Year-In-Review: 2014 Sales and Consumer Confidence

With the New Year upon us, retailers are assessing the industry’s performance in 2014 and looking to prepare for what lies ahead. After 2013 delivered light gains, 2014, too, remained largely stable with only light growth from Q1 through the back-to-school season.  Consumers spent modestly until early on in Q4, when they and retailers alike began to express growing optimism in the economy. As unemployment rates hit pre-recession levels and gas prices dropped to new lows, consumer confidence levels also reached notable highs, helping to spur solid end-of-year growth. 

As it turned out, consumers proved to be more confident at year’s end than they were in January. Confidence levels hit 83.9 on the Consumer Board Index midway through Q2, their highest mark since January 2008, then steadily grew to new heights throughout the summer and fall, ending the year at 92.6 in December, their highest level since February 2008. Overall, consumers have begun to respond to the revived environment, which has been characterized by positive economic and labor market conditions. Over the year, the number of unemployed workers declined by 1.7 million as the unemployment rate dropped by 1.1 percentage points to 5.6 percent, the lowest it’s been since June 2008, according to the NCSL National Employment Monthly Update. With a restored spirit toward spending, consumers appear to be slowly but surely loosening their purse strings.

Sales began slowly in 2014, perhaps due in part to bad weather keeping consumers at home. Still, despite overall U.S. sales only posting slight gains in Q1, they managed to pick up steam in Q2, jumping 2.4 percentage points, according to U.S. Department of Commerce census data. Total retail sales for Q3 were estimated at $1.9 trillion, a 4.2 percent increase from the same period in 2013.

Not surprisingly, e-commerce sales played a large role in buying gains in 2014, consistently increasing their contribution to total sales from Q1 through the holiday season. According to the census data, e-commerce sales accounted for 6.2 percent of total retail sales in Q1, 6.4 percent in Q2, and 6.6 percent in Q3.  Although census data for Q4 is yet to be released, Bigcommerce’s Q4 2014 E-commerce Report reveals that, based on the total value of goods sold through retailers’ own platform, the quarterly gross merchandise volume (GMV) per store climbed 34.3 percent over the same period last year. Mobile was also a critical platform for shoppers this year, especially during the holiday season. In fact, an e-commerce analysis from Custora reports that nearly 25 percent of holiday shopping purchases were made on smartphones or tablets.

While back-to-school shopping numbers contributed to the jump in sales through July and August, consumers truly hit their stride during this year’s holiday shopping season. A prolonged season full of deep and frequent discounts, which began as early as Halloween for some retailers, resulted in strong sales through November and December, with less focus on the key four-day stretch of Thanksgiving Weekend. In fact, Black Friday did not even rank in the top 10 days for sales in 2014, according to First Data.

First Data also reported that store sales increased 3.2 percent from November 1 through January 4, 2015, as compared to a 0.5 percent gain during the same period in 2013, with all 50 states reporting positive sales growth. Newly released National Retail Federation data reports gains of 4 percent in holiday sales in November and December, only slightly below the BDO’s Retail Compass Survey of CMOs’ forecasted 4.1 percent increase in overall holiday store sales. Sales at 1,000 retail chains across the U.S. rose 4.6 percent in November and December, marking the strongest growth since 2005, based on ShopperTrak data.  At least 10 retailers—including Barnes & Noble and J.C. Penney—reported that holiday sales surpassed expectations this year.

As we reflect on the industry’s performance in 2014, a modest three quarters gave way to robust year-end sales and consumer confidence levels, which bring positive momentum as we push further into Q1 2015. Stay tuned to the blog for results from BDO’s 2015 Retail Compass Survey of CFOs for insights into which key issues are top of mind for retailers in the year ahead.

In the meantime, let us know in the comments section below which trends in consumer behavior you anticipate as we head into 2015.

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