Forecasts point to modest holiday growth
Thursday, September 22, 2011
NEW YORK (AP) — Retailers just got an early Christmas gift: Americans are expected to spend more than they did last year during the holidays.
Retail revenue in November and December is expected to be up 3 percent during what is traditionally the biggest shopping period of the year, according to research firm ShopperTrak said Tuesday.
The sales prediction, which matches the outlook from the International Council of Shopping Centers on Friday, would be below last year’s 4.1 percent spike — and the 5-plus percent gains during boom economic times. But it’s still above the 2.6 percent average gain over the last 10 years and is considered respectable growth given the down economy.
“Clearly, consumers will remain surgical in their spending,” said Bill Martin, ShopperTrak, co-founder. “But the Christmas season should still be quite satisfactory.”
The retail industry still is waiting for a widely-watched holiday forecast on Oct. 6 from the National Retail Federation, the nation’s largest retail trade group. But the ShopperTrak and ICSC outlooks are the first insight into how consumers, which account for 70 percent of U.S. economic activity, might spend during the season. Retailers depend on the season for up to 40 percent of their revenue and are worried that Americans saddled by concerns about their jobs, the stock market and the overall U.S. economy, will cut back on holiday shopping.
So far, consumers still are spending on necessities, as shown during the critical back-to-school spending, the second-biggest shopping period of the year. In August, for instance, many shoppers bought clothes and supplies for their children, which they deem as essentials, giving retailers a boost during the second-busiest shopping season of the year.
Shoppers also are being more deliberate about searching for bargains — a buying habit many picked up during the recession. Retailers expect that trend to continue into the holiday shopping season.
“Our customer is more cautious, more value oriented,” said Ron Boire, president and CEO of Brookstone, which sells gadgets in 300 locations nationwide.
Customers also are expected to do more comparison shopping online before they head to stores — and browse less when they are in stores. As a result, customer traffic in the store is expected to be down 2.2 percent, according to ShopperTrak, which measures foot traffic in 25,000 stores in the U.S. and blends those figures with economic data.
Revenue for clothing and accessories, in particular, is expected to rise 2.7 percent over the holidays, but its traffic is projected to dip 1.1 percent compared with a year ago. Revenue for electronics and appliances is expected to rise 1.2 percent from the previous year, but traffic is predicted to fall 4.9 percent
“Every shopper in a store will be more valuable than last year, and retail stores should be ready to convert their holiday shoppers into sales,” said Martin, from ShopperTrak.
When consumers do head out to the stores for the holidays, the divide between the high and low end customer is expected to continue. For instance, high-end retailers Saks Inc., which operates Saks Fifth Avenue, and Nordstrom Inc. have reported that shoppers are going back to paying full price and are gravitating toward the highest priced goods at their stores. But Wal-Mart Stores Inc., the world’s largest retailer, has said its core low-income shoppers are struggling to stretch their paychecks.
As a result, during the holiday season, ShopperTrak says stores catering to the low-end may need to cut prices further, while upscale stores will likely be able to cash in on consumers looking for goods they feel will hold up over long-term use. Those on the lower-end will also need to come up with new ways to help shoppers pay for their gifts, said Martin, from ShopperTrak.
Indeed, it’s not even fall yet and retailers already are showing their fear. Wal-Mart Stores Inc., which acknowledges that its low-income shoppers are being squeezed by the economy, said earlier this month that it would offer layaway for the holiday season. The retailer is following in the footsteps of Sears, Roebuck and Co. and Toys R Us, both of which began offering layaway during the depths of the Great Recession.