Reporter Sandra Brown summed up holiday sales forecast sentiments in a fantastic article in the October 2, 2011 Sunday issue of the Chicago Tribune. Much like in recent years, retailers are concerned about the biggest shopping season of the year. For many retailers, November-December is when they make 20%-25% of their annual revenues. This number climbs to 30%-40% for jewelry and toy stores.
Brown’s article points out that consumer behavior is getting harder and harder to predict in the long aftermath of the recession. Retailers placed orders in the spring for the holiday season when consumers optimism was on the rise. Since that time, US and world economic conditions, including continued high unemployment, have left people worried. Research indicates that consumers are still shopping but placing value on what is most important to them which doesn’t always mean the lowest price. The example given in the article by one retailer is of customers who routinely splurge on $20 olive oil but cut back in another category that’s not valued as much. This makes the task of predicting buying habits very challenging. An Atlanta-based firm has seen consumer spending predictability go from 78 to 20 percent from the start of the recession to now.
What’s bad for retailers can end up being good for consumers. When retailers are worried they might be left with tons of goods, consumers could see deep discounts across the board like in 2008 after the financial crisis. On the flip-side, the following year led to smaller orders and less merchandise for buyers to choose from. Of the forecasts that have trickled in, fourth quarter sales are expected to increase around 2%-3% this year, compared to 4%-6% in 2010. With all of this said, shopping is an emotional activity with one strategist reminding us that consumers want to be disciplined, but end up buying when they go into stores. I think this is especially true during the holiday season.
Even if our coin is worth less or we don’t have as much to spend, many of us will dig deep and head to the stores to find the perfect gift to say to our loved ones, Merry Christmas! I chose this just for you, from Santa.