Consumer Corner: Predictions up for holiday shopping season, good news for retailers

By MARCELLA S. KREITER, United Press International  |  Nov. 6, 2011 at 4:30 AM
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As the Halloween decorations are stowed and the candy shelves cleared of all that orange-and-black packaging, retailers' fancy turns to the biggest season of the year: Christmas.

Forecasters are predicting better-than gross domestic product results for the 2011 holiday shopping season, which traditionally begins on Black Friday, the day after Thanksgiving. Few retailers, however, are waiting for the starting gun, with plans for midnight openings and pre-holiday sales in full swing. Walmart has even promised to release its Black Friday circular to its Facebook friends during the preceding week.

"Retailers are optimistic that a combination of strong promotions and lean inventory levels will help them address consumer caution this holiday season," National Retail Federation President and Chief Executive Officer Matthew Shay said in a release. "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."

Indeed. The NRF is predicting a 2.8 percent increase from 2010 results to $465.6 billion -- not quite the 5 percent and 6 percent increases before the recession hit, but better than the anemic growth of recent years. ShopperTrak predicts a 2.2 percent increase in sales from last year while the Purdue University Retail Institute predicts sales will increase 2 percent to 4 percent.

"With 9 percent unemployment and 7 percent underemployment -- people who have given up or are working below the radar and are not counted as unemployed -- the fact that we will have an increase in holiday sales is a miracle," said Richard Feinberg, professor of consumer science and retailing.

After receipts were tallied last year, ShopperTrak said, holiday sales actually increased 4 percent.

American Research Group Inc. reported its survey of 1,000 consumers found more than 35 percent planning to cut back on holiday spending because of rising food prices.

The NRF estimates retailers, who have added 100,000 jobs since August, will hire 480,000-500,000 seasonal workers, comparable to the 495,000 hired last year. A CareerBuilder survey was not quite as optimistic, predicting 29 percent of retailers will add help, slightly fewer than last year, largely because of uncertainty about roiling markets and fears of a double-dip recession. The 9 percent unemployment rate doesn't help either.

"Just when you think the U.S. economy is turning around, another factor comes into play that changes the game," NRF Chief Economist Jack Kleinhenz said. "Persistently high unemployment, an erratic stock market, modest income growth and rising consumer prices are all combining to impact spending this holiday season. 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."

And if Halloween-buying was any indication, some fears may be well-founded.

Marshal Cohen, chief industry analyst for NPD Group Inc., said Halloween produced a lot of traffic at retail stores -- but much of it was browsing, not buying.

"It turns out that not all Halloween shopping brings treats for retailers … . And ... we can see that in the drop-off in our shopping conversion rate as more people browse and don't make a purchase," Cohen said.

But Christmas -- and to a lesser extent, Hanukkah -- is different. Though shoppers are counting their pennies, consumers likely will reward themselves as they spend an average $704.18 on gifts and seasonal merchandise, BIGresearch reported earlier this month. That figure is down from the $718.98 predicted last year.

Nearly 60 percent (59.9 percent) of the 8,585 people queried Oct. 4-11 said they planned to take advantage of holiday sales and discounts on non-gift purchases for themselves and their families.

"In 2009 it was all about personal and practical and last year consumers wanted to treat their loved ones to something special. This year, it's a little bit of both," said Pam Goodfellow, consumer insights director for BIGresearch. "Limited budgets and a desire to make the most out of gift-giving will drive consumers to shop at a variety of retailers while also thinking outside the box for great gift ideas."

The eHoliday survey indicates online sales will do better than brick-and-mortar stores. The survey predicted a 15 percent increase compared to last year, with consumers planning to do 36 percent of their shopping online, compared to 32.7 percent in 2010.

Purdue's Feinberg said gift cards likely will be the hottest sellers this year. Among electronics, iPads and smartphones should lead the way, he said.

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