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2018 U.S.

RETAIL HOLIDAY TRENDS GUIDE

2018 Retail Holiday Trends

Retailers Enhance
Shipping & Reward
Programs; Many Seek
to Fill Toy Void
2018 U.S. RETAIL HOLIDAY TRENDS GUIDE October 2018

4 Key Trends

OPTIMISM & RETAIL GETS BOSSY A NEW APPROACH THE AMAZING RACE
OMNICHANNEL As the cost and TO LOYALTY FOR TOY SHARE
With consumer spending complexity of home Consumers today have With Toys R Us’ recent
growth exceeding delivery grows, retailers more shopping options bankruptcy leaving
expectations and a positive will focus on having than ever before, forcing substantial share in a
turn in retailer earnings online orders shipped to retailers to increase their high-growth category up
over the first half of the their stores. In addition efforts to both gain and for grabs, retailers from
year, holiday sales to the more traditional retain business. This unexpected corners are
forecasts are optimistic. buy-online/pick- holiday season will usher chasing holiday toy spend.
Retailers are expected to up-in-store model in a significant innovation
push their omnichannel (BOPS), retailers in retailer loyalty
strategies more than ever are introducing a programs, with a shift in
during this holiday season more complex focus from discounts to
and encourage shoppers to concept—buy-online/ experiential services and
buy across channels. ship-to-store (BOSS). rewards.

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2018 U.S. RETAIL HOLIDAY TRENDS GUIDE October 2018

Holiday Sales Forecasts:


Optimism, Omnichannel &
Blurred Lines
Retail sales across all channels are expected to rise extensive experimentation, retailers are learning to
between 4.3% and 4.8% this holiday season, leverage online channels to drive store sales and
according to the National Retail Federation, a vice versa. Several pure-play e-tailers and non-
trusted source for holiday projections. Optimistic traditional retail brands will open their first pop-up
predictions for holiday sales performance are based stores this holiday season, including Wayfair,
on positive fundamentals in both consumer Conde Nast and Good Housekeeping magazine.
spending and retailer health. On the consumer side, While this is helping drive overall revenue, it’s also
low unemployment, modest wage growth and near blurring the traditional boundaries between online
record-high sentiment continue to drive positive and off-line growth.
sales trends. On the retailer side, a shift toward With growth in buy-online/ship-to-store (outlined
more positive earnings among major players this below) and in-store returns, omnichannel
year has underscored the belief that investments in strategies are blurring the accounting line between
new omnichannel strategies are finally starting to in-store vs. online and making it difficult to clearly
pay off. Retail sales over the first half of 2018 have identify what is a store sale and what is internet-
supported this optimism, with year-over-year growth driven. Retailers have been re-assessing how they
hitting a six-year high of more than 5% in H1 and count and measure in-store vs. online growth,
exceeding most industry expectations. questioning whether the distinction is even worth
E-commerce continues its ascent in both sales and making—a question that poses challenges for
share. Online sales are forecast to rise 16.3% landlords, who rely on in-store sales reporting to
year-over-year (on par with 2017 growth levels) and set rents and measure tenant health. This holiday
reach 12.5% of total retail sales (up from 11.2% in season, retailers will look more holistically at their
2017). However, the lines between online and sales than ever before, recognizing the value that
in-store are increasingly blurred as retailers online brings to store traffic and the benefit of
recognize the interdependent nature of brick-and- brick-and-mortar to online purchases.
mortar and online sales growth. Following

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2018 U.S. RETAIL HOLIDAY TRENDS GUIDE October 2018

Figure 1: Holiday Retail Sales and E-Commerce Sales


16.5% 16.3%
14.4% 14.1% 13.9%
12.5%
11.2%
10.1%
9.3%
8.3%

5.2% 4.3%-4.8%
4.5% 4.4%
2.8%

2014 2015 2016 2017 2018 F

E-Commerce Share Total Retail Growth E-Commerce Growth

Source: U.S. Census Bureau, eMarketer.com, National Retail Federation, CBRE Research, October 2018.
Note: All growth figures refer to year-over-year. Holiday sales are defined as the sum of the November and December period.

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2018 U.S. RETAIL HOLIDAY TRENDS GUIDE October 2018

Driving Down Delivery Costs:


Retail Gets BOSSy
Many retailers have successfully established their With the newly advanced BOSS program that
buy-online/pickup-in-store strategy (BOPS). For entices shoppers to retrieve items from the store,
example, Zara reports that nearly one-third of its retailers can both forego delivery costs and offer
online orders are picked up in-store, while Home more inventory without having to stock it at the
Depot reports in-store pickups for 47% of its store. Kohl’s found that in addition to saving
online orders. money on delivery costs, the company generates
This holiday season, many retailers are utilizing a 20% to 25% in additional in-store “attachment
more advanced concept—buy-online/ship-to-store sales” from its BOPS and BOSS programs. In
(BOSS). This advanced program entails shipping response, this holiday season, Kohls is
items to stores that are not regularly stocked incentivizing shoppers to pick up their online
there. Retailers such as Macy’s, Michaels and orders in-store by offering $5 in “Kohl’s Cash”
Kohl’s have announced BOSS programs. Kohl’s is through an initiative called “Smart Cart.”
currently rolling out this more robust program in With the rise of omnichannel shopping—a trend
20 stores, with expectations to expand it into all of highlighted in CBRE’s Definitive Guide to
its stores within the next few months. Meanwhile, Omnichannel Real Estate—retailers should expect
craft retailer Michaels foresees its BOPS and BOSS this holiday shopping season to be more
programs accounting for almost half of its online interconnected than ever. As a result, many
sales this holiday season. retailers likely will utilize both the BOPS and BOSS
Since the rise of e-commerce, delivery to programs to lower delivery costs and increase
customers’ doorsteps has been costly and complex. in-store attachment sales, while ultimately
providing a seamless in-store customer experience.

