Holiday sales were strong this year, but the post-holiday season will be brutal for mall-based tea and coffee merchants, and for beverage wholesalers that primarily sell to chain restaurants. Malls pulled all the stops (including a lawsuit to prevent Starbucks from closing its Teavana locations) but 2018 is their year of reckoning.
Dan Bolton
Dan Bolton, STiR editor
These developments cast a shadow over 2018.
Falling foot traffic - Mall visits declined by half between 2010 and 2013 and continue to descend. Traditional malls now account for barely 15% of total retail sales, down from 35% a generation ago. As a result, half of the 1,200 shopping malls in the US will likely close by 2023. An estimated 6,700 retail stores closed in 2017, a number greater than at the height of the last recession. This even though holiday sales rebounded from last year, unemployment is low, consumer confidence is high, credit is cheap, and the economy growing.
Restaurant closures - Same-store traffic has fallen 27 of the past 29 months, according to MillerPulse. Chain restaurants are cutting units, slowing expansion, and taking defensive measures after a decade of rapid growth. Americans now spend more dining out than on groceries, but their dining destinations are changing. Chain restaurants closed 1,000 stores in 2017 (or simply closed) goodbye Howard Johnson’s. Fortunately, the number of locally owned indie restaurants is expected to grow 5% per year during the next three years, according to food industry consulting firm Pentallect. Growth at the top 500 US restaurant chains will slow from 3.6% to 3% through 2020.
E-commerce - Black Friday alone generated $5 billion online and when the 2017 ledgers close consumers will have spent more than $650 billion over the holidays (an average of $967 per person), according to the National Retail Federation. An increase in online sales accounts for almost 40% of business. This year 58% of retailers said they focused their attention on online shoppers, while 42% focused more heavily on in-store shoppers. Retail giants Amazon and Walmart did both. Samsung and Dyson, following Apple Computers’ lead, invested in brick-and-mortar to bolster sales while Nike is going all-in and shifting their business online by decreasing its retail partners from 14,000 to 40 “showrooms.”
Walmart hosted 20,000 holiday parties to promote in-store prices that were even lower than online. Click and collect programs like you see at Starbucks have now been used by 69% of shoppers, of which 68% say they would “definitely” do it again, according to IRi.
It was a lucrative year-end for Amazon (on track to be the first $1 trillion brand) and Walmart with a resulting smaller slice for all the rest. This is not a message of doom.
Food and beverage sales are expected to grow an estimated 3.5% in 2018, according to Customer Growth Partners. Artisan is in. Local restaurants with authentic dishes and experiential destinations in off-mall locations saw the biggest sales growth in years. Connecting through digital media has never been easier or as well targeted.
The end of the holidays marks a time of risk for retailers who spent aggressively on marketing and inventory and miscalculated. This is the time to re-think retail. Convenient locations and big department store selections with discount pricing – the mainstays of holiday success for generations no longer generate sufficient cash to pay down debts coming due.
The new year is the time for beverage retailers to try something new.