November 12, 2003
Holiday shopping forecast: Too much optimism by experts?
WEST LAFAYETTE, Ind. A Purdue University retailing expert says retail executives' predictions for a merry Christmas shopping season may be overblown. But the retailer's loss will translate into a merry Christmas for consumers.
Richard Feinberg, professor of consumer sciences and retailing and director of Purdue's Center for Customer-Driven Quality, said when retailers realize the season will not live up to expectations, they will put merchandise on sale.
"This is good for the consumer," he said. "As retailers panic, there will be early and aggressive sales and promotions. In addition, there will be lots to choose from.
"My preliminary outlook is for holiday spending to be 2 percent to 3 percent above last year, not the 6-plus percent increase that's being forecast," said Feinberg, who has been issuing annual holiday shopping forecasts for more than a decade.
The only big seasonal winners on the sales side will be e-retailers, but they still represent such a small percentage of sales (only about 5 percent) that they won't significantly affect the overall shopping season.
He explained that the big increase retailers are expecting could come from predicting holiday sales based on third quarter results, which were buoyed by the tax rebate consumers received.
"If this is what retailers are basing their expectations on, they have been led down a garden path no longer paved by tax rebates," Feinberg said. While the economy has shown signs of improvement, the largely jobless economic recovery also is a significant factor, he said.
In addition to lack of extra cash, Feinberg said consumers won't find many hot, "must-have" items this holiday season.
"There aren't compelling new fashion or apparel items for women, or Cabbage Patch dolls or Tickle Me Elmo for kids," Feinberg said.
The retail winners, Feinberg said, will be e-retailers and Wal-Mart, which, unlike department stores, has a shot at the 6 percent increase over last year.
"Total holiday e-retail sales will be $8 billion to $10 billion this year out of a total retail holiday sales of about $220 billion," Feinberg said. "So e-retail is still just a ripple. But the percentage of shoppers (30 percent) who exclusively shop in stores is decreasing, and the percentage of consumers (13 percent) who shop exclusively online is increasing."
However, to put the move to online shopping in perspective, Feinberg points out that in 1997 it was predicted that e-retail annual sales would be $78 million, and they are nowhere close to that.
Other factors and implications for this year's shopping season, according to Feinberg's forecast:
The price of gasoline is a significant factor in Christmas shopping. Feinberg said, "Each increase of 5 cents per gallon means consumers will have $5 less to spend on Christmas presents."
Department stores will see no increase in sales over last year. Feinberg said they will range from minus 5 percent to plus 2 percent.
The consumer is still nervous about world events. Feinberg said, "Small events in Iraq, Afghanistan or in the areas of terrorism and the economy could keep money in wallets."
Even though retailers started their Christmas promotions earlier than ever, the Friday and Saturday before Dec. 25 will be the biggest shopping days of the year, as they have been for a number of years. Feinberg said, "Conversely, online shoppers start early. Fifty percent of online holiday shopping happens before Thanksgiving."
Holiday job seekers may be disappointed. Feinberg said, "Since personnel represents the largest variable cost for retailers, retailers will wait for sales increases. Seasonal hiring will be very restrained."
Hot items for holiday shoppers will be DVD players, MP3 players, remote-control electronic spinning top, Barbie and Powertouch learning systems. Feinberg said, "E-retailers will do best in music, movies and books, with the largest increase over last year in toys, games and jewelry."
E-retailers will work hard for the holiday shopping dollar. Feinberg said, "Look for strong e-mail 'blast' marketing weekly and daily e-mails, specials and free shipping."
Writer: Mike Lillich, (765) 494-2077, email@example.com
Source: Richard Feinberg, (765) 494-8301, (765) 491-5583 (cell), firstname.lastname@example.org
Purdue News Service: (765) 494-2096; email@example.com
Note to journalists: Richard Feinberg will be out of town Wednesday through Friday (11/12-11/14). Journalists wishing to speak to him should call him at (765) 491-5583 (cell).