NORTH PLAINFIELD, N.J. — Holiday shopping won't be as robust as it was last year, but that doesn't mean retailers shouldn't expect sales gains.
The 2012 holiday forecast from Deloitte calls for a retail sales increase of 3.5 to 4 percent over last season. Total holiday sales are expected to reach up to $925 billion. However, the anticipated increase won't be as strong as that of 2011, when holiday sales rose 5.9 percent over the prior holiday season.
The firm blamed the tepid outlook on high gas prices and weak housing and job markets. The report added that while consumers may have paused in advance of the election, retailers may benefit from a post-election “spending boost.”
Additional analysts and trade groups also posted a tempered forecast for the holiday shopping season this year.
The National Retail Federation (NRF) predicts that holiday sales will increase 4.1 percent, which would be a drop from the 5.6 percent growth in 2011. It is, however, the highest forecast NRF has issued since the recession and beats the 10-year average holiday sales growth of 3.5 percent.
The federation's forecast is also more optimistic than the International Council of Shopping Centers (ICSC), which predicts a 3 percent increase this year. In September, ShopperTrak, a Chicago-based research firm that tracks retail foot traffic, predicted holiday retail growth to be 3.3 percent.
In recent years, NRF's holiday surveys have asked how the economy will impact consumers' spending plans. Customers this holiday season have become accustomed to living on a budget, cutting back on non-essential purchases and searching for deals. About 52 percent say the state of the U.S. economy will affect their spending plans, down from 62.2 percent last year. According to NRF, while recent polls have shown consumers are focused on the economy as it relates to discretionary spending, the lower percentage indicates a consumer that has spent four years changing spending habits and is better prepared for the uncertain economic outlook in the near future.
“More than half of Americans this holiday season will feel the impact of the economy and will compensate by doing what they've been doing for several years — looking for ways to cut any corners, comparative shop online and in stores more often and even planning to travel less or not at all,” says Matthew Shay, president and CEO of NRF.
Allison Paul, vice chairman of Deloitte, says high gas prices may discourage shoppers from going to the store this year, which could result in higher online orders. The firm forecasts a 15 to 17 percent increase in non-store sales, which include purchases made via catalogs, the Internet and interactive TV.
“Non-store sales continue to outpace overall growth, but increasingly influence consumers’ experience with the retail store, from trip planning to in-store product research to post-purchase reviews and sharing,” says Paul. “This holiday season, retailers’ most lucrative customers may be the ones they engage across physical and virtual storefronts.”
Deloitte also anticipates even more shoppers will use mobile phones to search for discounts this year. Mobile-influenced retail store sales will account for 5.1 percent, or $36 billion in retail store sales this holiday season, the firm reports.
“Retailers that welcome the smartphone shopper in their stores with mobile applications and Wi-Fi access — rather than fear the showrooming effect — can be better positioned to accelerate their in-store sales this holiday sales,” says Paul. Recent research from Deloitte indicates shoppers armed with smartphones are 14 percent more likely to make a purchase in the store than those who do not use a smartphone as part of their in-store shopping.
Paul adds that he expects retailers will come to the starting gate with omni-channel pricing strategies, as opposed to disparate or reactionary strategies of the past.
“Consumers should see more price transparency across mobile, online and store channels, and retailers will use these same channels to gain insights into their core customers’ behavior. Retailers that interpret and respond to real-time information about shoppers can hit the right notes on pricing and promotions that drive traffic without eroding margins.”
RETAILERS OPTIMISTIC
A pre-holiday survey by Levin Management reveals respondents expect sales to be the same or at higher levels than 2011. During October, the North Plainfield, N.J.-based real estate firm polled store managers within its 95-property portfolio.
About 53.6 percent of respondents reported the same or higher sales volume compared to this time last year (in 2011, 55.8 percent reported the same or high sales at year-to-date 2010).
“While the numbers skew slightly negative from last year, we do not see this change as significant,” says Matthew Harding, president and chief operating officer of Levin Management.
