Holiday sales tick up as shoppers invest in their homes

Retail sales increased a modest 3% during a longer holiday season this year, as homebound shoppers spent more on furnishing and food but less on clothing and jewellery, according to figures released by a firm that tracks all forms of payments.

The increase fell short of predictions from the National Retail Federation, the nation's largest retail trade group, which had expected sales to rise between 3.6% and 5.2% this year compared to 2019.

As expected, a surge in online shopping fuelled much of spending. Online sales rose a record 49% year-over-year between October 11 and December 24, according to the Mastercard SpendingPulse figures released on Saturday. The figures exclude services, automotive and gasoline sales.

The holiday shopping season was considered longer this year as retailers offered promotions sooner and encouraged customers to get a jump-start to avoid delivery delays. During the traditional holiday period, between November 1 and December 24, retail sales rose 2.4% year-over-year, according to Mastercard's data.

Steve Sadove, senior advisor for Mastercard and former CEO and Chairman of Saks Incorporated, said the surge in online spending and the early shopping was "a testament to the holiday season and strength of retailers and consumers alike.”

Buying trends benefited e-commerce giant Amazon and big-box stores like Target and Walmart, which already had robust e-commerce operations and were allowed to stay open during the pandemic, attracting shoppers who wanted to avoid visiting multiple stores.

But the pandemic has been detrimental for smaller shops, clothing brands and department stores, which had already been struggling to adapt to the rise of online shopping. Already, more than 40 US retailers have filed for Chapter 11 bankruptcy protection since the pandemic started forcing shutdowns in March.

Holiday department store sales fell 10.2% year-over-year, according to Mastercard. Spending on apparel plunged 19.1%, and jewellery sales fell 2.3%.

Shoppers instead invested in their homes. Furniture and furnishing sales increased 16.2%, while spending on home improvement rose 14.1%. Consumers also favoured electronics and appliances, a category where sales rose 6%.

Clothing stores and specialty retailers offered big discounts and promoted curbside pickup in the hopes of rescuing the holiday season and surviving a difficult year. There was some payoff, as online clothing sales rose 15.7%, according to Mastercard. E-commerce sales at department stores also ticked up 3.3%.