If the cloud of government bickering goes away, retailers may weather a better Christmas season, according to National Retail Federation projections, with early promotions expected to boost growth.
NRF President and CEO Matt Shay said the association sees a 3.9% increase in November and December sales, over 2012’s actual 3.5% holiday season sales growth. The forecast is higher than averages recorded over the past 10 years, but if the government shutdown continues and Washington, D.C. politicians don’t resolve economic issues, the optimistic forecast could shrivel significantly.
The Washington crisis has implications for the entire holiday season, Shay said in a teleconference last week. “The gloom and doom coming out of Washington is not conducive to a robust holiday retail season.
“Consumers will come and shop and spend if we get out of the way,” he said. “If we don’t give ourselves a self-inflicted wound.”
He also cautioned that weather and national disasters might impact sales forecasts, referring to the double bind last year of government “fiscal cliff” debates and Hurricane Sandy.
NRF Chief Economist Jack Kleinhenz said the U.S. economy continues to expand but at an unspectacular pace. While better than a year ago, the economy is not great and economic activity is anything but normal, he said.
Because of unemployment conditions, Kleinhenz believes consumers will continue to be very promotionally minded and likely won’t use extensive credit-card purchasing. “Credit cards will be used mostly for short-tem spending, and to cover shortfalls between saving and spending,” he said.
Shay said his conversations with retail leaders indicate that consumers will do much more shopping online and by mobile device this year. Online sales are expected to increase between 13% and 15% over the 2012 holiday season to as much as $82 billion. In 2012, online sales increased 15.5% in the fourth quarter over the comparable 2011 period.
Shay also said the shorter Christmas selling season this year, because shopping days between Thanksgiving and Christmas are compressed, will cause retailers to push promotions earlier. He referred to national TV advertising already promoting layaway programs.
Christmas decorations in stores are going up earlier because consumers are shopping earlier, Shay said, indicating this month will begin strong retail promotions to attract consumers’ first holiday spending.
While pricing pressures may not be intense this year because of “benign inflation,” consumers will still be looking for value.
“Price is an element of value, that’s understandable with the economy and anemic job growth,” Shay said, “but in many categories value will be measured in selection, service, and exclusivity.”
Retail promotions this year are expected to sustain margin, he said.
NRF projects seasonal hiring to be between 720,000 to 780,000 temporary jobs, in line with the 2012 season’s actual 720,500 temp hires, which then was a 13% year-over-year increase from 2011.