In RSR’s October 21 Retail Paradox Weekly, I opined that the NRF’s October 7th prediction that it expects sales in November and December (excluding autos, gas and restaurant sales) to increase a healthy 4.1 percent, seems to be a little on the rosy side because other studies are forecasting that average holiday household spending will decline. That’s the thing about forecasts – sometimes they seem likes guesses… or wishful thinking.

The one thing that all seem to agree on is that this will be a promotionally driven period. But the NRF stands by its “4% sales growth ” prediction. Steve Sadove, the National Retail Federation’s chairman, being interviewed on CNBC on Monday 11/17/14, said that the NRF remains hopeful of a 4% lift for this 4th QTR over last year. He mentioned several favorable factors; the weather outlook, the favorable calendar, lower oil prices, and momentum in the U.S. economy, as well as consumer excitement about recent technology launches like the Apple iPhone 6.

When asked about worries, the chairman pointed straight to the promotional environment, saying that retailers “will get the sales, but <they will be> a little bit promotional “. “A little bit promotional ” might sound like understatement, but Mr. Sadove pointed out that while Cyber Monday and Black Friday are blending and although there will be a “scream of discounting “, retailers have planned for it in their buying. But when asked if this could continue “forever ” or whether retailers would try to shape consumer expectations away from promotions, the NRF chairman admitted, “that’s a tough one- that’s why the Brands are going towards unique product. That’s why technology investments are so important, to get to personalization and customization of what that individual customer wants. ” But, he advised, “‘value’ is going to be a watchword for a long time to come. ” Mr. Sadove concluded by saying “price transparency is real… The Internet has changed everything. “

So confidence in the retail industry remains high, although at the same time retailers are justifiably worried that being so promotionally driven could result in “soft ” profits. But as various members of the RSR team have all stated at one time or another, once retailers started down this path, it was going to hard to get off of, especially given the power of instant information that consumers now carry around with them in their purses and pockets. It’s the “smart ” mobile phone that has changed everything.

IBM’s Predictions

As it has done for the prior six years, IBM released its predictions for holiday sales via its Digital Benchmark Hub. The Hub is a cloud-based information service that utilizes IBM’s state-of-the-art Watson technology and Enterprise Marketing Management solution to sift through historical and trending data from “hundreds of U.S. retail websites ” to track almost 400 performance indicators. The site processes over 1 billion transactions a day, then anonymizes and aggregates that data to deliver insights and trend data to Hub subscribers.

For the 2014 holiday season IBM released these predictions in a press release on November 5th:

• For the first time ever, IBM predicts more than half of all online shopping on Thanksgiving, roughly 53 percent, will come from a mobile device, up 23 percent year-over-year. Mobile sales are also expected to grow, reaching 28 percent of all Thanksgiving online sales, an increase of more than 9 percent over 2013.

• As consumers become more comfortable with digital couponing, IBM predicts shoppers will save dollars this holiday season as they cash in on online deals. Consumers will spend on average $123.28 per online order over the five-day holiday period, a decrease of 2.9 percent over 2013. At the same time, the average number of items included in those purchases will be 4.4 items per order, an increase of 17 percent year-over-year. (RSR Note: this finding reinforces the concern expressed by the NRF’s Sadove – the average basket size will be up but the average $-per-basket will be down. The conclusion is inevitable: consumers are expected to snap up the hot priced items).

• IBM predicts click-through rates for emails sent during the five-day shopping period will be 10 percent higher than the same period last year, thanks to data-driven insight which allows marketers to reduce the amount of unwanted email and instead, deliver personalized and relevant promotions. The company also estimates that 35 percent of all click-throughs will happen on a mobile device. The highest volume of emails is expected on Cyber Monday.

• Smartphones will continue to lead in mobile browsing over the five-day shopping period, accounting for 29 percent of all online traffic versus 15 percent for tablets. However, IBM predicts tablets will account for twice as many mobile purchases than smartphones thanks to the larger screen size.

• The retail industry can look forward to strong holiday in-store sales with four percent growth predicted during the November and December shopping period. Health and Beauty products are expected to lead the way with 4.2 percent and 4.7 percent growth, respectively, followed by women’s clothing at 2.6 percent.

The Big Aha!

I wanted to get a little more color to these factoids, and so I reached out to Jay Henderson, Director of Strategy for IBM ExperienceOne. Jay and the IBM team have been tracking retail trends particularly as relates to the relationship between consumers’ use of digital electronics and overall retailer performance for several years. When I asked Jay what the most astonishing data was coming out of the most recent study, he said, “#1 has to be the meteoric rise of mobile, from 6.5% of all Thanksgiving weekend online sales in 2010 to over 50% now. Everything else revolves around that one fact. “

The IBM’er went on to say that this growth shows a seismic shift in the way consumers are behaving and how retailers need to engage with them. The multi-year trend highlights the blurring of the line between online and instore shopping; for example, in 2013, there was a 37% growth from 2012 in push notifications to consumers during the 5-day Thanksgiving weekend, and there was a 23% increase in the number or retailer apps installed on smart mobile devices. The question that many retailers ask however is, are consumer digitally-enabled paths to purchase creating new sales or merely cannibalizing the stores? Jay said it’s a little of both. While total sales are expected to grow 4%, ‘online’ sales are expected to grow 15%. That means that there certainly are some net-new sales coming through.

The big “aha! ” is that consumers are in fact using mobile not so much as a channel, but as an integral part of their paths to purchase no matter where those paths ultimately end up. To understand that a bit more, I asked Jay about some of the behavioral shifts the study has been able to detect in how consumers shop. And it turns out that the study is starting to see new usage patterns; for example, Jay noted that while consumers may browse more frequently on their smart phones, the study is seeing a sharp uptick in what he referred to as “couch commerce ” – using a tablet device to actually make the purchase (the IBM’er pointed to the fact that tablet use is trending towards enabling 2X as many purchases as smart phones).

What It Means

There are several conclusions to be reached from hearing the NRF’s Steve Sadove and IBM’s Jay Henderson. The first is that the two organizations agree that retailers generally should expect a 4% increase in sales over last year for the same period. The second is that consumer shopping behaviors are truly informed by Internet-connected mobile technologies. But mobile use also offers the first glimmer of how to get out of spiral-dive of hyper-competitive pricing. And that is, to build on the digital connection to consumers to offer far more customized, personal and relevant value, regardless of whether they end their shopping experience in the store or at home.