Busting 5 Holiday Shopping Myths That Come Up Every Year

Don't believe everything you read this holiday season.

Andrew Lipsman | comScore

We are now several weeks into the holiday shopping season, one in which many fascinating storylines have emerged.

During the five-day period from Thanksgiving through Cyber Monday, online buying from desktop computers totaled $8.41 billion, up 17 percent versus last year.

Consumers have shifted their online shopping habits, and retailers have changed their marketing strategies to adapt to a digitally driven environment.

For instance, we predict that time spent on mobile will outpace desktop three to one, while purchasing on desktop will still outpace mobile two to one. Due to screen size and other factors, the conversion (sales) rate on mobile is still lagging – even though it’s been improving in recent years.

While there are many positive stories, I believe this season will also bring us the usual staple of outdated and unfounded holiday headlines that simply miss the real story.

Let’s take a look at some myths most in need of debunking.

Myth #1: Half of holiday spending will happen online.

Every year before the holidays we see the results of an online survey suggesting that up to half of holiday spending will be done online.

Often these results get reported as if they are a good approximation of what to expect for the holidays.

However, the percentage of holiday spending that actually occurs online is nowhere near that level.

The Department of Commerce pegged Q4 2015 e-commerce as 8.7 percent of total retail, and comScore’s calculation – which excludes the Department of Commerce categories of Food & Beverage, Gas and Auto Sales for a more apples-to-apples comparison of discretionary retail spending – pegged the number at 15 percent last year.

In each case, the numbers are far lower than online survey estimates.

Why such a discrepancy? Because online survey respondents have a strong skew towards heavy internet usage and the responses reflect that skew.

Past comScore research has shown that online survey respondents engage in many internet behaviors – including online buying – at a rate up to three times that of the average internet user.

myth_chart1

source: comScore

[Also on Longitudes: Back to the Future in e-Commerce]

Myth #2: Weak Black Friday, in-store sales mean the season will be a disaster.

The past two seasons have seen varying levels of hysteria and doomsdayism following unexpectedly weak Thanksgiving weekend spending at brick-and-mortar stores.

In both cases, growth expectations and consumer sentiment heading into the season were reasonably positive, so when the holiday weekend recorded unexpected sales declines, some feared the season was unexpectedly heading for a disaster.

In both cases, this turned out to be false as the seasons experienced healthy overall year-over-year growth rates, including double-digit increases for online spending.

Why, then, the early season troubles and subsequent misreading of its implications?

Because the analysis assumed Thanksgiving weekend sales would be a bellwether for the full season, which has traditionally been the case.

But the past few years have seen an idiosyncratic development emerge that threw off the early-season spending patterns, rendering it an ineffective bellwether for the rest of the season.

That idiosyncratic development? Thanksgiving Day store openings.

A limited amount of stores now open for a few hours in the evening of Thanksgiving Day, drawing out the most avid Black Friday shoppers, many of whom then sit out Black Friday.

With a limited shopping window for a limited set of stores on Thanksgiving, $100 of spending gets pulled forward by a day, but maybe at the expense of $200 spent on Black Friday.

As a result, overall spending for the period has declined, not because of an inherent lack of demand, but because of the unique dynamics of how and when people actually get out to the stores in those first few days of the season.

I’ve described this phenomenon as a Prisoner’s Dilemma for retailers, which I’ve modeled below.

myth_chart2_rev

source: comScore

This game theory concept says that the payoff for retailers would be better if everyone just stayed closed on Thanksgiving. But given the option to open on Thanksgiving, each retailer’s dominant strategy is to open early.

The net result of that decision is a lower payoff than if they had all just remained closed.

Myth #3: The Cyber Monday phenomenon occurs because people have faster internet connections at work.

This myth is a bit dated but persists every year. 

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On the topic of Cyber Monday, for years we had to fight another myth – the common misconception that it was the heaviest online spending day of the year.

When Cyber Monday was first coined in the mid-2000s it was theorized that the spike in online buying on the Monday after Thanksgiving was because internet connection speeds were faster at work than at home.

History has proven that if this was ever a driver of buying at work, it was only marginally the case – and certainly hasn’t been the case for a number of years with high-speed internet connections available almost universally at this point.

