Marketing, Motherhood, and Mayhem

Holiday Forecasters Have Their Work Cut Out for Them This Year

October 10th, 2011 by Deb McLean

The first round of Christmas sales forecasts are trickling in, and retailers are once again wringing their hands about the biggest shopping period of the year.

Most merchants placed orders for holiday goods in the spring, when there was still plenty of hope that the economy was on the mend. But since then the combination of the first-ever U.S. credit downgrade, the European debt crisis and widespread talk of a double-dip recession has squelched that optimism.

Consumer behavior has never been easy to discern. But experts say it is getting harder to predict in the long aftermath of the recession.

“Consumerism today is getting more and more unpredictable, and the recession has a lot to do with that,” said Tracy Pilar Johnson, research director at Context Research, a Baltimore-based consumer behavior research firm. “People are still shopping. They are still buying things. It’s just more hit or miss.”

Trying to figure out shoppers’ appetites for holiday spending is critical for retailers, as sales rung up in the November-December period account for 20 to 25 percent of most retailers’ annual revenue. At jewelry and toy stores, the figures reach 30 to 40 percent.

At the same time, a bad holiday season for retailers could be a bonanza for consumers. Recall the horrible holiday of 2008. The financial crisis happened so quickly that retailers were stuck with loads of goods and panicked. They slashed prices, overwhelming consumers with deals. Shoppers snatched up designer duds at Neiman Marcus and Saks Fifth Avenue for markdowns at 60 and 70 percent, a rare treat.

In 2009, with the memory of the previous season’s price slashing fresh in their minds, retailers reduced their holiday orders. The play-it-safe strategy led to bare shelves and slim pickings for procrastinating shoppers. Last year, retailers brought in more inventory but took extra steps to make sure the goods would sell. Widespread offers of free shipping and Black Friday promotions that lasted throughout November sent retail sales soaring more than 4 percent, double what most forecasters had predicted.

Kurt Salmon, the Atlanta-based retail consulting firm, has watched consumers becoming less predictable since the depths of the recession. The correlation between what the 8,000 consumers on the firm’s monthly research panel say they’re going to spend and what they actually do spend has been shrinking in the past three years.

Before the recession, the survey had a 78 percent accuracy rate, said John Long, retail strategist at Kurt Salmon. Today, it is 20 percent. The difference: Consumers say they will trim their spending, but then they don’t cut back as much as they intended.

“Consumers want to be disciplined, yet they are enticed to buy when they go in stores,” Long said. “Even when consumer confidence goes down, consumers aren’t reducing their spending. It gets to what shopping is doing for them psychologically.”

Still, confidence among the nation’s consumers languished at a two-year low in September, while the percentage of households saying it is hard to find a job climbed to the highest level in 28 years. That’s not exactly a recipe for a merry shopping season, according to some forecasters.

“The outlook for the 2011 holiday season is not a matter of whether it will be weak, but rather how weak it will be in the wake of declining consumer and business confidence,” wrote Frank Badillo, senior economist at Kantar Retail, in the London-based retail consulting firm’s annual holiday forecast report.

Ho Ho Ho

Tags: No Comments

Leave a Comment

0 responses so far ↓

There are no comments yet...Kick things off by filling out the form below.