Will Holidays Bring Retailers Good Cheer? Two Surveys, Two Outlooks

Depending on which holiday sales forecast ends up being the most accurate, retailers will either be shouting, "It's A Wonderful Life!" or grumbling "Bah, Humbug!" when the season is over and final holiday sales are tallied. Two recently released holiday sales forecasts, one from the National Retail Federation (NRF) and the other appearing in the Kiplinger Letter, paint contrary pictures for the upcoming holiday season.

According to the NRF 2004 Holiday Consumer Intentions and Actions Survey, conducted by BIGresearch for NRF, the average consumer plans to spend $702.03 on holiday shopping this year, a 4.5 percent increase over last year. In addition, in terms of what consumers want to receive for Christmas, the largest jump this year came in gift cards, with 50.2 percent of consumers noting they wanted to receive a gift card this year -- up more than 10 percent from two years ago.

Meanwhile, in its October 15 newsletter, Kiplinger noted "holiday sales won't provide much cheer for retailers this year. An overcrowded market means brutal competition to win consumers, with many retailers already bracing for a blizzard of two-for-one sales." Overall, retailers as a whole should expect sales growth of fewer than 3 percent at best, the newsletter noted. Kiplinger wrote that hardest hit will be stores that cater to low- and middle-income consumers, while upscale merchants should be "in good shape." It explained that consumers who purchase more expensive products are better able to "absorb fuel cost hikes and [are] less worried about jobs."

That said, here are some details from the more optimistic NRF 2004 Holiday Consumer Intentions and Actions Survey:

Overall, total holiday spending this year is estimated to reach $219.9 billion, a 4.5 percent increase over last year, the survey forecast. "Retailers can be encouraged that consumers have been planning ahead for the holidays," said Tracy Mullin, president and CEO of NRF, in a statement. "Shoppers won't let higher gas prices and rising interest rates steal Christmas this year."

This year, consumers are expected to spend their holiday dollars on a variety of merchandise. On average, shoppers will spend $406.52 on gifts for family and $71.29 for friends. Consumers will also spend $22.12 on co-workers and $41.10 on other people, including babysitters, teachers, and clergy. Other items shoppers will buy include decorations, greeting cards and postage, candy and food, and flowers.

The survey also noted that many consumers plan on some non-gift shopping for themselves or family this holiday season, with 51.2 percent planning to take advantage of sales this season -- spending an additional $89.25 on those purchases. Moreover, men and young adults plan to spend the most on themselves, $116.87 and $114.69, respectively.

In terms of what consumers would like to receive this year, once again, books, CDs, DVDs, videos, and video games top shoppers' holiday wish lists, with 53.1 percent of consumers hoping to receive something in that category. Over 50 percent said they would like to receive clothing and clothing accessories. Consumers also hope to receive electronics (32.6 percent), jewelry (22.6 percent), and home decor (21.3 percent).

NRF noted that, while many retailers have been placing greater emphasis on customer service this year, the study showed that most consumers still state that sales or price discounts (41.8 percent) or everyday low prices (15.6 percent) are the most important factors when choosing to shop at a particular store. Only 4.4 percent of consumers said that "helpful, knowledgeable customer service" was the most important factor when choosing where to shop, though it is increasing in importance, the survey showed. Only two years ago, only 3.1 percent of consumers said customer service was the most important factor in shopping.

The study found that many consumers are starting their holiday shopping earlier each year, with 18 percent of consumers beginning their holiday shopping before September, an additional 6.9 percent starting in September, and 17.7 percent beginning in October. Another 34.3 percent plan to begin shopping in November with 23.1 percent planning to wait until December. --David Grogan