Early holiday retail sales forecasts for 2004 might have led you to believe that stores would be busy as usual this year. Now that it’s down to the wire, it appears either that floor traffic stores will be a nonstop shopping traffic jam for the last week of this year’s holiday sales season, or aisles will be eerily quiet.
When Archstone Consulting predicted last month that retail sales would increase by 3%–5% this year over last year, it was careful to describe the forecast in terms of uncertainty. The retail categories that could expect to see the largest increases, according to Archstone, were furniture, household appliances, and audio-video equipment, and at a slightly lower level, electronics, apparel, and luxury items. All are considered to be discretionary-spending categories. It’s not surprising, therefore, that chief among the factors Archstone identified as positive for holiday spending were this year’s record-low interest rates and related refinancing cash-outs that have increased discretionary spending; and figures that show consumer confidence higher this year than in 2003 in “seven out of nine regions in the United States.”
Factors that might negatively affect this year’s holiday spending, Archstone pointed out, include interest rates that continue to rise— the Federal Reserve Board, for the fifth time since June, raised interest rates on overnight loans another quarter of a percent, to 2.25%, just yesterday—and the continued disparity between wages and consumer prices. Wages are rising at a rate of 2.3%; the prices of consumer goods are increasing at 2.7%. More nebulous as a negative factor was consumer uncertainty wavering “between terrorism fears and an election,” although just the completion of the election was expected to reduce some of that consumer sense of uncertainty.
How accurate has the Archstone assessment been? It’s evidently going to be a cliff-hanger, so tune in next week, or the week after, for final results. Right now, the week before the actual holiday that fuels the annual retail sales frenzy, the National Retail Federation has just released its Holiday Consumer Intentions and Actions Survey. The survey finds that shopping this year so far is lagging significantly behind last year’s pace, with “average” consumers having completed only 46.3% of their planned shopping this year, compared to having completed 52.0% of their shopping at this time last year “despite snowstorms that dampened traffic.”
But that’s not all: An impressive 37.5 million shoppers haven’t even started shopping yet. What gives? It’s not clear yet. Relentlessly upbeat, NRF president and CEO Tracy Mullin says that “There is little doubt that stores will be packed for the next two weeks with last-minute shoppers.” Phil Rist, the VP of BIGreasearch, which conducts the NRF survey, says that “while some retailers are sweating out the holidays, shoppers are taking their time.” Meanwhile, the NRF is sticking by its projection of a 4.5% increase in holiday sales.