Levin Retail Sentiment Survey Reflects Positive Outlook on 2016

Lower Gas Prices, Job Growth, and the Housing Market Will Bolster Sales this Year

Store managers in our 95-property, 13 million-square-foot portfolio told us they feel good about the year ahead during our annual January Retail Sentiment Survey. This is particularly good news considering that the poll was conducted at the outset of the current stock market volatility.

In fact, an impressive 68.1 percent of the survey respondents said they are optimistic about 2016. “We really are at a transitional time for retail, with factors like positive job growth, low gas pricing and the housing market uptick working in the industry’s favor,” noted Levin President Matthew K. Harding.

Mixed with the good news was some uncertainty about the specifics of 2016’s performance, with 20.5 percent of participants undecided about what exactly to expect. “The unseasonably warm fall and early winter, and what has become a longer –and therefore more diluted – holiday shopping season impacted sales for some retailers,” Harding said. “As such, it makes sense that our tenants are expressing some remaining uncertainty.”

Our survey mirrors leading industry sources, who are also predicting a respectable 2016 performance. Kiplinger anticipates retail will grow approximately 4 percent. Trading Economics expects 3.6 percent growth.

2015 Sales Showed Modest Upward Momentum Nationally

The U.S. Department of Commerce announced in January that 2015 retail sales were up only 2.1 from 2014 (for context, 2014 sales were up 3.9 percent over 2013). And the National Retail Federation reported moderate 2015 holiday season sales growth of 3.0 percent, down from its forecasted growth of 3.7 percent. Our survey, as well, showed modest momentum in both year-over-year and holiday sales.

Nearly 53.0 percent of survey respondents reported 2015 sales at the same level or higher than 2014. This figure is up from 51.7 percent and 49.4 percent reporting same/higher sales in our January 2015 and 2014 polls, respectively.

The majority of our respondents also reported a generally positive 2015 holiday shopping season, with 58.0 percent reporting sales at the same level or higher than 2014. And 57.0 percent reported that shopper traffic at the same or higher level than in the 2014 holiday season. While these figures are slightly lower than last year’s poll (63.6 percent reported same/higher sales; 60.0 percent reported same/higher traffic), they still outpace the prior year (50.6 percent reported same/higher sales; 48.2 reported same/higher traffic).

A Retail Real Estate Trend: Online and Bricks-and-Mortar Converging

Our survey and other industry reports, like RetailNext’s Retail Performance Pulse, reflected the strength of bricks-and-mortar retail during the holidays. In fact, the International Council of Shopping Centers’ Holiday Consumer Purchasing Trends Study revealed that 91 percent of consumers shopped in physical stores during the 2015 season. ICSC also reported that 32 percent of shoppers made purchases online and picked them up in physical stores; 76 percent bought additional items in the same or an adjacent store.

“We are witnessing a growing synergy between in-store and online purchasing, and its benefits for bricks-and-mortar,” Harding pointed out. “Increasing demand for this type of technology-driven, omni-channel retailing will play a big role in 2016. Bricks-and-mortar and online are converging. And it appears our tenants are gearing up accordingly.”

Looking Forward: More Than a Retail Trend, Tech is Driving Results

More than half (50.9 percent) of our survey respondents plan to add or enhance their tech-based marketing efforts in 2016 with mobile apps, social media, email and text messaging.

Approximately half indicated their company has changed its business model in response to the growth of e-commerce. The most popular adaptations include enhanced in-store services and incentives, added in-store pickup and returns option for online purchases, and generally increased collaboration between online and bricks-and-mortar. Among the retailers that have revised their business models, 40.6 percent reported a positive impact on sales.

Crystal Ball Time: What will 2016 Hold for Retail? New Stores and Right-Sizing

What’s ahead? “It remains to be seen whether the recent stock market shake-up will have a long-term impact,” Harding concluded. “We all hope to see a fairly rapid correction. Should that take place, the retail industry is likely to maintain growth momentum well into 2016.”

In some cases, this means new stores – good news for retail real estate companies like ours. More than one quarter (28.4 percent) of the store managers in our survey indicated their company planned additional locations this year. “We anticipate that smaller footprints will be the norm as retailers continue to right-size and make shifts to incorporate e-commerce into their operations,” Harding noted.

We also asked retailers if they observed shifts in the hiring climate as the unemployment rate continues falling. Their feedback indicates about 44.0 percent are noticing changes, most prominently in the areas of applications by fewer qualified job candidates and increased demand for higher starting salaries.

“U.S. unemployment inched down to 5.0 percent last month, and if this trend continues it will likely have a growing impact on retail hiring,” Harding pointed out. “This is an area we will be focusing on more closely in upcoming surveys.”

Levin’s next Retail Sentiment Survey will be conducted in June, reporting mid-year progress and exploring technology issues.

