Consumer Corner: Retailers seeing double-digit increases in holiday spending

By MARCELLA S. KREITER  |  Dec. 18, 2011 at 4:30 AM
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CHICAGO, Dec. 18 (UPI) -- Retailers were breathing a little easier as consumers showed signs of ramping up spending, but canny merchandising strategies still will be needed to get shoppers to part with their cash.

Industry groups increased their projections for the holiday shopping season as actual sales showed the potential for double-digit increases in coming days.

IBISWorld boosted its holiday sales estimate to nearly $64.3 billion, up 3.3 percent from last year, while ShopperTrak predicted a 4.1 percent increase and the National Retail Federation upped its estimate a full percentage point to 3.8 percent.

"Consumer spending this holiday season has surpassed expectations though many shoppers continue to stick to their budgets and buy only what they need," NRF Chief Economist Jack Kleinhenz said.

ShopperTrak blamed weak sales compared with last year for the week ending Dec. 10 on unseasonably warm weather and the late start to Hanukkah, which begins Tuesday night, nearly three weeks later than last year. The week-over-week comparison showed an increase of 10.6 percent.

With the NRF reporting consumers have completed only half their shopping, the figures are positive, indeed.

"Last week's strong week-over-week retail sales increase is an indication of things to come," Bill Martin, ShopperTrak founder, said. "Retailers will see sales increases all the way up to Christmas Day and the end of Hanukkah. As these important days get closer, shoppers will concentrate on completing their holiday shopping and year-over-year losses will be wiped out."

The NRF's survey found consumers had completed only 46.5 percent of their shopping by last week, less than the 49.5 percent reported at the same time last year.

"For consumers, the holiday season is more of a marathon than a sprint -- typically starting the season strong, pacing themselves in the middle and gearing up again in the final stretch, a trend retailers expect every year," NRF President and Chief Executive Officer Matthew Shay said. "As the hours tick toward Christmas, retailers still have a few tricks up their sleeves to entice even the most extreme procrastinators looking to cross the final names off their lists."

The NRF survey done by BIGresearch polled 8,402 consumers Nov. 30-Dec. 7 and had an error rate of 1 percentage point. It found 37 million people, roughly 16.5 percent of shoppers, had yet to start their shopping, while 7.6 percent said they were done. Some 45.5 percent of those queried said they planned to finish their shopping online, the highest percentage in the survey's history.

Nearly a third of shoppers (31.4 percent) said they were going with gift cards and gift certificates. Sales of clothing, electronics, toys, jewelry and personal care gifts are all up from last year.

"This holiday season, shoppers have their eye on more discretionary purchases -- whether they're looking for gifts or just a few small items for themselves," BIGresearch Consumer Insights Director Pam Goodfellow said. "Many shoppers realize that it is crunch time for making decisions but are still planning to stick to their budgets and seek out good deals until the final gifts are wrapped."

"The luxury market has led the economy in recovery, showing signs of growth throughout 2011," IBISWorld senior analyst Nikoleta Panteva said. "The holidays are an especially appropriate time for consumers to purchase splurge-worthy items like jewelry for their loved ones."

NPD Group reported foot traffic was down in brick-and-mortar stores in the week ending Monday compared with the previous week, but that trend is expected to reverse in the final week. Since Black Friday, NPD said book, craft, department, mass merchant and off-price stores have seen increased traffic.

"There is good news and bad news in these holiday results," said Marshal Cohen, chief industry analyst for NPD Group. "The good news is that the consumer keeps shopping and some categories are seeing nice growth week over week. The bad news is that the post-Thanksgiving lull continues. Retailers need to be more aggressive in luring consumers into stores by using online and by offering more deals. We do see that some stores continued door-busters and it has paid off."

Consulting group Accenture notes just because the merchandise goes out the door before Christmas doesn't mean it's gone for good.

Accenture predicts $17 billion in electronics will be returned after the holidays -- many of those returns the result of "buyer's remorse" or an inability to figure out how to use the item rather than product defect.

"These high consumer electronics return rates are unsustainable in a sector with brutal competition and thin margins," said Mitch Cline, managing director of Accenture's Electronics & High-Tech group. "Manufacturers and retailers should do more to differentiate their customer service by helping consumers understand, set up, use and optimize the products they purchase.

"Most companies invest considerable sums to manage returns, but need to refocus their strategies on proactively preventing returns through customer education and aftermarket support," Cline said.

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