With many economic factors weighing heavily on consumers’ minds and wallets, retailers should expect only a modest increase in holiday sales over the 2007 season, according to two forecasts released this week.


Deloitte’s Retail group expects holiday sales, excluding motor vehicles and gasoline, to increase 2.5% to 3.0% during the November-to-January period, less than last year’s 3.4% increase, and one of the smallest gains since 1991’s 2.0% uptick. The TNS Retail Forward forecast is for 1.5% growth-compared with 1.2% in 1991-for the holiday fourth quarter in the key holiday retail segments combined.


“Higher energy and food prices are making a dent in consumers’ wallets, and the dramatic drop in home mortgage refinancings has dried up a substantial source of discretionary funds,” said Carl Steidtmann, chief economist with Deloitte Research, a subsidiary of Deloitte Services LP.  “In addition, continued softness in the housing market, rising unemployment claims and a volatile stock market are negatively affecting consumers’ perceptions of the economy, their wealth, and their ability to spend. In all, these factors will likely lead to a challenging holiday season.”

“Consumers are in a cost-conscious mood and more focused on value than ever before,” said Stacy Janiak, Deloitte’s U.S. Retail leader. “Retailers that can offer unique value propositions-in terms of price, customer service, loyalty programs, or some other means-will be best positioned to attract the consumer’s attention. For example, many time-strapped consumers, who are now also feeling the pinch of higher gas prices, are seeking to make fewer shopping trips and may therefore be attracted by an efficient, streamlined multichannel shopping experience.”


“Retailers can also take advantage of innovative marketing concepts, such as pop-up stores and an emphasis on ‘green.’ These creative approaches may resonate with consumers, bring shoppers into stores and attract new customers, thus helping expand a retailer’s customer base.”


Janiak also commented that retailers appear to be positioned well heading into the holiday season, with low inventory-to-sales ratios and payrolls and other costs that are in check. These measures are particularly important given the extensive promotions expected this holiday season, and will hopefully offset some of the impact on retailers’ bottom lines.


Included in the TNF Retail Forward forecast are the key retail sectors-where many holiday gifts are traditionally purchased-known as GAFO (general merchandise stores such as conventional and discount department stores, supercenters, warehouse clubs, apparel stores, furniture, home furnishings, consumer electronics and other specialty stores) as well as home improvement stores, catalogs and online sales.


“The holiday sales forecast represents a weakening from modest third-quarter growth as the boost from tax rebates runs out,” comments Frank Badillo, Senior Economist for TNS Retail Forward.  “The benefit from a letup in gasoline prices will be overwhelmed by the impact of rising unemployment, tighter credit and other hardships on households.  And, unfortunately, the trends in economic conditions offer no sign of an impending recovery,” he adds.



“Our top-line forecast separates into two distinct groups-the leaders and the laggards,” Badillo states.  “Sustaining above-average growth will be non-store and mass retailers.  They will see combined growth near 6.0% in the fourth quarter.  Continuing to troll the depths will be the homegoods and softgoods retailers where growth is expected to decline 1% or more,” he adds.

TNF Retail Forward anticpates:



  • Mass retailers will see a pickup in performance this holiday season as a result of a shift among shoppers toward value formats and the impact of higher food prices.  TNS Retail Forward forecasts 5.6% combined growth, nearly a full percentage point stronger than last year.  Supercenters and warehouse clubs will remain among the best retail performers while discount department stores will be the laggard of the channel.


  • This year’s letup in retail sales will continue to take a toll on the softgoods sector this holiday season.  Sales at apparel and accessories channels are forecast to decline 1.3% in the aggregate in the holiday period compared with flat growth in 2007.  Department stores, including the upscale players, will remain the biggest drag as upper-income households become increasingly vulnerable to economic pressures.  Apparel and other specialty stores are expected to register flat growth this holiday season.

Online sales across retail channels are forecast by TNS Retail Forward to grow 9% this holiday season compared with 19% in 2007.  This represents the first single-digit growth rate for online retailing during the holiday shopping season since 1999.  TNS Retail Forward forecasts online sales to reach $42.5 billion in the fourth quarter up $3.5 billion from the prior year. 


“The letup in online shopping reflects the spreading impact of the economic downturn since the last holiday season, particularly among upper-income shoppers,” Badillo notes.  “These shoppers, who are more likely to shop online, have turned increasingly value-focused in recent months as they have felt worse off with regard to investments, home values and other economic measures,” he concludes.