Forecast: Holiday Sales Will Be Muted

With Anticipated Increases Between 2% and 3%, Retailers Will Start Early With Promotions, Coupons

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Source: NRF
It's looking like a ho-hum holiday is in the cards.

The National Retail Federation predicts that holiday retail sales will increase 2.8% to $465.6 billion. That's far lower than the 5.2% growth retailers saw a year ago, though it's on par with the 10-year average holiday sales increase of 2.6%.

Other forecasts have also begun trickling out, placing holiday sales growth in the range of 2% to 3%. The International Council of Shopping Centers is coming in at the low end, with a forecast of 2.2% growth, while ShopperTrak has one of the more optimistic forecasts, predicting 3% growth. ShopperTrak, however, is predicting a 2.2% decline in foot traffic, citing high unemployment rates and gas prices.

Credit: Asaf Hanuka

"The persistently high unemployment and fuel rates along with consumers' conservative purchasing attitudes will affect spending this holiday season more than in recent years," said Bill Martin, ShopperTrak co-founder. "Every shopper in a store will be more valuable than last year, and retail stores should be ready to convert their holiday shoppers into sales."

To that end, James Russo, Nielsen's VP-global consumer insights, declares it will be important to market early this year, as consumers create lists, collect coupons and plan shopping strategies. Almost 40% of consumers have plans to use coupons this year, he says, up from just over 20% before the recession.

Just 6% of consumers plan to spend more this year than last year, according to BigInsight, while 39% of consumers plan to spend less. In the September survey, one-quarter of consumers were still unsure of how much they'd be spending.

Still across the board, industry trackers are downplaying expectations, acknowledging that unemployment, wild swings in the stock market and rising prices are all weighing on consumers.

"Just when you think the U.S. economy is turning around, another factor comes into play that changes the game," said Jack Kleinhenz, NRF's chief economist. "How Americans will react to shaky economic data is the question, but the good news for retailers is that shoppers have not yet thrown in the towel."

"Retailers are optimistic that a combination of strong promotions and lean inventory levels will help them address consumer caution this holiday season," added Matthew Shay, NRF president-CEO. "While businesses remain concerned over the viability of the economic recovery, there is no doubt that the retail industry is in a better position this year to handle consumer uncertainty than it was in 2008 and 2009."

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