Holiday Retail Boom:  Physical Not Dead Yet? 

Retail had a great holiday season and physical retail was much better off than a year ago. Overall, holiday retail sales were up 5% over 2016's disappointing season. Kohl’s and Target--two retailers with strong online presences--reported physical same store sales growth (+3-7%), exceeding expectations.

While consumer confidence and economics were cited as contributing factors, new engagement strategies like “try it in person before buying online” helped to contribute to the season's success. While overall retail grew 5%, digital retail was up 18%.

Anyone thinking this is a resurgence in physical retail needs a reality check--there were 7,000 reported store closures in 2017. Traffic and buying patterns are still rapidly changing in retail, and those changes will continue to shift traffic and demand away from bank branches.

The other lesson from the holiday retail season is about engagement. Some retailers did succeed at creating ways to get people into their physical stores, which suggests that physical retail isn't dead yet. But is this really about "life" or"death" -- or is it about resource allocation and where to put your money? With fixed marketing budgets, are retailers smart to allocate marketing promotions to getting people into the physical store, or to driving engagement online, where the real growth is happening? Banks must answer the same question.

Sam Kilmer
Senior Director
Cornerstone Advisors