Retail Group Predicts

Time: 2017-09-20
The National Retail Federation forecast sales would increase 2.2 percent for the 2008 holiday season, the slightest increase since 2002, when holiday sales rose 1.3 percent. Over the past 10 years, holiday sales have increased about 4.4 percent annually, so this year's expected increase will be half of that.

"Current financial pressures and a lack of confidence in the economy will force shoppers to be very conservative with their holiday spending," said Rosalind Wells, chief economist for the trade group. "We expect consumers to be frugal this season and less willing to splurge on discretionary items."

Those financial pressures include the struggling housing market, rising unemployment rates, high fuel and food costs and relatively stagnant personal income levels, the group said.

Indeed, consumer research conducted for NRF by BigResearch showed that 52 percent of consumers with definite holiday spending plans planned to spend less this year than in the past, 42 percent planned to spend the same and only 6 percent planned to spend more.

Twenty-one percent of all consumers asked reported it was too early to know for sure how their spending would go.

Those planning to spend more were more likely to be male, between 18 and 34 years old, or relatively affluent (household income greater than $62,000), according to Phil Rist, vice president of strategy at BigResearch.

Only 28 percent of surveyed consumers expected the economy to improve within the next six months and about half expected more layoffs, he said.

"They're taking control of what they can control by deferring purchases," Rist said.

For example, 56 percent of consumers expected to focus on needs rather than wants this holiday season, 49 percent plan to be more practical with their gift-giving and 45 percent plan to be more budget conscious.

Similarly, retailers were going into the season with their eyes open, Krugman said, by maintaining tighter controls on inventory and staffing.

Rist expects the season will draw heavy promotional activity. Already retailers like Walmart and Target are marketing themselves for their low prices. Not a big shift for Walmart, but a real departure for Target's recent efforts, which focused more on style.

A good message for retailers to promote: "Practicality doesn"t mean cheap. It means a good price for value."

An advantage for independent retailers, Rist noticed, is that they know their customers better than the national chains, which will allow them to better predict buying patterns and more quickly adapt to market changes.

Rist also expects consumers will browse online more, do more online price comparisons, and, therefore, shop more online this season.

Both Rist and the NRF believe the economy should benefit from the November presidential election, no matter who wins. "Everyone is uncertain now," Rist said, noting about half the people will be happy with the results of the race. Given the current administration"s disapproval ratings, even those whose candidate loses are apt to be more optimistic about the future.

The NRF expects home furnishings and gift card sales to be especially challenged this season, said Scott Krugman, vice president of industry relations.

Krugman said the group expects consumers will avoid full-price gift cards in favor of discounted merchandise as a way to get more value for their money. This may benefit retailers as last season's gift cards were in large part redeemed for necessities rather than discretionary purchases, Krugman said.

The home furnishings weakness was largely attributed to housing issues. The group expects electronics to do fairly well, as new items are being introduced and prices are falling.

Another sector poised to do well experience giving, such as certificates to spas, movies, restaurants, etc. Many of these service providers also add incentives to purchasers that make them seem more valuable than a traditional face-value gift card.

The group defines holiday sales as the months of November and December and excludes sales at automotive dealers, gas stations and restaurants

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