Why Retailers Should Have Good Attitudes, Not Discounts, For The Holiday Season – Part 1

In my last post (Everything Retailers Need To Know About Consumers' Mind-Sets & Buying-Plans For Upcoming Holiday Shopping), I referenced recent research by Booz & Company about what the consumer is thinking and what the consumer planned to buy this upcoming holiday season, plus some suggested retailer strategies. Today, I want to discuss the tone set by Holiday Shopping Season Predictions, Statistics & Headlines, and what they mean for consumers and retailers.  And if you're going to compete and survive in the marketplace, you need to know about tracking competitors, and your competitors' pricing using pricing and assortment intelligence.    

Some recent headlines:

-- Modest Increase Due in Holiday Retail Sales -- Sept. 26, 2012, 24/7 Wall St. - Deloitte Research.

-- Holiday sales seen rising 4.1 in 2012 -- Oct. 2, 2012 USA Today (AP)

-- Retailers Report Slower Sales Growth in September -- Oct. 4, 2012, Anne D'Innocenzio, AP

-- Booz and Company Identifies Consumer Behavior Trends Shaping Holiday Retail In 2012, Sept. 2011

What I'm getting at, posed by Business Strategy and Marketing Expert Bob Phibbs, the Retail Doctor®, is: Do the media, by their headlines and content, set the tone? Does it become a self-fulfilling prophesy? And how can retailers keep from buying (excuse the expression) into it?

Excerpts from the articles -- 

-- Modest Increase Due in Holiday Retail Sales, Sept. 26, 2012, 24/7 Wall St. - Deloitte Research. 

SUMMARY: Citing high gasoline prices and soft housing and job markets, consulting firm Deloitte LLP forecasts that retail sales for the November through January holiday season will rise between 3.5% and 4% this year, compared with a rise of 5.9% in 2011.

The firm’s chief economist said: While consumers turned out in the summer to give retailers solid gains for a few months, that pace may be difficult to sustain through the end of the year. Consumers and businesses alike may pause in advance of the election; however, retailers may benefit from a post-election consumer spending boost.

Deloitte’s holiday sales forecast is slightly higher than others which predict a sales rise of 2.8 to 3%. According to the National Retail Federation, 2011 holiday sales rose 4.1% when compared with 2010 sales, based only on November and December sales.

A couple of bright spots are a projected 15% to 17% rise in non-store sales due to “mobile-influenced retail store sales.”

Holiday sales seen rising 4.1% in 2012 -- AP article in USA today, Oct. 2, 2012

SUMMARY Americans are expected to spend more during what's traditionally the busiest shopping season of the year, but they're not exactly ready to shop 'til they drop like they have been the past two years.

The National Retail Federation, the nation’s largest retail trade group, said it expects sales during the winter holiday shopping period in November and December to rise 4.1 this year. That’s more than a percentage point lower than the growth in each of the past two years, and the smallest increase since 2009 when sales were up just 0.3.

The projections are an important indicator for retailers that depend on the last two months of the year for up to 40% of annual sales. But the estimates also offer valuable insight for economists who closely watch consumer spending, which accounts for up to 70% of economic activity.

The holiday shopping season is one gauge of not only the shopping habits, but also the mindset of the average American during what has turned out to be a slow and uneven economic recovery. Right now, people are feeling better about rising home prices and a rebounding stock market, but job growth is still weak and prices for everything from food to gas are higher. At the same time, there’s uncertainty about who the next president will be and some Americas worry that the US debt crisis could lead to another recession.

No one’s feeling those uncertainties more than US shoppers… It’s Americans’ worries about the economic uncertainty that led the National Retail Federation to predict slower growth during the winter holiday shopping season than the increase of 5.6% in 2010 and 5.5% in 2011.

…Forecast: The Federation’s forecast also is still more optimistic than the international Council of Shopping Centers, a mall trade group that last week said it predicts a 2.9 increase. It’s also higher than the 3.3 growth estimated by ShopperTrak, a Chicago-based analyzer of retail foot traffic.

But predicting holiday spending is never easy. Take last year’s holiday period. Overall sales were strong, but sales don’t tell the whole story: Retailers’ profits were eroded because they had to do a lot of discounting to get shoppers to spend, particularly during the final weeks before Christmas.

And all the economic variables that will likely have an impact on this year’s shopping season make predicting sales that much more difficult.

Still, American’s are more optimistic than they have been in a long time. Consumers’ confidence rose to a seven-month high in September even as the unemployment rate has been stuck at around 8%, according to the Conference Board. Gallup Poll, which tracks consumer confidence daily, also registered a pick-up in confidence last month to the highest level since May. The upcoming presidential election seems to be having an impact on how shoppers view the economy, economists say.

Retailers Report Slower Sales Growth in September, Oct. 4, 2012, Anne D'Innocenzio, AP

SUMMARY: Americans may have slowed their spending in September after splurging during the start of the busy back-to-school shopping season in the month before. But most importantly, they were still spending.

September sales rose 3.9 percent—a slowdown from the 6-percent rise in August—as 22 retailers like Macy’s and Costco reported mixed results, according to the International Council of Shopping Centers.

Still, given the economic and political uncertainty that weighs on many Americans right now, analysts say the results are an encouraging sign for stores as they head into what’s traditionally the business shopping period of the year in November and December.

Because of economic and political uncertainty, The National Retail Federation, the nation’s largest retail trade group, has tempered its expectations for the winter holidays. The group said this week that it expects sales for the November and December period to rise 4.1 percent. (That’s more than a percentage point lower than the growth in each of the past years and the smallest increase since 2009 when sales were up just 0.3 percent. But the forecast still is higher than the 3.5 percent average over the past 10 years.

September’s results offer hope for retailers as they head into the winter holiday shopping season, a two-month period in which they can make up to 40 percent of their annual revenue. It’s the latest sign that consumers are feeling a little better about the economy. That’s important because consumer spending accounts for 70 percent of economic activity.

Takeaway: 

I'm not questioning the statistics, nor the reporting, some of the comments are a little demoralizing. If everything is good news, it wouldn't be news, so I get the part about what they are saying, but want to caution against self-fulfilling prophesies.

I'm also not saying to ignore the economy. As Phibbs says, there’s something inherent in the season about announcing doom and gloom for retailers. "Retailers should tailor their retail strategies and techniques to start with a good attitude – not discounts."

Subsequent posts will take a closer look at the effect of the media reports on consumers and retailers; discuss how retailers can grow their holiday sales, and ideas to make retailers' holidays profitable.  

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Gilon Miller, CMO

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Gilon is a seasoned marketing, sales and business development executive with over 15 years of experience in the software and Internet business. He is the Founder and CEO of GuruShots. Previously, Gilon was the CMO of Upstream Commerce, VP of Marketing at iMDsoft and Director of Global Marketing at SAP. He earned an MBA at the MIT Sloan School of Management and a BS in Electrical Engineering from Tufts University.
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