U.S. Consumer Sentiment Bodes Well For Holiday Sales

NRF Projects Rise of 3.7 Percent over 2014; All Eyes on Black Friday

According to a recent NPD Group survey of 3,600 adults, U.S. shoppers are looking forward to the winter holidays this year. Eager to catch a break from “what’s going in the world” and wanting “to give to the less fortunate” are the main reasons given for the positive sentiments. Whatever’s behind their holiday outlook, 15 percent of those surveyed plan to spend more than last year and 16 percent plan to spend less (down from 20 percent in 2014). That’s the smallest gap between the two groups in the last three years. The glass looks half full as we head into the make-or-break season, and as a leader in retail real estate, we’re watching for the opening salvo – Black Friday – and what it might indicate for the final stretch of 2015.

Modest Rise in Holiday Sales Projected by Major Retail Trend Watchers

After a sluggish 2015, will retailers get a rush of spending in the year’s closing weeks? The National Retail Federation has projected an increase of 3.7 percent, totaling $630.7 billion in sales for November and December and slightly below last year’s 4 percent advance. Deloitte LLP is more optimistic, predicting an upward tick of “as much as” 4 percent. Alix Partners’ view is more sober at 2.8 to 3.4 percent. Whichever number eventually materializes, it seems that the retail trend toward bargain-hunting will continue, with buyers as the ultimate winners.

“Americans remain torn between their desire and their ability to spend. The fact remains that consumers still have the weight of the economy on their minds,” said NRF President Matthew Shay. Despite low energy prices and a strengthening job market, the economy is not in full recovery and not all boats have been lifted by the rising tide. Stagnant hourly wages at the lower end of the economic spectrum have restrained a substantial segment of consumers.

PwC describes today’s shoppers as divided into two groups: “survivalists” and “selectionists.” The border between the two is a household income of $50,000. Those below that mark will seek bargains this holiday season, planning to spend $631 less than last year. Those above, who are planning to boost seasonal spending by $1,331, will gravitate toward personal electronics and experiences (travel and entertainment). But, because of the power of the Internet, shoppers in both groups will be able to search for and find the best deals for almost everything on their wish lists, using dozens of websites with up-to-the-minute news on Black Friday specials.

Once a Retail Trend, Now a Retail Institution, Will Black Friday Bounce Back from 2014s Fall-off?

The winter holidays are a crucial season for many retailers, with the major chains dependent on November and December activity for as much as 30 percent of their annual sales. Black Friday, the unofficial opener to the season, holds special significance. A consistent winner for the past dozen years, Black Friday’s sales fell off 11 percent in 2014, with four-day total sales of $50.9 billion, down from $57.4 billion in 2013. This includes both in-store and online.

Amazon Will Open the Season on November 1, But Wal-Mart Will Finish on Top

No retailers are waiting for the day after Thanksgiving to launch holiday promotions. First out of the gate on November 1 will be Amazon with its “Countdown to Black Friday” promotion. From there, the frenzy will continue, peaking on Black Friday but continuing through the holiday weekend before slipping into online’s own Cyber Monday.

If Black Friday itself turns in a disappointing performance, trend watchers say, it will likely be the result of a time frame that has stretched from one day to two to now a full month. BestBlackFriday.com, a website that tracks seasonal retail activity, predicts that Friday sales will slip 3.3 percent to $8 billion. Thanksgiving Day will get a bump of 18.8 percent. Together, the two days will see online sales up 33.3 percent from 2014.

As Black Friday 2015 becomes retail history, promotion will continue to surge from Cyber Monday to Green Monday (the second Monday in December), all the way to the final holiday shopping week, when in-store sales are expected to spike. At the season’s end, retail watchers predict, Wal-Mart will emerge the big winner. Its multi-channel strategy includes their one-hour in-stock guarantee policy, online exclusives on a powerful website, and irresistible in-store pricing on the hottest holiday items.

Interested in more trends and predictions for Black Friday, visit: http://www.twice.com/news/statistics/top-10-black-friday-2015-predictions/58759.

Annual Post-Holiday Survey: Seasonal Cap Positive Year

Retailers Ramping Up Staffing and Tech-Related Marketing for 2015

The results of our annual Post-Holiday Retail Sentiment Survey are in and the news is good. Participating store managers in our 95-property, 13.0 million-square-foot shopping center portfolio reported a healthy rise in both yearly and holiday sales and traffic. Optimistic as a result of 2014’s performance, they’re also ramping up staffing and planning to put more technology into their marketing mixes in anticipation of continued momentum. That’s a retail real estate trend we like.