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2018 U.S. RETAIL HOLIDAY TRENDS GUIDE October 2018

A New Approach to Loyalty:


Rewards Get Exclusive
& Experiential
Retailers are introducing exclusive and experiential cooking classes from famous chefs, while Sephora
services to their loyalty programs this holiday offers its most loyal members exclusive access to
season. The internet and digital technology have meetings with brand founders and trips to New
exposed consumers to more brands than ever York Fashion Week. This trend was outlined in
before, and as the diversity of options increases for CBRE’s recent The Future of Retail 2030 report,
consumers, retailers are beginning to get creative which predicted that “members clubs” will play an
in how they retain their customer base. important role in fulfilling customers’ increased
Additionally, with so many options, consumers expectations for loyalty rewards. Further validation
expect to be rewarded for their brand loyalty. of this trend is Nordstrom’s recently announced
Discount programs that were a major strategy of “Nordy Club,” which offers customers personalized
retailers to attract customers are beginning to give and enhanced services and experiences, including
way to experiential rewards. As a result, retailers exclusive access to products and events. The most
will roll out new and revamped loyalty programs loyal customers who spend more than $5,000 a
this holiday season. year will be rewarded with priority access to style
Major chains such as Macy’s, Kohl’s, Target, events and services.
Sephora, Nordstrom and Victoria’s Secret have With this year’s holiday season being the longest
already upgraded their loyalty programs to include in six years, holiday sales should well exceed last
experiential offerings. For example, the platinum year’s $692 billion,1 and retailers will compete
tier of Macy’s program gets VIP access to New York harder than ever before to retain customers
City’s Fourth of July fireworks show and exclusive through new and revamped loyalty programs.

1
Source: National Retail Federation

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2018 U.S. RETAIL HOLIDAY TRENDS GUIDE October 2018

New Category Opportunities:


The Amazing Race for Toy Share
Though most holiday retail forecasts only address the overall retail sector, CBRE Research can make
some predictions around category growth based on annual prognoses. Figure 2 shows a sampling of
full-year 2018 forecast growth for key consumer goods categories, which likely will be reflected in holiday
sales performance.

Figure 2: Forecast Sales Growth for Select Retail Categories (Full Year 2018)
Y-oY Growth
Personal and Small Appliances 4.3%
Toys 3.9%
Furniture 3.7%
Garden Supplies 3.5%
Jewelry and Watches 3.4%
Total for Core Retail Categories 3.2%
Beauty and Cosmetics 2.7%
Footwear 2.6%
Sports Equipment 2.5%
Clothing 2.2%
Office Products -1.0%

Source: Forrester Research, 2018.

Most interesting is the projected annual growth in the toys category—a segment that has become a
battleground for market share following Toys R Us’ January bankruptcy filing. Forrester Research
forecasts nearly 4% growth in the toys category this year, placing it above the total retail sales average
and as one of the top-growth segments.

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2018 U.S. RETAIL HOLIDAY TRENDS GUIDE October 2018

Figure 3: Toys by the Numbers

$27.4 Billion 35.3% 30%


TOTAL U.S. TOY SALES ONLINE SHARE % OF TOY SALES PURCHASED
(ESTIMATED 2018) (FORECAST 2018) IN THE HOLIDAY SEASON

$8.2 Billion $1.3 Billion 4.8%


HOLIDAY TOY TOYS R US TOYS R US SHARE
SALES ANNUAL TOY SALES * OF TOY MARKET

Source: Forrester, U.S. Census Bureau, eMarketer.com, CBRE Research, October 2018.
Note: figures based on a combination of company sources, third-party research and calculated estimates; the holiday period is defined as the sum of November and December.
*Based on latest available figures; TTM Q4 2016 to Q3 2017.

Toys R Us’ closure puts an estimated $1.3 billion Toys R Us bankruptcy is also expected to bolster the
dollars—nearly 5% of the overall toy market—up revival of iconic toy retailer FAO Schwarz, which
for grabs. Although the company’s lenders recently announced the reopening its Manhattan flagship in
announced potential plans to salvage the brand November along with shop-within-a-shop locations
and its stores under a new name, that resurrection at several department stores. KB Toys also has
would not happen until after the holiday season. announced plans to open 1,000 holiday pop-up
Consequently, several major chains are vying for stores under new owner Strategic Marks.
this share this holiday season, when an estimated As retailers compete to capture the category sales
30% or $8.2 billion of toy revenue is made. The few vacuum left by Toys R Us’ demise, online will be an
national toy chains left to compete—large mixed- important key to growth. E-commerce penetration
merchandise retail chains—are sensing an in the toy category is forecast to reach 35.3% in
opportunity. Kohl’s, BJ’s Wholesale Club, Target 2018, with online toy sales up 19% year-over-year.
and Walmart have all announced plans to expand Success in the segment will likely require both
their toy offering for the holidays in hopes of investment in omnichannel options and a focus on
capturing toy spend. experiential brick-and-mortar concepts, both of
The segment has also attracted the attention of which likely will be seen in force over the 2018
specialty retail chains like Michaels, Party City, holiday season.
Barnes & Noble and Ace Hardware, each of which
has announced toy department expansions. The

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2018 U.S. HOLIDAY TRENDS GUIDE October 2018

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