Reports of U.S. Holiday Fulfillment Retail Sales came forth last week and once again, it is important that sales and operations planning (S&OP) and supply chain product demand teams process such numbers in proper context.
U.S. Commerce Department
The U.S. Commerce Department reported that retail sales, excluding those at auto dealers and fuel filling stations, increased 0.5 percent in December.
That number alone is a rather positive indicator except for the fact that the Commerce Department indicated that it would likely downward revise prior retail sales data related to October and November. That prior data had indicated that the month of November had a slow start, with retail sales excluding autos and retail filling stations dropping 0.2 percent.
Of reported concern was that traditional department stores related retail sales reportedly declined 0.8 percent in December. That is yet another reinforcement that consumers continue to flock to online shopping channels.
National Retail Federation
Last week, The National Retail Federation (NRF) indicated that holiday fulfillment retail sales, again excluding autos and retail filling stations, grew to a total level of $730.2 billion, representing a 4.1 percent over the same holiday period last year. Online and other termed non-store sales increased 14.6 percent to a reported $167.8 billion.
The reported retail sales numbers matched the range of NRF’s original forecast calling for 2019 holiday period retail sales growth between 3.8 and 4.2 percent, and totals between $727.9 billion to $730.7 billion.
Once again, forecasted data needs proper context as to sourcing and assumptions.
During the 2018 holiday fulfillment period across the U.S., holiday retail sales generally declined and that was initially attributed to lower consumer sentiments and the effects to a U.S. government shutdown that occurred at the same time.
In a Supply Chain Matters published commentary in February of 2019, we along with others, expressed puzzlement as to what we termed as head-scratching December retail sales reported by the Commerce Department.
According to last year’s December retail sales report, retail sales declined a seasonally adjusted 1.2 percent from that of November, representing the largest retail sales drop since September 2009. According to the government report, every major category with the exception of home improvement sales, posted sales declines in December 2018. At the time, the Chief Economist of the NRF was on record as indicating skepticism about the reported December 2018 number because it would imply that consumer worries were far more than expected. The original NRF forecast for 2018 holiday fulfillment retail sales called for a reported 5 percent overall increase to a total number of $720 billion.
Supply Chain Matters has continually cautioned S&OP and supply chain planning teams that first, it remains early to assess the final financial and operational results of the 2019 holiday fulfillment period. With merchandise returns expected to be upwards of 36 to 39 percent, and with reported numbers either still in a state of flux or laden with different assumptions, it will take several additional weeks to cull thru all of the data and assumptions.
The good news though, is that with the introduction of artificial intelligence and machine learning technology applied to supply chain related forecasting and planning, teams will eventually be able to garner a quicker sense as to what really occurred during a surge fulfillment period, along with rather determinant indications of where sales volumes exceeded or underperformed based on established plans.
Second, we remind teams that smarter supply chain decision decision-making comes down to focusing on the most pertinent data in the right context. When comparing performance in the 2019 holiday fulfillment period to that of 2018, context includes the external economic environment, consumer sentiment changes among both years, the total number of shopping days available and even the differences in weather patterns. Similar good news is that today’s more advanced data management technologies allow for such analysis. The question is the skill levels of analysts to establish the right queries and to context the most pertinent data sets.
All of that stated, it remains rather clear that the 2019 holiday fulfillment period established new online retail milestones and added challenges, all of which will be factored into subsequent promotional shopping holidays.
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