Reimagining Retail: Lessons From the 2024 Holiday Shopping Season—The Election Impact, Why Returns are Way Up, and More | Jan 15, 2025

Summary

Behind the Numbers: Reimagining Retail – Lessons From the 2024 Holiday Shopping Season

Episode Title: Reimagining Retail: Lessons From the 2024 Holiday Shopping Season—The Election Impact, Why Returns are Way Up, and More
Release Date: January 15, 2025
Host: Sara Lebo
Guests: Rachel Wolfe and Zach Stambor

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Introduction

In the January 15, 2025 episode of Behind the Numbers: Reimagining Retail, host Sara Lebo delves into the key lessons learned from the 2024 holiday shopping season. Joined by eMarketer analysts Rachel Wolfe and Zach Stambor, the discussion navigates through unexpected trends, the impact of the recent election, soaring return rates, and offers early predictions for the upcoming holiday season.

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Holiday Shopping Season Overview

Sara Lebo opens the conversation by reflecting on the 2024 holiday season dynamics. Initially, the outlook post-Black Friday was positive, anticipating a robust but atypically short December. However, as January unfolds, notable deviations have emerged from initial forecasts.

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E-Commerce Growth and Consumer Sentiment

Zach Stambor highlights two significant growth spikes:

• Cyber Dozen Period ([00:39] – [02:30]): The week before Cyber Week saw unprecedented sales launches, dubbed the "Cyber Dozen," resulting in steep discounts and substantial year-over-year growth.
• Post-Cyber Week Surge ([02:30] – [04:23]): A strong spike in consumer spending immediately after Cyber Week, driven by the compressed window between Thanksgiving and Christmas.

Rachel Wolfe corroborates these trends, noting that Adobe reported a record 8.7% growth in e-commerce sales, reaching $241.1 billion, closely aligning with eMarketer’s forecast of around 9% growth ([02:59]).

Zach also points out a growing economic divide:

• Higher Income Consumers: Displayed optimism and increased discretionary spending, such as dining out, evidenced by a 6.3% rise in restaurant spending ([04:20] – [04:55]).
• Lower and Middle Income Consumers: Showed caution, with cautious spending patterns observed in retailers like Dollar Tree and Dollar General. Higher-end products saw robust sales, whereas lower-priced items experienced sluggish performance ([03:02] – [04:23]).

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Election Impact on Consumer Spending

The recent election significantly influenced consumer behavior. Zach explains that the swift resolution of the election results allowed consumers to react promptly to economic policies anticipated under the new administration:

• Trump’s Victory: Prompted concerns about inflation and potential tariffs, leading to a surge in "doom spending" on big-ticket items to preempt price increases ([05:15] – [07:08]).

Rachel adds that the election outcome not only fueled precautionary spending but also boosted confidence among Trump supporters, further driving holiday purchases ([06:53] – [07:37]).

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Soaring Return Rates and E-Commerce Challenges

A major concern discussed is the significant increase in return rates:

• Salesforce Report: Returns surged by 28% year-over-year ([07:58] – [08:02]).

Rachel attributes this spike to the shorter holiday season and intensified e-commerce activities, where consumers often buy multiple sizes or duplicate items to ensure satisfaction before returning unwanted products ([08:16] – [08:47]).

Zach emphasizes issues like inconsistent sizing across retailers and the rise of showrooming, where consumers buy online after trying in-store, leading to higher return volumes ([08:48] – [09:44]).

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Predictions for the 2025 Holiday Season

As the episode progresses, Sara invites Rachel and Zach to share their early predictions for the 2025 holiday season.

Zach's Prediction ([12:00] – [13:36]):

• Anticipates rising inflation influenced by Trump’s economic policies, potentially leading to a lackluster holiday season.
• Expects a split in retail performance, with strong sales figures masking flat or declining real numbers.
• Predicts further economic divides among consumers, influenced by policy changes such as tax bills benefiting higher-income groups disproportionately.

Rachel's Prediction ([13:45] – [15:20]):

• Foresees a significant increase in the use of Generative AI (Gen AI) shopping assistants and chatbots.
• Highlights the integration of AI in product discovery, research, deal finding, and customer service as integral to the shopping experience.
• Believes that AI’s presence will grow organically, enhancing consumer interactions without overt awareness of the underlying technology.

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Conclusion

The episode concludes with reflections on the nuanced performance of retailers during the 2024 holiday season. While certain sectors thrived, others struggled, underscoring a divergent retail landscape shaped by economic policies and consumer sentiment. As the industry moves forward, the integration of AI and the persistent economic divide are poised to shape future retail strategies.

