WASHINGTON¡ªFollowing a September announcement which indicated 2008 holiday sales are expected to rise only 2.2 percent to $470.4 billion, the National Retail Federation (NRF) recently said that the amount consumers plan to spend on holiday-related shopping will pale compared to past years.
Based on the results of the NRF¡¯s 2008 Holiday Consumer Intentions and Actions Survey, which was conducted by BIG Research, the NRF said that consumers plan to spend an average of $832.36 on holiday-related shopping, which represents a 1.9 percent increase compared to 2007¡¯s $816.69. The NRF said this is the lowest increase in planned consumer spending since the survey was first introduced in 2002.
The news that 2008 holiday sales estimate would only bump up to $470.4 billion would be significantly below the ten-year average of 4.4 percent holiday sales growth and would be the slowest growth rate for this period since 2002, when holiday sales were up 1.3 percent.
And in a somewhat obvious sign of today¡¯s strained economy, the NRF survey stated that 40.0 percent of consumers surveyed identified prices¡ªin terms of sales or promotions¡ªis the largest factor in determining where to shop.
Another interesting takeaway from the survey was that 40.2 percent of consumers will begin holiday shopping before Halloween, which, the NRF said, is consistent with data from recent years and shows that ¡°bargain hunters are looking for ways to spread out spending over a period of time.¡±
In an NRF September conference call, NRF Vice President of Communications Scott Krugman said that there are various economic indicators that the NRF refers to when making its analyses on holiday sales projections. These indicators include: energy prices, housing, the credit market¡ªas it tightens on consumers and businesses for investment, consumer confidence, wage growth, and news regarding the turbulent events on Wall Street. It is also worth nothing that freight transportation indicators like truck tonnage, railroad volumes, and intermodal metrics have all been down or flat to a large degree.
Retail categories that may face significant challenges, according to Krugman, include home furnishings (as their prospects are tied closely to the housing market) and gift cards, which could be challenged as consumers may be likely to opt for discounted merchandise. Last year, consumers tended to redeem gift cards on necessity items like food and gas, as opposed to things like televisions and consumer electronics products, said Krugman. Electronics, he said, are being viewed as a potential growth item, in terms of new products and may be a prime investment for consumers.
Phil Rist, vice president of strategy at BIGresearch in Columbus, Ohio, a consumer research partner of the NRF, said during the call that in light of current economic conditions consumers are getting hit from all sides.
¡°The fluctuating gasoline prices, the home crisis where foreclosures are pulling down the value of other homes, which has created a domino fall in the credit market, Wall Street, and the uncertainty of who is going to be running our country¡are all creating a lot of uncertainty¡± said Rist.
Rist noted that this uncertainty is reflected in a September survey conducted by BIG research that stated 28.3 percent of consumers said they are ¡°confident¡± or ¡°very confident¡± for a strong economy in the next six months, which is up five points from August but is 13 points below September 2007.
Along with the economic indicators mentioned above, slow job growth and rising energy costs are other factors contributing to what looks like will be a challenging retail season, said the NRF. It noted that it does not foresee an economic turnaround until the second half of 2009.