Our Research Mirrors NRF and ICSC Polls, But with Sales and Traffic Higher

Mirroring findings of the National Retail Federation (NRF) and the International Council of Shopping Centers (ICSC), 63.6 percent of our survey respondents reported 2014 holiday sales at the same or higher levels than 2013’s. Last year, only 51.2 percent reported sales at the same or higher level year over year. The NRF reported a smaller rise of 4.0 percent in total holiday retail sales, which include November and December sales, while ICSC reported a 3.6 percent increase.

An impressive, though slightly smaller, percentage (60.0 percent) of our survey respondents also reported the same or higher traffic to their stores this year compared to the 2013 holiday season. That said, retail analytics firm RetailNext Inc. reported a 7.1 percent year-over-year decline in traffic at brick-and-mortar stores during December.

What accounts for the more robust numbers from our managers? Our survey is conducted at the grassroots level and involves a regional mix of local, regional and national retailers, while many larger, national studies focus on ‘big picture’ corporate earnings or only major retail organizations. That differentiates our study, which sometimes counters what others report – like in the case of holiday traffic. This different approach gives a picture of what merchants are seeing at the ground level, in realtime.

Retailers Expectations Met or Exceeded by 2014 Holiday Shopping Season

Since our survey measures the sentiment of retailers along with sales and traffic, expectations are an important element. And 2014 scored well. According to our participants, the 2014 holiday season met expectations (44.4 percent) or exceeded them (24.4 percent). For context, last year only 13.4 percent of respondents said that their holiday season was better than they thought it would be.

Two Holiday Sales Peaks Are Emerging as a Retail Real Estate Trend

Seasonal sales peaked earlier for a larger percentage of our responding managers this year. For 15.9 percent, sales spiked before Thanksgiving, and for 19.3 percent they peaked during the Thanksgiving/Black Friday weekend (compared to 12.8 percent and 15.4 percent, respectively, in 2013). That percentage dropped off in early December and then surged, with 26.1 percent reporting a peak during the weekend before Christmas.

Retailers have been promoting the Black Friday sales push earlier and for longer, which has extended that buying period to include more and more of November. The slowdown early in December and spike just before Christmas likely reflect emerging patterns in online shopping, with consumers returning to physical stores as the holiday nears and shipping deadlines become tight. RetailNext’s study supports this observation, citing December’s “bookend” performance for brick-and-mortar stores.

Holiday Staffing Levels Expected to Stick

While some sources reported a drop in seasonal retail hiring in 2014 (including consulting firm Challenger, Gray & Christmas, Inc., which reported a 4.0 percent drop), a significantly larger percentage of our survey respondents hired temporary workers during the holiday season – 43.3 percent vs. 33.7 percent in 2013.

Even more encouraging, 62.0 percent of those say they intend to retain some of those positions in 2015. That’s a big jump over last year, when only 40.5 percent said that they would transition seasonal workers to permanent staff. And while the percentage is down year-over-year, nearly one third (31.5 percent) of survey respondents anticipate their companies will open new stores in 2015. We see this as really good news, especially in light of January announcements of store closings and layoffs by Macy’s, JC Penny and other large retailers. It’s good news for commercial retail leasing too!

Use of Tech in Marketing Is a Retail Trend Thats Here to Stay

In recent Retail Sentiment Surveys, we’ve closely tracked our tenants’ growing use of technology in marketing, and the trend appears to continue unabated. For the holidays, 74.2 percent of survey respondents incorporated technology such as mobile apps, social media, email and text message marketing into their promotional mix. Among those respondents, 63.2 percent said they believe the efforts bolstered holiday sales performance. Additionally, 44.9 percent of all respondents indicated they will add or enhance marketing efforts involving technology in the coming year.

Technology innovations are entrenched in how the retail industry does business, and our survey pool reflects this. Our respondents are seeing direct benefits, especially in social media, mobile apps and email. It is encouraging to hear how these new tools are making a difference.

Several third-party reports support our findings. The Consumer Electronics Association indicated more than half of shoppers who use mobile devices prefer to look up information while shopping, rather than talk to store employees. And BDO recently found that 84 percent of retailers are using social media, with this platform projected to comprise an average of 19 percent of their marketing efforts this year.

2014: All Around It was a Very Good Year

The U.S. Census Bureau announced a 4.0 percent rise in retail sales in 2014. Over half of our survey respondents (51.7 percent) reported 2014 sales levels above or the same as 2013, a slight uptick from the 2013 post-holiday survey, when just under half (49.4 percent) reported the same or higher sales year over year.

Levin’s retailers feel good about what 2015 will bring. A full 67.0 percent of respondents are optimistic about the coming year’s potential. And it’s important to note that this percentage is higher than the average for the prior three years (65.1 percent).

Retailers have reason to be positive. Overall indicators for the retail industry point to further positive momentum. Gas prices are down. Unemployment is down. And consumer confidence and spending are rising. We expect continued steady growth in the near term, and our tenants appear to mirror this sentiment.