Notable Quotes:

• Zach Stambor ([02:30]): “There is a growing divide between people who feel pretty good are spending. They're going out to eat.”
• Sara Lebo ([05:15]): “Higher income consumers being confident as lower income consumers are not feels like the theme of all of Q4 last year.”
• Rachel Wolfe ([10:19]): “Customers are deal conscious and it looks like they're going to be that way for some time.”
• Rachel Wolfe ([13:45]): “Gen AI shopping assistants and chatbots are going to play a much larger role in holiday sales this year.”

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This comprehensive summary encapsulates the critical discussions from Behind the Numbers: Reimagining Retail on the 2024 holiday shopping season, providing valuable insights for marketers, retailers, and advertisers navigating the evolving digital media landscape.

Transcript

[Sara Lebo]

Hello, listeners. Today is Wednesday, January 15th. Welcome to behind the Reimagining Retail an emarketer podcast. This is the show where we talk about how retail collides with every part of our lives. I'm your host, Sara Lebo. Today's episode is lessons from the 2024 holiday season. It's gonna be our last time talk about these or the holidays for a little bit, so we're gonna make it count. Before we get into that, here are the guests for today's episode. Joining me first up is Rachel Wolfe. Hey, Rachel.

[Rachel Wolfe]

Hey there.

[Sara Lebo]

Also with us is Zach Stambor. Hey, Zach.

[Zach Stambor]

Hey, guys.

[Sara Lebo]

Both joining from very cold places, New York and Chicago right now. And I am also joining from a very cold New York. So everyone's just bundled on this.

[Zach Stambor]

Got our flannel.

[Sara Lebo]

Yeah. All right, let's learn some lessons from the 2024 holiday shopping season. When we last checked in on this season, Black Friday had just happened. Holiday spend was relatively healthy and we were eyeing a very short and very funky December holiday season. Now it's January. I still haven't made my returns of the thing I bought that didn't fit me on Black Friday. And it's probably too late now. But before we go down that hill, I want to know, did anything change, anything unexpected happen as it relates to what our holiday predictions were?

[Zach Stambor]

Yeah, there were a few interesting trends that I saw that I'm not sure that I expected. One was if you look at the year over year growth, there were two very strong periods. One, the week before Black Friday. So the week before Cyber week had very strong growth. We saw a lot of retailers launch sales that week. I dubbed it the Cyber Dozen because the sales launched like the Thursday before Thanksgiving. And so there was like a real 12 day period of pretty steep discounts. So we saw that period and then we saw another strong growth period the week after the Cyber week, which I think is a reflection of the very short window between Thanksgiving and and Christmas. Because as soon as Thanksgiving was over, it was basically December and people were like, oh, I've got to buy stuff now to ensure that it gets to my door so I can give it on Christmas or Hanukkah.

[Sara Lebo]

Yeah, you didn't have that extra week of padding like where December sneaks up on.

[Zach Stambor]

I know that certainly happened for me. I was like, oh, I've got to start buying some stuff.

[Rachel Wolfe]

I think from my perspective, the broader trend lines are pretty much what we saw with Cyber Week. I mean, you had E Commerce sales growing pretty strongly. Adobe said you Know, it was a record 8.7% growth to 241.1 billion. And in terms of growth, it's actually pretty close to what we forecast, which was around 9%. So that's just something to call out.

[Sara Lebo]

Yeah, good work to our forecasting team.

[Zach Stambor]

Yeah. One other thing that I saw was this growing divide between higher and lower and middle income consumers. And you kind of saw it manifest in several different ways. One is just consumer sentiment. The University of Michigan consumer sentiment really showed that higher income consumers are far more positive about how things are going than lower and middle income consumers. You saw it at retail stores when like retailers like Williams Noma were pretty bullish about how things went and were going and they didn't need to lean too heavily on promotions. And then, then at the same time you saw the dollar trees and dollar generals of the world say that their shoppers are spending pretty cautiously. Even manufacturers, this was a phenomenon where like Newell Brands, which makes like Graco strollers and Oster kitchen appliances, they saw like the high end blenders that are like $100 or $100 plus, those were selling really well. But the cheaper ones, the like $20 ones just had pretty sluggish sales. So there really is a growing divide between people who feel pretty good are spending. They're going out to eat.

[Sara Lebo]

Yeah.

[Zach Stambor]

And those who are pinching pennies. Yeah.

[Sara Lebo]

It's interesting you say going out to eat because restaurant spending was up 2 during the season also, right?

[Zach Stambor]

Yeah, it was up 6.3%, which is pretty strong. And there has been, you know, some inflation. You know, you go out to eat and you, you get your bill and you're little surprised at how much it was. But still, 6.3% is, is not nothing. And it's a sign that at least some consumers, probably these higher income consumers are feel pretty decent about spending on something that is purely discretionary.

[Sara Lebo]

Yeah. Higher income consumers being confident as lower income consumers are not feels like the theme of all of Q4 last year. So I'm not at all surprised. I feel like it bl all news that we heard about everything in Q4 and it makes sense that it was thematic during the holidays.

