The National Retail Federation projects that holiday retail sales will rise 2.2 percent this year to $470.4 billion. This gain would fall well below the ten-year average of 4.4 percent holiday sales growth and would represent the slowest growth since 2002, when holiday sales rose 1.3 percent.
“Current financial pressures and a lack of confidence in the economy will force shoppers to be very conservative with their holiday spending,” said NRF chief economist Rosalind Wells. “We expect consumers to be frugal this season and less willing to splurge on discretionary items.”
A number of economic indicators point to a challenging holiday for retailers, NRF said in a statement. A struggling housing market and rising unemployment accompanied by meager income gains will continue to hamper the consumer throughout the season. Food and energy costs will remain high. With the current financial industry crisis continuing to chip away at consumer confidence, NRF said it does not foresee an economic turnaround until the second half of next year.
Phil Rist, vice president of Strategy at BIGresearch, which conducted the survey, in a conference call Tuesday with the media, noted that the survey of consumers was taken from Sept 2 till 9, prior to the extraordinary economic events that are unfolding on Wall Street.
Rist said that survey results do not include jewelry as a category, however, he said the challenge will be whether people will see jewelry as a viable gift this year.
“Other than to say holiday season is an emotional time, I think the jewelry around getting engage will do as it always does,” Rist said. “I think the challenge is in the non-engagement jewelry area.”
Scott Krugman, NRF vice president of public relations, who was also part of the conference call, said the question may be whether consumers will purchase fine jewelry or jewelry at the lowest price. In fact, he said this season will determine the strength of the luxury market.
“Jewelry has been a tremendous driver,” he said. “However, the luxury segment isn’t immune (to falling sales during difficult economic times). It will be a true test for them.”
Krugman also noted the challenges being faced by mom and pop retailers during these uncertain economic times, and also the advantages they have in being able to react to the needs of their customers.
“Mom and pops have an advantage because they are part of the community,” Krugman said. “They understand their customers very well. It’s easier for them to make merchandising decision and adapt quickly. They can’t always compete on price, but they are always in a position to compete on service.”
Among the overall survey results, 21 percent of respondents said it’s still too early for them to know how much they will spend for the holidays. Among those who have a spending plan for the holidays, 52 percent plan on spending less than last year. About 42 percent said they plan to spend about the same as last year. Only 6 percent said they plan to spend more.
Younger consumers plan to spend more than their older counterparts, according to the survey. Men plan to spend more than women. There was very little difference in the spending plans of those in different economic brackets.
Only 28 percent of respondents said they have a positive view of the economy for the next six months. About halfof the respondents said they worry there will be more layoffs in next six months.
“They’re getting hit from all side,” Rist said. “Fluctuating gas prices, the home crises, the fall in credit market, savings, the uncertainty of who is running our country. All of these events are creating a lot of uncertainty.”
Almost 26 percent of population (at least 18 years of age) are using the Internet to conduct product and store research and 17 percent are buying online,” according to the survey. Among those 18 to 34, 18.9 percent say they are shopping more online.
“We see this as an issue of how they manage their expenditures,” Rist said.
NRF defines holiday sales as retail industry sales in the months of November and December. Retail industry sales include most traditional retail categories including discounters, department stores, grocery stores, and specialty stores, and exclude sales at automotive dealers, gas stations, and restaurants.