While retailers experienced a decent back-to-school season this year, experts warn not to expect too much for the holiday season. Sales are predicted to be up, but experts say consumers will shop with caution and wait until the last minute to shop for the best deals. They advise retailers to offer promotions, rewards and coupons to draw in consumers. Why? Consumers are expected to do even more comparison shopping and purchasing online than last year. Although the high unemployment rate (holding at 9.6%) continues to put a damper on retail sales, positive September sales for department stores and teen retailers (discount retailers struggled!) might give a glimmer of hope for the holiday retail season.
September sales soar...for some
September sales for many retailers show a light at the end of the recession tunnel, especially departments stores and teen retailers. Surprisingly, discount retailers did not fare as well.
Here are some highlights:
Teen retailers
- Abercrombie and Fitch posted an increase total comp store sales of 13% vs. an 18% decrease from last year
- American Eagle Outfitters, Inc. posted an increase in comp store sales of 4% compared to flat from the year before
Department stores
- Macy's same store sales increased 4.8% vs. a 2.3% drop from last year
- JC Penney Company, Inc. reported a 5.1% increase in comp store sales vs. a 1.4% decrease from last year
- Limited Brands comp store sales rose a whopping 12% vs. a 1.7% decrease from last year
Discount stores
- TJX Companies posted a 1% increase in consolidated comp store sales vs. a 7% increase from last year
- Kohl's reported only a 3% increase vs. a 5.5% increase for the same period last year
- Ross Stores, Inc. posted same store sales of 2% vs. an 8% increase from last year
- Although Walmart doesn't report monthly sales any more, they have posted five consecutive quarters of negative same store sales.
What does this shift foretell? Perhaps just having low prices isn't enough - retailers may need to show they have the right merchandise to bring consumers into their store.
Overall Holiday Sales Predictions from the Experts
Deloitte predicts that retailers can expect about a 2% rise in sales, beating last year's 1% increase, and most of the boost will come from non-store sales such as catalog, interactive television and online. In fact, Deloitte expects a 15% jump in non-store sales, nearly two-thirds of which will be online and the rest of which will come through catalogs and television.
"Online activity may also influence in-store shopping this holiday season, as social networks and mobile applications are playing a more prominent role in the shopping process."
-Alison Paul, Deloitte Retails Sector Vice Chairman
Kantar Retail calls for fourth quarter retail sales to rise 2.5% better than the 0.5% gain from the same period a year ago. Although they predict the holidays will be a soft spot, Kantar says it's not an indication of a double-dip recession. The slow-rising economy, though, will keep consumers in a thrifty mode, which means consumers will be looking for discounts and deals, as well as shopping at dollar stores and small-format value retailers. Kantar found that one-third of consumers plan to comparison shop online before heading to the stores, and that one in every 20 customers will bypass stores completely.
National Retail Federation expects holiday sales to rise 2.3% over last year and that sales will reach $447.1 billion, the biggest increase in three years in part because of more aggressive pricing. This would be a vast improvement over lat year's 0.4% rise and the 3.9% holiday sales decline in 2008.
"Though the retail industry is on stronger footing than last year, companies are closely watching key economic indicators like employment and consumer confidence before getting too optimistic that the recession is behind them." -NRF President and CEO Matthew Shay
The International Council of Shopping Centers released its forecast Tuesday with the most optimistic predictions of an increase in holiday sales landing between 3% and 3.5%
What are consumers thinking?
Kantar Retail's September ShopperScape survey shows early spending plans by shoppers.
- 7% of shoppers are planning to spend more for the holidays vs. 9% from last year
- 19% of Gen Y shoppers plan to spend more - the strongest among all generations
- 38% of shoppers plan to spend less on holiday gifts vs. 40% from last year
- 42% of Baby Boomers plan to spend less - representing the greatest cutbacks between all generations
- 49% of shoppers plan to spend about the same compared with 46% from last year
- 55% of seniors are most likely to hold their holiday spending steady
Although the retail industry experienced a good back-to-school season and many stores saw positive September same store sales, with nearly 15 million people out of work, and until unemployment changes, retailers may not see a strong holiday season this year. Sales are certainly expected to be up, especially compared to the last two years, but the recession continues to have an effect on consumer spending. The holiday season shouldn't be completely dreary though, as long as retailers offer discounts and promotions, the consumers will shop.
Image: dream designs/freedigitalphotos.net
Sources:
September Retail Sales Lift Holiday Sales Expectations, 123jump.com, 10/9/10
Employment Situation Summary, bls.gov, 10/8/10
September Same-Store Sales Grow Slightly Slower, Kantar Retail Reports, retailforward.com, 10/7/10
September Retail Sales Rise; Holiday Looks Happy, multichannelmerchant.com, 10/7/10
Retailers' Holiday Hinges on Discounts, wsj.com, 10/6/10
Retailers Need 'Promo Mojo' to Survive Holiday 2010, cnbc.com, 9/30/10
Deloitte: Online will drive small uptick in holiday sales, bizreport.com, 9/26/10
Retailers Cautious As They Hire Holiday Temps, npr.org, 9/19/10
Analysis: As school starts, retail thoughts turn to holidays, reuters.com, 9/3/10
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