Levin’s next retail sentiment survey will be conducted in late May and early June, gauging mid-year performance. Watch for the results here on our blog.

Outlook on Holiday Retail Sales is Optimistic

But Analysts Present a Mixed Picture of How Robust the Increase Will Be

After a tepid back-to-school season and with Black Friday just weeks away, all eyes in retail, including retail real estate, are fixed on analysts’ predictions for 2014 holiday spending. The majority of the announcements are cause for good cheer, with major forecasts from such sources as the bellwether National Retail Federation (NRF), pointing to healthy increases over the 2013 season. The question seems to be not whether there will be a spike in sales, but how much of a rise we can expect.

In General, a Bright but Mixed Picture of Crucial Retail Holiday Season

The National Retail Federation predicts that 2014 holiday sales will increase 4.1 percent for a total of $616.9 billion. That’s a full percentage point ahead of 2013’s gain and well above the ten-year average annual rise of 2.9 percent. Jack Kleinhenz, the trade organization’s chief economist, cites increases in employment, disposable income and the number of shopping days in this year’s calendar among the contributing factors. But don’t pop the champagne corks prematurely. The Wall Street Journal observed that the NRF’s forecasts have failed to match actual sales for the past six years. Other major retail analysts, however, mirror the NRF’s outlook for the upcoming season.

In September, Deloitte predicted a rise of 4 to 4.5 percent in holiday sales, which would be the biggest increase in at least three years. Alison Paul, Deloitte’s vice chairman and retail distribution section leader, said in a widely quoted interview that there is “a psychological glow of people generally feeling better about the economy” as a result of increased employment and rising personal income.

AlixPartners delivered an even more optimistic vision of the holiday ahead, predicting an increase in sales of as much as 4.9 percent. Like Deloitte and the NRF, they cited the improving economy, including falling gas prices and unemployment rates, as the reasons why shoppers can be expected to open their wallets wider this year.

Prosper Spending Score, based on their recent consumer survey, sees an 8 percent leap from 2013’s levels. The engine driving their outlook is feedback from upper-income households ($75,000+ per year) who maintain a spending score that is 13.2 percent higher than the overall average. Of interest to the retail real estate market is Prosper Spending Score’s predictions about the performance of individual retailers. According to their consumer research on 150 retailers, Gap, Amazon, Macy’s and Nordstrom are among those expected to be top holiday performers.

PricewaterhouseCoopers Says Cash-Strapped Consumers Point to Sales Drop

The sole dissenter among the major analysts is PricewaterhouseCoopers, who has predicted that average household holiday spending will drop by 6.9 percent from last year’s levels for an average outlay of $684 in 2014. Their projection is based on a poll of 2,200 U.S. consumers, who, in spite of a stable level of inflation, cited concerns over rising costs in food, transportation, housing and health care as motivators to cut their holiday spending. “The consumer doesn’t believe the economy has necessarily improved,” said Thom Blischok, chief retail strategist of PwC’s Strategy& unit (formerly Booz & Co).

There’s Agreement on One Thing: Online Looks Bigger Than Ever

The forecasters seem to be of a single mind about one thing for the 2014 holiday season: online will continue to be the star performer. Deloitte projects a spike of as much as 14 percent in online and mail-order sales, while Shop.org predicts an increase of between 8 and 11 percent. That’s good news not only for online retailers but for shipping companies like UPS, who is expecting to hire as many as 95,000 temporary employees. Total seasonal retail hiring is anticipated to range from 725,000 to 800,000.

But online shopping isn’t the only role electronic devices will play. Digital interactions will influence 50 percent of in-store sales as savvy shoppers research products and compare prices via their computers and mobile devices. Retailers are responding by optimizing their websites for mobile platforms and supplying their sales associates with tablets for in-store customer support.

Gift cards will continue to be top sellers and the most popular gift category will be electronics. Apparel sales may lag except among those retailers with a trendy inventory supported by a strong web presence.

Despite Solid Outlook, NRF Advises Retailers to be Cautious

The most wonderful time of the year may be about to arrive, but retailers are still advised to be aware of consumers’ continued price sensitivity. “Recognizing the need to keep household budgets in line, we expect shoppers will be extremely price sensitive as they have been for quite some time,” said NRF President and CEO Matthew Shay. “The lagging economy, though improving, is still top of mind for many Americans.” He advises retailers to respond by “differentiating themselves and touting price, value and exclusivity.” Promotions, though perhaps not as prevalent or as deep as last year, will continue to play a role.

What do Retailers Think About Holiday 2014? Levin Survey Looks for Answers

Levin Management is one of the retail real estate companies that conducts regular surveys of tenants in their shopping centers. Our annual Pre-Holiday Retail Sentiment Survey is currently in progress and we expect to release the feedback in mid-November. Key findings will be published here.