Wal-Mart, Amazon show changing shopping habits
BY MAE ANDERSON | AP Retail Writer January 31, 2014 7:42AM
Updated: January 31, 2014 3:13PM
NEW YORK — The financial strains and shifting shopping habits of Americans have led to uneven fortunes for retailers.
Traditional consumer companies like Wal-Mart and Mattel have continued to struggle as Americans spend more cautiously in the uncertain economy. But Amazon.com has flourished as shoppers increasingly buy online rather than head to stores.
The trend was evident during the pivotal holiday shopping season, a time roughly from November through December when many retailers can make up to 40 percent of their annual revenue. Overall, government figures show that spending during October through December rose at the fastest clip in three years.
But exactly where — and how — Americans spent their money during the final months of the year shifted. Fewer people were in and out of stores during the holiday season, but more were shopping online.
Online shopping rose 10 percent to $46.5 billion in November and December, according to research firm Comscore. Meanwhile, sales at stores rose just 2.7 percent to $265.9 billion, according to ShopperTrak, which tracks data at 40,000 stores in the U.S. And the number of customers in stores dropped 14.6 percent.
“Consumer behavior evolved quickly, as retail foot traffic fell, while online purchases grew,” said Mattel’s CEO, Bryan Stockton, in a call with investors on Friday.
Mattel, the world’s largest toy maker, announced that results for the quarter that included the holiday shopping season missed both analysts’ estimates and the company’s own expectations due to weak sales of Barbie and other toys. “From my perspective, the 2013 holiday period has to be one of the most transformative I have seen,” Stockton said.
Wal-Mart Stores Inc. also expects disappointing results. On Friday, the world’s largest retailer said its fiscal fourth-quarter and full-year adjusted earnings from continuing operations may come in at or slightly below the low end of its prior forecasts.
Chief Financial Officer Charles Holley in part blamed a bigger-than-expected impact from the federal government’s reduction in Supplemental Nutrition Assistance Program benefits that went into effect on Nov. 1. , which pressured its primarily low-income consumers.
Wal-Mart is among 33 major retailers that have lowered their outlooks for the fourth quarter and beyond, mostly because of the disappointing holiday shopping season, according to Ken Perkins, president of RetailMetrics LLC., a research firm.
“A highly competitive environment is going to be staring (retailers) in the face throughout the course of 2014 the pressure and competition are not going to abate at all,” Perkins said.
Paradoxically, Amazon said late Thursday that its profit and revenue both grew in the latest quarter. Still, the world’s largest online retailer said its results fell below what Wall Street was expecting as costs rose in tandem with revenue.
But Amazon faces different problems than its bricks-and-mortar peers. Amazon’s results were hurt because its costs are rising along with its meteoric revenue growth.
As it struggles to balance its operating costs with revenue growth, the company said late Thursday that it is considering raising the fee on its Prime membership, which offers free two-day delivery on most items.
The service is so popular that Amazon had to suspend accepting Prime members during the holidays because it couldn’t process them fast enough. In addition, carriers had trouble delivering orders on time due to unforeseen demand, so Amazon had to issue some gift certificates and rebates.
Despite that Amazon’s results fell short of expectations, Wedbush analyst Michael Pachter said 2013 was Amazon’s best holiday ever.
“Amazon set records in several areas, including a record number of Amazon Prime items shipped worldwide on Amazon’s peak shipping day,” he said.