Susan Dickenson

I'm dreaming of a flat Christmas...

"The recession is over — sort of," was the response of most analysts to October's gross domestic product report, which indicated the economy expanded during the July–September period. A few days later the news was also better than expected for manufacturing, construction and housing contracts, further hinting that we could be headed into recovery mode. But we're not there yet. Lending remains tight, consumers are more cautious than ever, stimulus programs are winding down, and indicators point to a flat holiday spending season. It's not great, but it's not horrible, either. 

At the beginning of October, the National Retail Federation forecast that holiday sales would fall 1% this year to $437.6 billion, which is less than the country's 10-year average holiday season growth of 3.39%, but not as bad as last year's 3.4% drop in holiday retail sales, nor as severe as the 3% decline in annual retail industry sales expected for all of 2009.

Then, on Oct. 20, the NRF released the results of its 2009 Holiday Consumer Intentions and Actions Survey, conducted by BIGresearch. Those findings reveal that U.S. consumers plan to spend an average of $683 on holiday-related shopping, which translates to a 3.2% drop (about $22 per shopper) from last year's average per-shopper amount. But, though the NRF says holiday shoppers will spend 3.2% less, it still expects holiday sales to decline just 1%.

Even though I find that last sentence to be a little confusing, I still put a lot of faith in the NRF's studies and forecasts. I also give them a lot of credit for making all those retail numbers and survey results a little more entertaining with their revitalized Web site which, if you haven't seen it lately, is a lot more interesting and personable.

In a nutshell 

In an Oct. 20 blog post, NRF VP and spokesperson Ellen Davis shared her and BIGresearch's Phil Rist's findings from the NRF's holiday survey in a "Top 10 Holiday Trends" piece, complete with commentary. Here's my condensed version, which also includes some of the results from NRF's Shop.org eHoliday survey of online retailing:

* Despite the tiny upticks in this, that and the other, Americans will not believe the recession is over until they see a sustained reduction in unemployment.
* This holiday shopping season will be one of economizing and bargain hunting: Re-using last year's decorations, giving practical gifts, making gifts and buying joint gifts. Seventy percent of shoppers surveyed by the NRF plan to shop at discounters, and 11% say they're planning to buy something from a thrift store or resale shop. Sales and low prices will be the deciding factor for more than half of them.
* The NRF will be paying close attention to how increases in credit card minimums and interest rates will affect holiday spending — and say it might bode well for retailers who offer layaway programs. Shop.org's eHoliday survey found that two-thirds of shoppers (67.3%) plan to use a credit card for some online purchases this season, 35.6% will use a debit card and 33.9% will use PayPal. In addition, 11.5% of shoppers say they'll use a gift card or gift certificate to purchase holiday items online.
* Greeting cards, candy and food, and gift cards will stay strong. Americans say they'll spend just 2% less on greeting cards this year. Candy and food spending is up about $10 per person. When people were asked what they wanted to receive this year, gift cards were the most popular and the only category that saw an increase.
* Look for fewer impulse buys. The number of people who said they planned to make additional, non-gift purchases for themselves or their family members fell, and those who said they do plan to make such purchases will spend less on them.
* Young adults (18- to 24-year-olds) are more likely to do their holiday shopping at department stores than anywhere else. The NRF says they're also the most likely to wait until the last minute to shop, meaning a large portion of department store sales might come in closer to Christmas Day. 

The promotions parade 

Speaking of department stores, the importance of Black Friday as the kickoff for holiday shopping seems to be diminishing as holiday promotions start earlier and earlier.
Sears began pitching its weekly "Black Friday door buster" deals before Halloween and announced it would open stores early every Saturday through Thanksgiving. Sears is also planning to offer Saturday specials post-Black Friday in the weeks leading up to Christmas.
Wal-Mart vowed to be the "price leader" this season, reduced toy prices at the end of September, and announced plans on Oct. 21 to cut prices every week until Christmas to attract shoppers. On Nov. 2, Wal-Mart announced a second round of price cuts on toys, some by 20%–30%.
Kohl's holiday sales kicked off Nov. 6 with a pricing promotion, and a Christmas kickoff sale began Nov. 11. The retailer ramped up its digital, social media and direct-mail marketing programs and increased its radio buys to include, for the first time, a national radio spot targeting the Hispanic market.

The Grinch 

Also in the last few weeks, the NRF released some new numbers on retail fraud as well as the final results of this year's National Retail Security Survey (NRSS).
Retailers will lose an estimated $2.7 billion to return fraud this holiday season, and nine in 10 retailers say stolen merchandise has been returned to their stores over the past year. Retailers are also plagued by problems with wardrobing, counterfeit receipts and returns of merchandise purchased with stolen credit cards. Not surprising, then, that two-thirds of retailers say their return policies have changed to combat fraud.
The NRSS revealed that retail shrinkage averaged 1.51% of retail sales in 2008, up from 1.44% in 2007, and total merchandise losses increased to $36.3 billion, up from $34.8 billion in 2007.
On the NRF's Web site, Joe LaRocca, senior asset protection adviser, shared a few of his most "most interesting takeaways" from the survey, the first being the finding that as a percentage of shrink, employee theft is down and shoplifting is up. Fourteen percent of cases involved collusion between employees and external (nonemployee) co-conspirators.
The number of employee theft cases is down, but the average dollar amount per theft case doubled to $2,672. LaRocca thinks it might be due to tighter budgets that have cut loss prevention and management personnel, employee training and loss prevention controls.
Same thing for shoplifting — the number of cases was down, but retailers reported a 59% increase in the dollar amount of the average shoplifting case. And, since dollar loss is a factor in deciding whether or not to prosecute, more shoplifting suspects were taken to court — at an average of $549 per case.
The security survey also revealed that retail burglary and robbery incidents increased by a staggering 400% in 2008, and retailers lost an average of $5,000 each time a store was hit. LaRocca called this finding "particularly disturbing" since burglary and robbery losses aren't necessarily reflected in the total shrinkage loss estimates.

Bright spot 

The Internet will influence one in three holiday purchases this year, and retailers are using it not only as a sales channel but also as a marketing vehicle. The Shop.org survey found that 47% of retailers surveyed are increasing their use of Facebook, Twitter and other social media this season.
More than half of retailers said they have added or improved their Facebook (60%) and Twitter pages (59%), while two-thirds (66%) have added or enhanced their blogs and RSS feeds. Many retailers have also added or revamped their sites' shopping cart (45 %), search capabilities (44%), suggested items (43%), customer ratings and reviews (41%), and featured sale pages (37%).
More than one-fourth of online shoppers (27%) said they plan to spend a larger portion of their holiday budget online this year because of the ability to shop at all hours of the day (42%), it's easier to compare prices (34%), free shipping (33%), convenience (32%), they don't want to fight crowds in stores (25%), and/or products are easier to find (17%).
On a positive note, 46% of online retailers expect their holiday sales to increase at least 15% over last year, and another third (34%) expect sales to grow up to 14%. Just one in five online retailers (20%) expects sales to be flat or decline.
In the coming weeks, as you ring, redeem, bag, wrap and shop, make a mental note of what's selling in home decor. I'll ask again next month in advance of Retail Update's annual "What's In-What's Out" list (to publish in January's issue), or you can e-mail your thoughts on the subject to susan.dickenson@reedbusiness.com.

Posted by Susan Dickenson on November 13, 2009 | Comments (0)