Dreaming of a Green Christmas
By George Anderson
The National Retail Federation has a present for all its members. The group has changed its forecast for the holiday season and now expects spending to be six percent higher than last year, not the five percent it had previously projected.
If the NRF’s prediction comes true, it would mark the second-largest year-over-year increase since 1999. Last year, sales for the holiday period were up 6.7 percent from 2003.
Tracy Mullin, president and CEO of NRF, said the reason for optimism is that gas prices are going down while consumer spending continues to rise. “Recent consumer spending has surpassed our expectations,” she said.
Not all share Ms. Mullin’s and the NRF’s optimism, reports the Chicago Sun-Times.
Last week, WSL Strategic Retail released its “How America Shops” report with research showing that 53 percent of consumers intend to spend less this year than last. Only nine percent expect to increase the amount they purchase.
“Holiday shopping 2005 will be as tough as post-9/11 because shoppers are once again surrounded by uncertainty: war, terrorists, acts of God striking randomly, plus oil companies putting a tight squeeze on wallets,” according to the report’s authors Wendy Liebmann and Candace Corlett.
Moderator’s Comment: Does your anecdotal or quantitative research suggest consumer spending will be up solidly this
year? –
George Anderson – Moderator
Anecdotally, my Aunt Helen says they have big holiday gift plans in Wyoming this year. When I plug that data into my computer, I calculate a 4.657 percent increase over last year’s holiday sales.
I don’t know what to predict but I would guess the increase would be strong. Inflation and population increases should get us at least 6%. As illegal aliens continue to enter the USA with pockets full of money, they will certainly be buying Christmas gifts. While home prices have slowed some, they have still risen adding home equity wealth to people’s incomes. With all the home refinancing that took place prior to interest rates rising, this added thousands of dollars of cash flow for a lot of households.
Ever since the last recession, which I like to call “dot-com nuclear winter,” the business cycle has seemed weird to me. For instance — business seems to be up in my sector (technology consulting). Corporations are buying again, acquiring other companies, making investments. I’m hiring. So I and the people surrounding me feel, not confetti-throwing confident, but at least back on solid ground.
On the other hand, I doubt the 30,000 laid-off GM workers will be spending a lot this Christmas. Also, projections for online spending are up. eMarketer said yesterday that “shopping at an online store” is second only to discount departments stores as a place where people will spend their money this Christmas. That’s great for online, but I wonder how brick-and-mortar-only stores will fare.
The right answer is that in spite of research, polls, analytics, etc., not a single one of us has a clue. Even though the creatures are stirring… go ahead and predict, its fun, but is it useful? Maybe. There has to be a better prediction than what Wendy and Candace offer. I’d be pretty miserable if I was that pessimistic. I simply don’t pay that much attention to the negativity spread by the mass media. There is too much to be positive about. Maybe their sponsors pay more for negativity? Give a really negative prediction and then beat it – you’re a hero. Okay, enough of the conspiracy theories.
Its going to be a great season. Why? If we work for it to be, it will be. Merry Christmas to all and Happy Holidays (to the pessimists). For you, its going to be tough out there!
For some of us, our soldiers are making great progress in Iraq, a huge milestone of elections will be completed prior to the holidays, people of all walks of life are pouring out aid to those in need from natural disaster in amounts unimaginable, and gas prices are lower than a year ago ($1.97 today!)and supplies are plentiful for holiday travelling. Just another perspective.
How does everyone define the holiday season? Does it end December 25th? Or after the gift cards have been spent in January? How does everyone define success? It is sales or profits? How does everyone define retailing? Does it include autos? Houses? Gasoline? Groceries? Restaurants? The internet? Any retailer can experience terrific sales by selling everything below cost via saturation advertising. Just ask certain American auto companies or some former dot com executives. How many of these people quoted in the media are willing to define what they are describing?
I’ve taken the pledge that this year I’m not going to make my holiday prediction until early January. That way I’ll be right, since last year I changed my prediction three times and I was still wrong.
So, like almost every holiday, we’ll see some growth. The big question is going to be whose cash registers are filled with cash and whose will be filled with lumps of coal? I love what Marshal Cohen of the NPD Group said about this upcoming holiday. He said, “Who’s doing things right is going to be rewarded and who’s doing wrong can’t get away with what they gotten away with in the past.” The key for retailers is not to focus on the sales predictions but to focus on the customer and the in-store execution. That’s how you grow your holiday sales!
This year is certainly going to be a robust spending year, but how much this will be over last year is difficult to say. There are certainly indications that consumer spending is still growing in the electronics area as more TVs, MP3s and other CE devices are being purchased. The same holds true for autos, as large incentives are put into place. The real litmus test will occur following Black Friday and the “first weekend” of the holiday season. So far, the large retailers are expecting some growth, or a flat response to previous sales from last year. This seems like a reasonable guess, and not a down year, like the post 9/11 comments suggested by WSL strategic retail.
I simply don’t see an outstanding Christmas. High fuel costs for both car and home will put some damper on spending. Even with costs declining, there is some lasting effect. I expect consumer confidence to decline a little due to recent layoff announcements. My estimate is half percent above inflation when all clears. Gift cards are becoming a greater percentage and these are spent on mark-down merchandise.