Holiday retail sales rose 3%, driven by online shoppers

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U.S. holiday season sales beat low expectations for the pandemic year as online shopping surged.

Total retail sales grew 3% over the extended 75-day holiday period, versus a forecast of 2.4%, according to Mastercard SpendingPulse, which tracks online and in-store retail sales across all payment methods. The number is far better than the 3.5% drop recorded during 2008, the last U.S. recession.

“It’s a very healthy number” given the challenges of the coronavirus pandemic, Steve Sadove, senior adviser for Mastercard and former chief executive officer of Saks, said in an interview. “That shows me the American consumer is highly resilient.”

Online sales rose a whopping 49% from a year ago, according to the Mastercard report. E-commerce now accounts for one in five dollars spent, up from about 13% of overall retail spending in 2019.

This year, Mastercard measured spending over an extended holiday period, from Oct. 11 through Dec. 24, because many retailers started the sales season early to disperse crowds. Within the traditional holiday period from the start of November to Christmas Eve, sales grew 2.4%, according to the report.

Home-related categories, which have been outperforming throughout the pandemic as consumers splurge on their residences, saw the strongest growth. Furniture and furnishings rose 16% and home improvement products gained 14% compared with a year ago. The weakest sectors were apparel and luxury, falling 19% and 21%, respectively.

Department store performance still lagged because of shoppers’ reluctance to visit malls. Total retail sales at department stores fell 10% during the extended season, with modest online spending growth of 3%.

Going forward, retailers should watch for gift card sales, a bright spot this year, which will only be recorded when they’re redeemed. For shoppers, expect fewer year-end promotions because retailers have accumulated low inventory this year. That’ll benefit their profit margins, Sadove said.

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