Mastercard announced that shoppers spent a record $800 billion over the holiday season, fueling a surge in retail stock prices.

The payment processor said the figure includes both online and in-store sales and represented a nearly 5% jump from last year – the best since 2011.

Also, in another sign that the economy is continuing to percolate, home prices jumped a healthy 6.2% last month due to a combination of strong demand and fewer units offered for sale. 

Reuters:

Most U.S. retail stocks have tumbled this year as they continued to lose sales to online stores, mainly Amazon.com Inc. Traditional players have also been hurt by heavy investments in technology and discounting, made to keep up with online and off-price competition.

Shares in J.C. Penney Co Inc rose 7.6 percent on Tuesday, while Kohl's Corp shares were up 5.8 percent, Macy's Inc rose 5.1 percent and Nordstrom Inc increased 2.8 percent.

SpendingPulse said the moderate sales increases seen in apparel and department stores were particularly impressive given this year's slew of store closures.

Online sales rose 18.1 percent during the holiday season, thanks to a late rally in sales, according to Mastercard.

<p content="" but="" 's="" probably="" 11="" or="" 12="" percent="" of="" total="" retail="" sales="" ...="" the="" bulk="" still="" is="" very="" much="" in="" "="" said="" data-reactid="30" type="text">"But that's probably only 11 or 12 percent of total retail sales ... the bulk of sales still is very much in stores," said Quinlan.

"There's growth, don't get me wrong, but we still love that experience of being in store."

The biggest winner of the holiday season was likely to be Amazon.com once again, however, according to a Reuters/Ipsos opinion poll conducted this month.

Amazon.com said on Tuesday that it had topped its worldwide holiday sales record this year, with more than 4 million people opting to trial Amazon Prime in one week during the period.

Some optimists might point to these figures as a sign of department store revival.  But realistically, department stores are in the same position as blacksmiths, wheelwrights, and buggy whip manufacturers at various times in the early 20th century.  Their time has passed, although they have yet to fully realize it.

Their efforts to exploit online sales have met with little success.  The web has not grown their customer base, which has been shrinking for decades.  In a business with such small profit margins, volume is everything.  The bottom line is that they are just not selling enough to make money.

Smaller, more agile specialty retailers are running rings around them while the 800-lb gorilla in the room – Amazon.com – continues to increase its dominance.  Even discount retailers like Walmart are seeing slower growth, leading to the inevitable conclusion that most brick-and-mortar department stores will either disappear entirely or switch to online only sales.

This is creative destruction at its finest.  The free market does not concern itself with history or tradition, nor does it stand still while businesses try to catch up.  In the case of the giant department store, management failed to anticipate how the market would change and is now paying the price.