Holiday Retail Sales Expected to Reach $1.5 Trillion

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Holiday retail sales are expected to rise 4% to 4.5% over last year’s shopping season, according to a Deloitte study. Deloitte predicts  total holiday sales to reach $1.4 to $1.5 trillion between November and January.

Deloitte also forecasts an 18% to 21% increase in ecommerce sales in 2017 compared to 2016.  Ecommerce sales are expected to reach $111 to $114 billion during the 2017 holiday season.

“The projected uptick in holiday sales ties to four primary factors affecting consumer spending, starting with anticipated strong personal income growth,” said Daniel Bachman, Deloitte’s Senior U.S. Economist.  “Last year, disposable personal income grew 2% over the year to the holiday period, and we may see that rise to a range of 3.8% to 4.2% this season.” “Consumer confidence remains elevated; the labor market is strong and the personal savings rate should remain stable at its current low level.”

AlixPartners however, expects holiday sales in November and December to rise 3.5% to 4.4% from the year prior, representing the highest holiday growth rates since the recession and on the heels of back-to-school sales posting the third highest rate in the past 10 years.

RetailNext projected that November and December holiday sales will rise 3.8% led by 14.9% increase online, while eMarketer forecasts total retail sales growth at 3.1%, with ecommerce rising 16.6%, the strongest growth in six years.

“Although there is a lot of turmoil in the industry, consumers are spending,” said Roshan Varma, Vice President in the retail practice for AlixPartners in a press release.

Deloitte reported that while the fundamentals remain positive, Deloitte’s economist also cited potential uncertainties that could affect income growth and bring the forecast in at the lower end of the range, such as an increase in the savings rate that would cause spending to expand more slowly.

There is a threat of a government debt ceiling crisis, which could cut employment and income growth.  While the active hurricane season is too early to predict, it could depress spending or increase it, particularly in-home improvement.

“Sentiment and spending indicators are firing on all cylinders, but the question is:  How will retailers respond given the profound disruption across the industry,” said Rod Sides, Vice Chairman of Deloitte LLP and U.S. retail and distribution sector leader. “The good news is retail is thriving, and it is the proliferation of new, niche retailers that is resulting in share constantly changing hands.  Consumers have unlimited alternatives and often bounce between brands, touchpoints and influencers, making it more difficult for retailers to attract shoppers without some level of customization.  These disruptive factors are likely to combine to create a highly competitive and promotional holiday season. Retailers should modify their assumptions about what drives traffic, engagement and holiday sales growth, and realign around customer experience, creating relevant, emotional and inspirational connections that go beyond just product, price and assortment.”

A RetailMeNot study found that nearly 80% of retailers will begin holiday marketing efforts earlier this year as 45% of Americans plan to start shopping before Nov. 1.  This is a continued trend from last year, Black Friday deals will start “well in advance” of Thanksgiving and last beyond Cyber Monday.  While promotions are starting earlier than ever.

The study found that a last-minute push will continue to be a big focus, especially since there is an extra Saturday shopping day before Christmas Eve.  Retailers are putting aside more than a quarter of their overall holiday marketing budget for last minute promotions.

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