With weak sales during the back-to-school shopping period, ShopperTrak, a Chicago based research firm, predicts that the holiday sales growth is going to be slower this year since shoppers are expected to visit fewer stores as emphasis will be on researching purchases before buying it online. It remains to be seen whether Americans would spend in November and December, a time where retailers make about 40 per cent of their revenues for the year.
Though the job prospects have been showing improvement in the US and the turnaround in the housing market is gaining traction, yet there has not been enough impetuous to sustain higher levels of spending for Americans as most of them continue to juggle moderate wage gains with a higher cost of living. Also, the retailer’s annual surge of holiday hiring will be more muted this year according to Challenger, Gray and Christmas, a consulting firm. While stores and distribution centres are likely to add 6,65,800 workers from October 1- 31 December, it is 11 per cent lower from last year’s 7,51,800 seasonal workers.
According to a report from ShopperTrak, retail sales in November and December will rise about 2.4 per cent compared with 3 per cent in 2012 and 4 per cent in 2011. The report also predicts that the shopper traffic will fall 1.4 per cent during November and December, compared to 2.5 per cent increase in 2012, partly due to consumers preferring online to in-store sales. “Although the economy continues to recover slowly, consumers remain cautious about spending and are not ready to splurge,” says Bill Martin, Founder, ShopperTrak. The prediction by the research firm which counts foot traffic at 60,000 stores and blends it with sales number from stores, offers one of the first insights into how shoppers might spend this holiday season.
Latest market analysis by Thomson Reuters and the University of Michigan indicate that consumer’s confidence is wavering and is falling to its lowest levels since April. Due to this, retailer’s are already strategising, positioning themselves with cautious consumers in mind, putting holiday plans into gear, pushing Christmas themed ads into circulation and decorating store spaces in red and green. On the other hand, the Jewish holiday Hanukkah is at least 3 weeks earlier than usual which will have many Jewish families shopping on and before the Thanksgiving for gifts which may bring in some buying momentum, but this shift alone is not expected to have a major impact on overall sales pattern.
Consumers have been facing a strong sequence of concerns throughout the year, including continued high levels of unemployment, the end of a 2 per cent payroll tax cut, higher gas prices and issues surrounding Syria. Nonetheless these issues have been balanced out by several positives for the consumers including a rising stock market, increasing home values and job creation. The current environment has produced what Citigroup analyst Deborah Weinswig termed in August as a C.H.E.A.P. consumer – a buyer who’s more interested in spending on cars, housing, e-commerce and home products than on apparel, electronics or house goods.
Meanwhile, weekends still remain one of the busiest shopping period within the time frame of holiday season, but this year there would be four compared to last year’s five. In addition, consumers will be able to enjoy a shorter shopping window between Black Friday – the day after Thanksgiving which is usually the biggest shopping day of the year – and Christmas which is 25 compared to last year’s 32 days. Nevertheless the retailers hope that although the consumers have only a few days to shop, but still they will have a certain amount of money to spend on gifts. “Last year, the Christmas season felt like it went on forever and I think the compression may add to more excitement and frenzy, which could help business,” claims Karen Houget, Chief Financial Officer, Macy’s.
These early predictions coupled with the sales report, are mirroring the concerns of a few retailers who are stepping up discounts and pushing earlier for what they fear will be hard-fought sales. Many stores are expected to bring out their promotion and services like Layaways, which lets consumers pay overtime for holiday gifts, earlier than expected. Sears Holdings’ chain Kmart has already aired its first holiday ad-promoting its layaway service – 105 days before Christmas and Walmart stores Inc. have also already announced their layaway plans. In the meanwhile, the recent second quarter sales for most retailers were below expectation which is exacerbated by the fact that many retailers have lowered their sales plan for the rest of the year leading to accumulation of merchandise. These unplanned inventory accumulations may cause markdowns that may eat up into the retailer’s margins.
Interestingly, Storm Sandy, which destroyed many properties on the Eastern Seaboard occurred on Nov. 1, 2012 and had strong effect on the retailers for most of November last year, hence the weak sales of 2012 will provide easy comparisons and help overcome some sale shortfalls in 2013. In order to meet the challenge of beating last year’s sales many brands are planning to line up a series of strong promotions for Black Friday and Cyber Monday and the following selling period.
Many retailers are considering opening stores at midnight or around 4 or 5 am on Black Friday to account for maximum shopping expenditure and to be first among the preferred shopping destinations. Despite this, it is likely to be a tough holiday season as retailers would have to ploy various ways either online or brick and mortar to tap consumers as the holiday rush would come earlier than expected.
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