Mastercard’s Steve Sadove on U.S. holiday retail sales: Growth in online sales made Amazon a 'major winner'

U.S. holiday retail sales rise 3% as online shopping booms, according to Mastercard’s latest report. Steve Sadove, Mastercard Senior Adviser & Former Saks Chairman and CEO joins Yahoo Finance Live to discuss the outlook for retailers as we near 2021.

Video Transcript

AKIKO FUJITA: Retail sales over the holidays jumped 3% in the US, dominated by online shopping. That number jumped nearly 50% year on year.

Let's bring in Steve Sadove. He's a Senior Advisor-- or MasterCard Senior Advisor and former Saks Chairman and CEO. Steve, it's always good to talk to you to kind of break down the retail activity here.

A 3% jump when you look at the number itself doesn't seem as significant, especially during the busiest or what is traditionally the busiest time of year. But you've said it's kind of important to put this all in context given the dire predictions that were out there in the early days of the pandemic.

STEVE SADOVE: Yeah, I mean, if we step back from it, 3% growth is still a record sales growth, and the projections were for 2.4%. So it was a very strong, successful holiday season.

If we look at it versus where we were in March, April, we were down almost double-digit retail performance. So we saw a recovery that started at let's call it minus 5% or so in the May-June period. It went to flat. And since September, we've been seeing a growing retail consumer overall.

So I think it was a very strong performance, again, versus a 2.4% MasterCard SpendingPulse forecast. It came in early. So the reason that the forecast was from the October 11 through the December 24 period versus the normally you look at it from November 1 was because the season started earlier. You had Amazon Prime Day on October 11, 12. And you saw that the consumer-- the deals came earlier. The retailers decided to promote their-- because they knew that the traffic in the malls was going to be difficult. You didn't want to bunch, from a safety/security perspective, all of the sales at the end. So the numbers came in earlier, and the consumer showed that they were healthy.

But it was an online season. You saw it. As we said, overall digital commerce represented about 20% of overall sales this year, but that means 80% of the commerce was still being done in a physical retail store. But we've gone from 12% of commerce being digital to now 20% of commerce being digital.

EMILY MCCORMICK: Steve, and I'm wondering if you have any granularity on which companies were really the big winners here. I mean, was it all the big-box retailers with a big online presence like the Targets and Walmarts and Amazons, of course, or were some of the smaller specialty retailers also seeing a boom here?

STEVE SADOVE: Well, I think that being safe/secure was the first-- and being related to grocery, home, things that you can go to. So the Walmarts, Targets, Home Depots clearly were winners. But it wasn't just the big boxes because you had specialty apparel in the athleisure space like a Lululemon, as an example, that performed extremely well.

But I would say that the consumer said that they wanted to shop local. They wanted to support their small stores in their communities. But the reality in the end was they went where they felt safe and secure. So contactless; buy online, pick up in store; curbside pickup, all of these thrived during the holiday season, and the large players like the Walmart, Target, Costcos, and the Home Depots did exceptionally well. And obviously with the growth in online sales, Amazon was a major winner.

AKIKO FUJITA: And you talk about that safety being the biggest concern among consumers. No question that has accelerated this push to digital in retail over the last several months or so. If it's at 20% right now, what's the catalyst, you think, that will get it to a 30%, let's say, at a time when a lot of people are finally saying, you know what? We've got the vaccine in the market. Six months from now, hopefully we can return to malls now.

STEVE SADOVE: Yeah, I think that we've had this underlying trend that's been going on for years to move more towards digital. My sense is that we're moving away from digital versus brick and mortar, that everything is converging, and I think that word of convergence is the most important. If you're a direct-to-consumer brand, you're now opening up your own stores. If I'm a mom-and-pop little store, I'm going to open up a Shopify and have an online presence. If I'm a big digital-- if I'm a big physical store like a Walmart or a Target, I'm using digital and buy online, pick it up curbside.

So everything is merging to the center, and I don't think that over time you're going to even be thinking about the digital store versus the physical store. It's going to be just stores, and it all is going to be about commerce and retail.

But I think that you're finding that technologies are becoming available so that the small guy can play on the same kinds of terms as the bigger people. The large companies made the investments years ago so that they're able to do it.

The next watch word is going to be analytics. Who provides the understanding of the consumer? What do they want? How do they sort a store so that the consumer gets what they want when they want to be able to do it? And that's where MasterCard and companies like that are absolutely investing so that the retailer can have those analytic tools to understand the consumer at a level of one.

I tell a story. My grandfather owned a little retail store in upstate New York. He knew every one of his customers. Now the big companies through these analytic tools are going to be able to do that like the small mom-and-pop store knew how to do years ago.

EMILY MCCORMICK: And, Steve, at the same time, I'm wondering if you're seeing that there might be pent-up demand for Americans to shop in person, that might actually come back mid-next-year. I mean, of course people have gotten used to shopping online, but perhaps with the vaccine, might they want to go back to brick and mortar, at least at first? And to Akiko's point, does that mean that there might be a step back in the share of online sales before there's another acceleration?

STEVE SADOVE: Well, I think that you're going to see people wanting to be back in stores. Remember, 80% of commerce is still being done in store. If you looked at the stores when the shipping-- you had the shipping windows end a couple weeks ago, you already saw a resurgence of some of the shopping in the malls as you got very close to Christmas.

So I would expect, as consumers feel safe, they're going to be getting back into malls. They want to social, have the experiences. They want to be able to socialize with other people. They want to get into a restaurant.

So all of that's going to come back, but you're still going to have this continued movement towards the omnichannel experience and the use of digital. Even before the pandemic, some 80% of commerce was affected in some way by mobile and digital. Consumers are researching the products. Who's going to buy a car without doing the research? They understand the prices of the product.

So all of that is going to continue to drive you more towards this convergence and the digital and the physical presence. But people will come back to a store, and certainly they want to go back to restaurants. If you think about some of the growth we're seeing in retail right now, it's because consumers aren't shopping. You know, they're not going to restaurants. They're not commuting. So they have money, and they're spending it on their homes. They're at home, and they're buying their groceries. They're cooking. All of these types of things are happening.

But you're not going to see lights turn on and off. It's going to have a slow recovery on experiences.

AKIKO FUJITA: Yeah, no question it's going to take a little while until we feel a little more comfortable going straight into these packed malls. But the omnichannel win there, which is why we've seen names like Walmart and Target thrive in such a big way during the pandemic.

Steve Sadove joining us. He is a senior advisor of MasterCard and, of course, former Saks chairman and CEO. Always good to talk to you. Thanks so much.

STEVE SADOVE: Thanks.