With the United States still reeling from the worst economic recession in 50 years, the unemployment rate approaching 10 percent, and increasing foreclosure filings, consumers don’t appear ready yet to bail out retailers this winter.
But most experts are predicting that sales will be flat—at least—during the holidays, compared to last winter. Of course, the 2008 holiday shopping season was one of the worst on record, an overall decline of 2 percent, the industry’s worst performance since 1967.
“Although there are signs that suggest the economy is nearing the end of its darkest days, many consumers remain burdened by restricted credit availability, high unemployment and foreclosures,” said Carl Steidtmann, chief economist with Deloitte Research, in a statement.
In a way, economic growth depends on consumer spending. But Deloitte suggests that consumers are in no position to spend when nearly 10 percent of the eligible population is unemployed with monthly bills piling up. “Americans continue to save at historically high rates while also paying down debt, and these factors combined suggest another chilly holiday season for retailers,” Steidtmann continued.
Deloitte, the consulting firm, predicts flat sales this holidays (November through January, 2010), compared to last year’s figures. That forecast, which excludes sales of gasoline and motor vehicles, is still better than last year’s decline.
An opportunity exists for certain retailers who are more in tune with technology, especially social networking and online advertising, the company predicts. “Retailers that can harness the power of technology likely have a better chance of engaging those consumers who are willing to spend.” said Stacy Janiak, the U.S. retail leader at Deloitte, in a statement.
“The proliferation of mobile applications and social networks may yield new opportunities to pursue targeted advertising, build brand loyalty and measure campaign effectiveness,” Janiak said.
A forecast by the International Council of Shopping Centers (ICSC) shows slightly better results for retailers this winter. The ICSC, a retail industry trade organization, predicts a 1 to 2 percent increase in sales.
Holiday sales will “likely to be much better than in 2008,” Chief Economist Michael Neimira said in an ICSC report.
Retailers Adjusting Holiday Strategies
Last week, big box retail chain Wal-Mart Stores Inc. announced that it would bring back its $10 toy campaign in all stores, and expand the section to more than 100 toys. The decision was based on the company’s success with the promotion last year.
Some of the $10 toys are new releases, while others will be 20 to 50 percent off Wal-Mart’s regular price for such toys.
Wal-Mart is one of a number of companies getting a jump start on attracting consumers. An internal study showed that more than 70 percent of customers plan their holiday shopping before Oct. 31.
Electronics retailer Best Buy Inc. is one of few companies projecting better sales this holidays. CEO Brian Dunn, at a press event last week in New York, said that the company will hire more seasonal staff to accommodate what he believes will be robust sales.
The higher sales will come from flat-screen televisions, netbooks, and smartphones, and other digital gadgets, Dunn said.
In an SEC filing, Best Buy said that, “Certain weeks during this summer selling period experienced unit volumes in flat panel televisions that met or exceeded certain weekly sales volumes during November and December of the previous year.”
Electronic retailers will also benefit from a slew of new computer and laptop releases to coincide with the introduction of Microsoft’s new Windows 7 this month.
