Surveys Indicate Slow Retail Growth This Holiday

A few weeks after the National Retail Federation projected a happy online holiday shopping season, a pair of surveys released yesterday show both retailers and consumers are proceeding with caution.

Soft consumer confidence and lingering unemployment have retailers looking to the 2011 holiday season with caution, according to a study by financial services group BDO USA. According to the 100 chief marketing officers at US-based retailers that took the survey, retailers expect a modest 2.9% increase in total holiday sales this year.

“With a weak jobs outlook and the economy still in flux, most retailers are not expecting big sales increases this holiday season,” said Doug Hart, partner in the Retail and Consumer Product Practice at BDO USA, in a statement.

But larger retailers appear to be more confident that their greater purchasing power and resources will allow them to be more competitive in this environment, according to Hart.

“Across the board, retailers are dialing back the recent trend of expanding merchandise offerings, and are instead looking for a signal of recovering consumer spending before making big inventory investments,” Hart said in the release.

Here’s what else the BDO USA study revealed:

Holiday same-store sales projected to increase 2%. More than half (54%) of retail CMOs project flat same store sales (which refers to revenues of retail stores open for a year) or more for the holidays, and just 37% expect an increase. These expectations mark a shift away from the holiday cheer predicted in 2010 when nearly half of CMOs said holiday same store sales would increase.

Consumer electronics will be strongest performers. With tablets, smartphones and e-readers topping consumers’ wish lists, it’s not surprising that CMOs overwhelmingly say consumer electronics will be the strongest performing category this holiday season (58%). This is followed by toys (16%), apparel (11%), home goods (10%) and lifestyle goods (5%). Eighty-three percent cite consumer electronics as this years’ top performing category, followed by apparel (8%) and toys (8%).

Gift card purchases gaining.Retailers expect a stronger tailwind for January 2012 sales as consumers begin redeeming holiday gift cards. Of retailers who sell gift cards, 57% expect an increase in gift card sales this holiday season, a notable jump from 2010 (47%) and 2009 (32%). Stronger promotion from retailers, greater convenience and a shift to delivery online are the likely contributors to the increase in popularity of gift cards.

Unemployment is greatest risk to holiday sales. The high rate of unemployment, hovering around 9%, remains a driving factor in low consumer confidence and more than half (52%) of CMOs say unemployment will have the greatest impact on 2011 holiday sales. The weak housing market (19%), energy and fuel costs (17%) and global market volatility (9%) are also named as sources that will impact holiday sales.

Meanwhile, The Conference Board Holiday Spending Survey, conducted by Nielsen, shows that US households are expected to spend an average of $497 on gifts this holiday season. Only 7% of consumers said they plan to spend more on holiday gifts this year, while approximately 40% plan on spending less than last year.

Consumers will be heading to the malls and online searching for bargains, according to the survey. Four out of ten holiday shoppers say they expect more than half of their purchases to be on sale or discounted. An additional three out of ten expect a quarter to half of their purchases to be discounted.

“With the overwhelming majority of consumers expecting to spend the same or less than they did last year, it’s not surprising that they expect a large share of their purchases to be on sale or discounted,” said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement.

Last week, Deloitte released survey results that said consumers were going to spend this holiday seaspn, but do so cautiously. Here’s more on the Deloitte survey.

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