[Zach Stambor]

Totally.

[Sara Lebo]

Zach, last year you mentioned the election as a big factor in this holiday season. Did that change things? I mean, obviously we can't know what would have happened either way. But do you feel like it had an impact?

[Zach Stambor]

Yes and no. Yes, it had an impact. No in not in the way that I expected. So what was surprising was the election. We knew the results of the election Much sooner than I thought we would. I thought there was going to be a lot of stuff going on that was just going to distract people for quite some time after Election Day. But lo and behold, we knew the results on election Night, but once we knew those results, that's when there was an effect because Trump won. And once Trump won, people started paying attention to his economic agenda and they started to get worried about inflation again. And they started spending because they figured, I might as well buy the car today before tariffs drive up the price. I might as well buy the TV today. I might as well buy appliances. And so they. They spend spent on these big ticket items that, like, in other circumstances, they might have held off.

[Rachel Wolfe]

Yeah, I think it's a bit of both. I think on the one hand, yes, you do have people who are doom spending who, you know, to get ahead of potential tariffs and higher prices this year. But there's also a segment that's just more confident. You know, they see the economy heading in a more positive direction now that Trump is president. And I think that may have also unlocked additional spending during the holiday season.

[Zach Stambor]

I think that's a good point.

[Sara Lebo]

Yeah. I mean, isn't it true that, like, the number one indicator of how people feel about the economy is, what, whether or not the party they support is in office? So that might be anecdotal. I think that might be true, though.

[Zach Stambor]

No, it's true. It's true. It's supported by evidence.

[Sara Lebo]

So it makes sense that there would be, at a minimum, a shift where a bunch of people maybe are pulling back, but a bunch of people are spending. And even the ones who might be pulling back, they're probably the ones that are paying the most attention to those tariffs and making sure that they get the spending in before tariffs set in.

[Rachel Wolfe]

Right. And, you know, they're buying not just big ticket items, but toilet paper, household essentials, like, all of these things that they're stockpiling just in anticipation of what will come next.

[Sara Lebo]

Yeah, stockpiling toilet paper hasn't historically worked, so hopefully people aren't doing that again. Something I did mention at the start of the show is that I have not made my returns from Black Friday. What's happening with returns? It sounds like this is a pretty crazy return season. This January it is.

[Zach Stambor]

Salesforce reports a 28% jump year over year.

[Sara Lebo]

That's crazy because a year ago on this podcast, we were talking about how high returns are. And so if we're up more than 25% from that, I mean, this is going to become A problem if it isn't already for retailers.

[Rachel Wolfe]

I wonder how much of that is because it was a shorter holiday season. Right. So people are just buying up, you know, whatever they think they'll need. And then, you know, you're just making a decision later on to send back what you don't want. So I think that just might be, you know, a lingering effect.

[Zach Stambor]

I think that's right. I think it's the growth of E commerce is. Is one factor. And in line with that, the growth of showrooming and people just being like, okay, well, I don't know If I'm an 8, a 10, or a 12, so I'm just going to buy them all and see what works.

[Sara Lebo]

Yeah.

[Zach Stambor]

And then eventually, hopefully you do return it and it's not just sitting in your bedroom. Like, I have a whole lot of stuff in my bedroom I need to return. But apparently a lot of people did not take their time. They rushed to the store or to the post office or whatnot to return it.

[Sara Lebo]

Yeah, we've talked about returns on the pod before. I'm sure we'll do it again. But the 8, 10, or 12, like, conversation also has to do, like, all retailer sizing is sort of bogus right now. None of it is consistent. And there's been a move sort of away from like, softer clothing toward, like, harder return to office clothing, hard pants, as we call them, which is harder to size. So I think that also is driving up returns.

[Zach Stambor]

That's so true. I was just buying a pair of shoes and the range of shoe sizes that fit me was all over the map. It was like a full, like, size and a half span.

[Sara Lebo]

Yeah.

[Zach Stambor]

And it's just frustrating.

[Sara Lebo]

I am a loyal Adidas customer for shoes. Not because I think their shoes are inherently better or, or like even spectacular, but because I know my size in Adidas sneakers. And even though I'm mostly not an E commerce consumer, once my sneakers get holes in them, I just want a new pair. And that's the only reason.

[Zach Stambor]

Yeah. But it does kind of force you to engage in this behavior because otherwise you're just going back and forth and back and forth, and that's a really bad experience too.

[Sara Lebo]

Okay, before we get too off topic with my not amazing E commerce habits, what is the biggest takeaway from this holiday season from each of you? Rachel, why don't you go first?

[Rachel Wolfe]

I think for me, the biggest takeaway is just that customers are deal conscious and it looks like they're going to be that way for some time. Especially now with all this uncertainty over what tariffs will mean for everything from grocery prices to car prices.