The latest U.S. Department of Commerce figures for retail and food service sales support this indication of continued, annual modest progress. In October, national retail and food services sales dropped slightly from the previous month but were up 3.8 percent year-over-year.
Looking ahead to the holidays, 69.7 percent of respondents anticipate sales will be the same or higher this season than last. Pre-holiday 2011, 81 percent anticipated the same or higher seasonal sales than 2010.
Approximately 18.4 percent of respondents said they plan to add staff for the holiday sales period. The figure represents a significant change from Levin's 2011 pre-holiday survey, when 29.5 percent planned to add staff. ICSC, on the other hand, projects a 0.4 percent increase in 2012 seasonal jobs nationally.
“The percentage drop in our survey respondents planning to hire for the holidays surprised us,” says Harding. “However, in our 2011 post-holiday survey, 54.7 percent of respondents said they would retain their temporary hires as permanent staff. It is possible, then, that after operating with ‘bare bones’ staffing through the recession, many retailers took on employees for the holidays last year and kept them on board. Therefore, they may simply be better staffed heading into the 2012 holiday season, lessening the need for temporary help.”
PEAK SALES AFTER BLACK FRIDAY?
The largest number of respondents in the Levin survey predict the weekend before Christmas (29.3 percent) and the mid-December period (29.2 percent) to be busiest.
Only 15.3 percent anticipated peak sales during Black Friday and the Thanksgiving weekend. The balance expected the heaviest traffic in early December and the period between Christmas and New Year's Day.
“This is an interesting reflection of a continuing trend in which people are shopping closer to Christmas Day,” Harding said in early November. “Black Friday is dropping in importance because value-conscious customers have been 'trained' to wait for progressively lower pricing. They may shop Thanksgiving weekend, but only for those products with door-busting pricing. Retailers are working hard to reverse this trend through increasingly aggressive marketing.”
A Black Friday survey by NRF showed shoppers visited stores earlier this year. Leaving the dishes for later, eager holiday shoppers ventured out as soon as they could on Thanksgiving night. According to the survey, 28 percent of weekend shoppers were at the store by midnight on Thanksgiving night.
The NRF survey, conducted by BIGinsight over the weekend, shows 247 million shoppers visited stores and websites over Black Friday weekend, up from 226 million last year. Taking advantage of retailers' promotions, the average holiday shopper spent $423 this past weekend, up from $398 last year. Total spending reached an estimated $59.1 billion.
“There's no question that millions of people were drawn to retailers aggressive online promotions this weekend, making sure to research and compare prices days in advance to ensure they were getting the best deal they could,” says Pam Goodfellow, consumer insights director of BIGinsight.
Black Friday retail sales online topped $1 billion, making it the heaviest online spending day to date in 2012, according to digital research firm comScore.
Amazon.com was the most visited retail website on Black Friday and it also posted the highest year-over-year visitor growth rate among the top five retailers. Walmart's website was second followed by Best Buy, Target and Apple.
Digital content and subscriptions, including e-books, digital music and video, was the fastest growing retail category online, with sales up 29 percent versus Black Friday last year.
comScore also estimates online retail spending reached $41.9 billion during the third quarter of 2012, up 15 percent year-over-year and marking the eighth consecutive quarter of double-digit growth.
In the Levin survey, 79.7 percent of respondents reported that e-commerce continues to either no impact or a positive impact on their business.
“There is much discussion about e-commerce impacting bricks-and-mortar retail,” says Harding. “Our survey polls a very wide spectrum of uses found in typical shopping centers. Survey results show that on some, the impact is moderate. Certain sectors – such as consumer electronics, apparel and accessories, books, and toys – may feel more of an impact than others, like groceries and personal services.”
Additionally, the survey points to technology taking on an increasingly important role when it comes to marketing. Many retailers are employing social media outlets in their marketing efforts. Approximately 70 percent of the respondents said their company uses social media to reach existing and potential customers. Facebook scored as the most popular platform (used by 81.5 percent) followed by Twitter (used by 26.2 percent).