2015 holiday season. In 2016, it soared to 21.3%.

Not All Brick-and-Mortar Channels Are the Same

So physical retail still accounts for more than three-quarters of holiday sales in the US. People continue to go to a store to shop, but not for everything. Whether a purchase is made in a store or online will depend on the product itself.

(It also depends on where a customer lives. According to First Data, the biggest growth in brick-and-mortar sales happened in the US west. This presumably will have something to do with the weather. Snow doesn’t keep shoppers home in California.)

eCommerce outpaced in-store sales by an average of 12 percentage points across the seven product categories First Data tracked. The only category in which in-store sales growth surpassed eCommerce was in the Health and Personal Care category for which brick-and-mortar sales came in at 5.7% versus 5.5% growth in online sales.

In-store sales actually shrank for three of the categories. Sporting Goods, Hobby, Books and Music stores reported the steepest decline in sales at -6.9%, while their online sales increased by 19%.

This all jives with the rash of closures among big chain stores over the last couple years, and the rapid growth of online marketplaces. There really isn’t any particular reason for a consumer to buy a popular novel in a physical book store when you have Amazon. It makes sense to go to a store if you have to feel or sample a product before buying it, or if you need advice from a salesperson.