What was really going on?

The first factor is simply opportunity, with many workers spending large portions of their days in front of computer screens with internet access.

It has become commonplace for people to take care of some personal tasks on their computers throughout the work day, and during the holiday season, that means doing a little holiday shopping.

With their shopping kicking into high gear during Thanksgiving weekend, it bleeds right into that Monday following the holiday.

Many workers also want to shop for their family members without anyone looking over their shoulder, and doing so from their work computer affords them that privacy.

myths_chart3

source: comScore

Myth #4: Holiday spending is happening earlier because of earlier promotions.

Talk of earlier and earlier promotions gets peddled earlier and earlier every year, and for the most part, it doesn’t correspond to how consumers actually behave.

While it’s true that there are always some anecdotal examples of holiday decorations going up in early October, this narrative incorrectly assumes that shoppers use these signals to ramp up their holiday shopping.

On the contrary, most shoppers are accustomed to shopping in earnest after Thanksgiving, when the deals and promotions are both ubiquitous and compelling enough to substantially change their behavior in a way that spurs buying.

Here’s what we’ve seen in our data over the past few years: There has been almost no distinguishable difference in the portion of annual spending that occurs before and after November.

myths_chart4

source: comScore

Holiday spending as a percentage of total-year, desktop e-commerce spending has been remarkably consistent – around 22 percent.

If there was actually a material pull-forward effect, we would expect to see a steady decline over time along with greater variation in that overall percentage.

There is also a question of whether spending is moving to pre-Thanksgiving weeks in November. But recent evidence suggests that is also not the case.

myths_chart5

source: comScore

Going back the past three holiday seasons, I plotted out the cumulative share of retail spending by week for the nine comparable-day shopping weeks that cover the bulk of the season. (For this analysis, using comparable shopping days is preferable to calendar dates.)

The consistency in share of cumulative spend by week showed remarkable consistency across all three years, particularly by Week Four, which is the week before Thanksgiving.

If spending were being pulled forward every year, we’d expect to see that percentage by Week Four increasing in each subsequent year.

That has not been the case.

Myth #5: Major holiday snowstorms provide a significant boost to e-commerce.

This myth usually pops up at least once during the holiday season and oftentimes in January or February when snowstorms might be the heaviest.

The logic goes: If a big snowstorm hits and people are confined to their houses and can’t hit the stores, they’ll turn to their computers and phones for shopping instead.

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The myth isn’t really that snowstorms can’t affect shopping patterns, it’s the magnitude of the effect.

Now, let me be clear, there’s a logic to this, and it probably does happen on some level.

The myth isn’t really that snowstorms can’t affect shopping patterns, it’s the magnitude of the effect and the implication that it will materially affect aggregate spending.

When we’ve examined the impact of major weather events on online spending patterns in specific local markets, we’ve never seen more than a minor impact, and it washes out when averaging in the affected market with the rest of the U.S.

And it washes out even further when taken in the context of a full holiday shopping season, since even bad snowstorms tend to leave shoppers home-bound for only a day or two.

The other mitigating factor is that bad snowstorms often leave people without power, which significantly hampers their ability to shop online.

Holiday headlines need a critical eye in 2016

When we see these narratives once again this year, let’s agree that we won’t simply take them at face value.

We have every reason to believe that 2016 will be one of the strongest – if not the strongest – holiday seasons in terms of year-over-year e-commerce growth since the financial crisis.

All relevant indicators are pointing in a positive direction.

Gas prices remain low, unemployment is low, wage growth is up and spending growth rates this year have been especially robust.

If we see some early headlines that read like the sky is falling or that consumers are suddenly channel-shifting by orders of magnitude more than previous years, let’s hold off on hitting the panic button.

Sit back, take another sip of eggnog and enjoy yourself – after all, it’s the most wonderful time of year! goldbrown2

This article originally appeared on ComScore and was republished with permission. 

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Every morning, wake up to the blog that gives you the latest trends shaping tomorrow.

Andrew Lipsman is Vice President, Marketing & Insights at comScore, covering multiple industries and overseeing the company’s marketing communications, insights and thought leadership initiatives.

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