[Sara Lebo]

Zach?

[Zach Stambor]

Yeah. So on the surface, I think this looks like a solid, close to a solid year. But if you look a little bit closer, you see a growing split in the haves and have nots within retailers. I mean, just in the final days of the holiday season, you saw both Container Store and Party City file for bankruptcy protection. You saw Nordstrom go private to avoid.

[Sara Lebo]

Which Susie accurately predicted on this podcast. Good work, Susie.

[Zach Stambor]

Good work. It also wasn't fully, like, unexpected, but, you know, they did want to avoid the glare of the public markets. And so, you know, some retailers are doing quite well, but it's not the rising tide with all boats. It's. It really is a more nuanced situation than that.

[Sara Lebo]

Yeah, it sounds like the haves and have nots are really maybe going to be the water we're all swimming in as we enter this new year. Okay, now that we've discussed the 2024 holiday season, I want to make you guys predict things that you can't possibly predict. So I have asked you each to come with an outrageously early prediction for the 2025 holiday season. To reiterate, it is January 15th. You cannot possibly know what will happen. But we know what's going on this year kind of. I mean, already we're in sort of a year of chaos. So maybe the prediction is just chaos. But I want to hear your outrageously early predictions for next holiday season. Zach, what is your 2025 holiday season prediction?

[Zach Stambor]

So I think we will see inflation this year pick up. I think Trump's economic policies, however they actually manifest, will lead to inflation. I think it'll lead to a somewhat lackluster holiday season. Sales might look strong because of inflation, but actual results will be kind of flat to down in terms of real numbers.

[Sara Lebo]

So sort of the opposite of what happened this year.

[Zach Stambor]

Yep.

[Sara Lebo]

We just talked about how, you know, the best indicator of the how you feel about the economy is if your party is in office or not. Do you think that, like, consumer confidence will actually drop with Trump, or do you think that people who support Trump will feel the confidence of seeing him back in office?

[Zach Stambor]

I think it kind of depends on what unfolds. And so much is uncertain, we really have no idea. I mean, it's a very uncertain world.

[Sara Lebo]

Comes back to the most predictable thing about Trump being that he's unpredictable.

[Zach Stambor]

Absolutely. So one thing that could give consumers some confidence, or at least some segment of consumers confidence, is if the tax bill passes and consumers feel like, hey, I'm going to have some more money in my pocket so I can spend that money. Last time around, that was very heavily weighted toward the more affluent. So we might just see a further divide in terms of the haves and have nots. Although a lot of people felt good about the Trump tax cuts, even if it didn't actually result in them getting a big benefit from it.

[Sara Lebo]

Okay, that makes sense. I mean, I don't know if it makes sense, but it sounds like a sound prediction to me. Rachel, what is your prediction?

[Rachel Wolfe]

So my prediction is that Gen AI shopping assistants and chatbots are going to play a much larger role in holiday sales this year. It still feels weird to say this year. Like, my instinct is to say next year. I know we're in 2025, but we saw, at least according to Salesforce, a pretty sizable number of people are already using Gen AI in some way in their shopping journey, whether it's just to help with product discovery or product research or finding deals, or even just using AI customer service. But I think that this year, people will be a lot more intentional about using it for those purposes.

[Zach Stambor]

Well, and I think it's going to grow whether they intend to or not, because it's just there. And I think a lot of the data that we've seen is that, like, people don't even know that they're using it, but they happen to be using it and it's delivering some sort of benefit. So I think it's a surefire prediction that will come true.

[Sara Lebo]

I can say with, like, pretty much certainty that if I were not a retail analyst, I would not notice that a chatbot is what's, like, delivering me my results. Like, I think I would just think I was getting results and not really think about it. The only lens from which I think about this is from my, like, analytical lens. And if I didn't have that on, I'd just be like, you type things in. A result happens. The result might have changed formats, but I wouldn't register it as Gen AI.

[Zach Stambor]

And that's totally fine. Like, you don't need to know what's behind the technology.

[Sara Lebo]

I do.

[Zach Stambor]

Right. But the average consumer does not need to know why what they're using works in the way that it does. They just need to know that it delivers the results that they're seeking.

[Sara Lebo]

Yeah, I mean, our search behavior is like, I'll get. We're going to get ahead of myself and Gen AI search. But our search behaviors have completely changed over the past 10 years, even from, like, boolean search terms to, like, plain text search. And so it makes sense that this evolution will just keep happening without us realizing and will specifically happen in retail. Okay, well, that is all we have time for today. Thank you to our listeners and to our podcast team who edits the podcast. We'll be back next Wednesday with another episode of Reimagining Retail, an E marketer podcast. And Friday, join Marcus for another episode of behind the Numbers, an emarketer podcast.