IU retail expert sees parallels between recent election and holiday shopping picture

  • Nov. 21, 2016


BLOOMINGTON, Ind. -- A longtime national retailing observer in Indiana University's Kelley School of Business sees several intriguing parallels between the recent elections and the upcoming holiday shopping season.

Like a national electorate that was unenthused about the presidential contenders, few consumers this year have found a leading candidate for that "must-have" gift. Both shoppers and retailers are deeply divided over whether stores should be open on Thanksgiving.

As with the pundits and politicians regarding national polls, retailers possess a lot of numbers about shoppers but aren't always sure what to make of them.

John Talbott, associate director of the Center for Education and Research in Retailing in the Kelley School, has followed these trends for a quarter century, including as a vice president or chief executive at three retail companies before coming to Kelley.

Five years ago, many stores began opening on Thanksgiving, getting a jump on the traditional start of the holiday shopping season, Black Friday. This year, the nation's two largest mall operators -- Simon Property Group and General Growth Properties -- will open their doors on Thursday, as will department store chains such as Macy's, J.C. Penney and Kohl's.

But many shopping centers, including Mall of America, and other leading retailers will opt to let their employees enjoy the holiday with their families.

"This year, the sense that I have is it's almost like our electoral process where there's two camps," Talbott said. "One of the camps says they need to open earlier because business isn't that good, and the other camp says they will forgo being open on Thanksgiving and points to the benefits for consumers and associates.

"The stores that are making the decision not to be open on Thanksgiving don't need to be open for a variety of reasons," he added. "Maybe they don't have products that are 'must-have' items that lend themselves to the shopping frenzy. For others, they have developed a successful internet-based store, and that store is always open.

"Established brick-and-mortar companies today have effective e-commerce sites. They send their customers to this location and can be open on Thanksgiving without incurring the store side expense."

Talbott would like to think that companies are being altruistic when they stay closed on Thanksgiving, but in reality, they view it as a pragmatic business decision. He said some publicly traded companies that will be open are seeking to overcome disappointing third-quarter sales reports and feel they need to "go all-in and not take chances on anything that might disappoint investors."

He suspects that the 2016 elections may have an impact on fourth-quarter retail sales. Before Election Day, the National Retail Federation was predicting a 3.6 percent increase in sales year over year. The U.S. Commerce Department on Tuesday announced retail sales rose 0.8 percent in October. Sales rose by 1 percent in September, contributing to the best two-month stretch of sales in at least two years.

But many Americans have more anxiety about the future since the election. "We had an unexpected result, and it's created a sense of uncertainty, and uncertainty typically isn't great for shoppers, " Talbott said. "As we get more information over these next two or three weeks, as we head into the really important shopping time, we'll see. I am more concerned about retail performance in the fourth quarter than I was a couple of weeks ago."

Earlier this month, IU Kelley School economists in their annual forecast said they expect output growth nationally next year to average only slightly above 2 percent.

Unlike in past years, there is little buzz about new items that people want to have under their trees. Talbott cited the successful response of the new iPhones and other products like virtual-reality headsets, but otherwise he can't point to a product that people will clear off store shelves. Interest in video game systems, which have been hot items in the past, may wane somewhat because consumers are looking to products being introduced in 2017.

"Last year, we talked a lot about wearables. In general, the market for wearables is not very good, with the exception of the Apple Watch. The rose is off that bloom a bit," he said. "It will be interesting to see if some of the new ideas around wearables, that make them more like jewelry, will take off."

He thinks this might be the Christmas, Hanukkah and Kwanzaa when more people might opt to give "experiences" as gifts, such as those involving travel and leisure.

"After a year of being beaten on by campaign messages and other aspects of the electoral process, the tension that I think that brought, along with the unexpected outcome, may create for many the notion that they have to get away -- let's do something fun together as a family or with friends," Talbott said. "I’m not sure customers are ready for a barrage of product messages about which products demand their dollar vote this holiday season."

Retailers today collect more information about their customers than ever before, but the IU faculty member isn't sure that data always leads to knowledge about what people want to buy.

"The election was an eye-opener about the shortcomings of the popular term 'big data. We had all these polls, that were very sophisticated, using tons of information, and almost all of them fell short," he said. "Retailers are struggling in the same way, in how to make the shopping experience for consumers better.

"At this point, there's a lot of experimentation surrounding big data and how to use it in the store, but ultimately it really is about having the customer being happier, more entertained, more satisfied with their experience. Data and analysis that inform and make this possible must be extracted from the billions of ones and zeros that are simply noise. It’s not easy, and retailers are very much still refining their processes. "

Internet retailers are getting better at monitoring consumer satisfaction. Traditional retailers are trying to do the same, but frequently "are stuck with legacy technologies" that falls short.

"It's an imperfect science," Talbott said. "Understanding what people want during the holiday season is just like trying to predict who people want to elect: We can predict and prognosticate, but ultimately the consumers will decide, and will likely surprise us when they do."

Talbott can be reached at 214-215 2690 or jstalbot@indiana.edu. For additional assistance, contact George Vlahakis at 812-855-0846 or vlahakis@iu.edu.

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