MERIC NEWS LETTER


Holiday Sales Outlook

Christmas fireplace with stockings hangingRetail sales during the winter holiday season represent a major indicator of economic activity and consumer sentiment.  Holiday shopping following Thanksgiving started briskly, driven by aggressive discounts by retailers.  Overall, forecasters are predicting a 2.0 to 5.0 percent increase in holiday retail sales this year, a slight decline from 5.1 in 2006.

Each forecaster uses different methods to predict holiday sales. All of them have predicted a slightly lower increase this year due to the cost of gas and heating oil, the housing crisis, and higher food prices. The National Retail Federation (NRF) and Purdue Retail Institute both predict an increase of 4.0 percent in holiday sales to $474.5 billion. The Deloitte & Touche Annual Holiday Survey forecasts a slightly higher increase at 4.5 to 5.0 percent while the International Council of Shopping Centers (ICSC) forecasts a 2.5 percent increase. The lowest estimate of a 2.0 percent increase was predicted by America’s Research Group. If holiday sales increase as predicted it will be the lowest increase since 2002 when holiday sales rose by 1.3 percent.  

Deloitte’s survey shows that consumers plan to spend less overall during the holidays, but will spend more on gifts.  American consumers are planning to be more generous to others, but more restrained on personal expenditures. Plans for general spending on home improvements, socializing/entertaining, charitable donations, holiday furnishings and personal clothing were down.

Safety and quality of products may also affect the types of gifts purchased this year. Recent product recalls have concerned consumers about the safety of imported products and toys. Six out of ten shoppers say the country of origin will influence the decision in purchasing a product. Child opening present

NRF’s Holiday Consumer Intentions and Actions Survey reported that consumers plan to spend an average of $618 nationwide on holiday gifts alone, with Midwesterners averaging $584. Nationally, holiday consumers plan to spend a total of $816 during the season. The Midwest consumer plans to spend $769.

Black Friday and Saturday, the first two holiday shopping days after Thanksgiving, have been dubbed thus because they represent the days when most retailers traditionally move the bottom line from red (losses) into the black (profit). This year, Black Friday and Saturday got off to a brisk start with most purchases being driven by retailers' aggressive discounts to lure buyers into their stores. Combined sales for the two days rose 7.2 percent from last year to total $16.4 billion according to the ICSC. 

The NRF’s Black Friday Weekend Survey, which covers Thursday, Friday, Saturday and Sunday Sales, reported that consumers nationwide spent an average of $347. Midwest totals for the weekend came in slightly lower at $318.

Black Friday pie chart Midwest holiday sales

*The sum of the totals may be greater than 100 percent because the respondents can choose more than one answer. 

Many retailers are breathing a sigh of relief with the higher-than-expected sales for the start of the 2007 holiday shopping season. Other analysts warn that the higher sales may slow as bargain hunters leave the stores as the holiday shopping season continues. The NRF’s Black Friday Weekend Survey shows that 36.4 percent of holiday shoppers have already completed their shopping. At the same time last year, 35.6 percent had completed their holiday purchases, supporting analysts’ expectations that holiday sales may be slightly lower than last year.

This year’s Black Friday hot items included the Microsoft Zune MP3 Player, Transformers toys, Hannah Montana Dolls, Nintendo Wii, and the Guitar Hero video game. 

Cyber Monday, the Monday after Thanksgiving, was predicted to have an increased number of shoppers hunting for bargains online.  An estimated 72 million Americans were planning to shop online, higher than last year’s 62 million, according to NRF’s Holiday Survey. Almost 75 percent of online retailers were planning to offer specials and promotions. The offer of free shipping is the most popular incentive used to drive consumers to online shopping.

The holiday retail season has 32 spending days this year and has the opportunity to show higher increases than predicted due to the extra shopping days. The accuracy of the analysts’ predictions will remain to be seen as the holiday season continues. 

View the 1999 Actual Spending through the 2007 Holiday Season Spending Forecast put together by the International Council of Shopping Centers (ICSC) here.

Sources: International Council of Shopping Centers, National Retail Federation, Deloitte & Touche USA LLP, CNN Holiday Site, Purdue Retail Institute, America’s Research Group and ShopperTrak.
 

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