Yet again it’s that time of the year when retailers come out at large with various marketing tactics and a horde of promotions to make up for their year-end gains. Not something to ignore, the holiday season is here and US retailers gear up to strike a sale amidst the still conscious consumers and the recovering economy.
According to Deloitte, the latest retail holiday sales forecast is projecting as much as US $ 965 billion in sales between November and January, with a 4 per cent increase over last year’s shopping season. This expected increase is due to the rising home values and lower gas prices that are contributing to an improved US consumer spending this holiday season. Another forecast by eMarketer predicts that US retail sales in the months of November and December 2015 will increase 5.7 per cent year-over-year, reaching US $ 885.70 billion, which is an upward adjustment from the 3.2 per cent growth rate predicted earlier this year and the highest since the 6.3 per cent rise in 2011. “Increases in real income from wages, further decreases in unemployment and an increased willingness to spend in traditional retail categories that missed out on the windfall in gas prices earlier on in the year should also drive this growth,” reveals Monica Peart, Analyst, eMarketer.
Reiterating the above, National Retail Federation expects sales in November and December (excluding autos, gas and restaurant sales) to increase a solid 3.7 per cent to US $ 630.5 billion, which is significantly higher than the 10-year average of 2.5 per cent. Holiday sales in 2015 are expected to represent approximately 19 per cent of the retail industry’s annual sales of US $ 3.2 trillion. Being the most important time of the year for both retailers and shoppers, the last two months of the year make about a third of a retailers profit and discounts can either make or break these results. “However, while economic indicators have improved in several areas, Americans remain somewhat torn between their desire and their ability to spend; the fact remains that consumers still have the weight of the economy on their minds, further explaining the complex retail spending environment we are seeing right now. We expect families to spend prudently and deliberately, though still less constrained than what we saw even two years ago,” informs Matthew Shay, President and CEO, NRF.
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A recent survey by PricewaterhouseCoopers reveals that shoppers are increasingly looking for deals. Therefore this season retailers are being cautious about controlling their discounts that have affected their results in the past, fighting competition in-between stores, luring consumers who are expecting heavy discounts throughout an economy, which is still on its road to recovery. Many retailers are either restricting heavy discounts or limiting themselves to a rather realistic clearance or heavy promotion days in comparison to a couple of years ago. Among them is high-end retailer Nordstrom, who plans a 20 per cent fewer clearance days this year, with another 25 per cent reduction next year, focusing on service and ‘differentiated’ products. During this season, teen apparel retailers such as Abercrombie & Fitch and Aeropostale will concentrate on offering more items at full price such as bohemian-style apparels and floral designs, while minimizing promotions.
This year, retailers are showing signs of concentrating on distinguishing themselves on the basis of personalized products and services that have a better chance of boosting margins than broader discounts. Nonetheless retailers such as Walmart have already started their holiday layaway program, and July saw Amazon.com’s Prime Day, with retailers getting easily lured into price wars, fighting for the shopper’s money. “Price, value and even timing will all play a role in how, when, where and why people shop over the holiday season. Retailers will be competitive not only on price, but on digital initiatives, store hours, product offerings and much more,” maintains Matthew.
Apart from shoppers going to physical stores to purchase, nonstore sales transacted online and in mail order channels are also expected to rise as much as 9 per cent this year, according to Deloitte. The digital interactions over desktop and laptop computers, tablets and smartphones are expected to influence 64 per cent of retail stores this holiday season, equivalent to US $ 434 billion. Additionally, NRF is forecasting online sales to increase between 6 and 8 per cent to as much as US $ 105 billion. Also, mobile will play an important part in eCommerce growth this holiday season. eMarketer expects US retail mCommerce sales to rise 32.2 per cent in full-year 2015, more than double the 14.2 per cent increase forecast for retail eCommerce sales as a whole.
But one of the challenges that retailers would face is to constantly compete with the buyer’s comparison to last year’s discounts and price cuts of at least 50 per cent and more. “The consumer has been permanently conditioned to expect significant discounts. Since the economic recovery has been sluggish and episodic, retailers can come to this season with strategies to not go promotional, but it only takes one or two to begin going promotional (to disrupt their strategies),” informs Steven Barr, who leads the PricewaterhouseCoopers’ U.S. Retail and Consumer team. The survey data reveals that 87 per cent of consumers say that price will be the prime factor in deciding what to buy this holiday season, up 3 per cent from last year.
So far 2015 has proven to be a challenging year, with some stores managing to navigate shoppers’ moodiness better than other. Although holiday sales predictions are optimistic in 2015, but it remains to be seen how the consumers react to the various marketing strategies deployed to lure them to shop earlier.
