Optimism remains the watchword for this holiday season, with retail sales expected to increase by 4% to 4.5% over those recorded in 2004, according to Clear Thinking Group, LLC, a retailing/consumer products and industrial manufacturing consultancy.
“While sales growth should fall short of last year’s 5.3% gain, the anticipated increase for 2005 is still fairly robust,” said Lee Diercks, a partner and managing director in the firm. Diercks deemed this year’s projections especially positive in light of such factors as gas prices and home heating expenditures, all of which are taking a bite out of Americans’ holiday budgets. “Fuel prices have fallen rapidly over the past six weeks, but even with the decrease to an average of $2.20 to $2.30 per gallon this week, consumers are still paying almost 30% more per gallon of gas than they did last year,” he noted. “Additionally, the high cost of home heating fuel, particularly in the Northeast, will continue to have an impact on how much disposable income is available for holiday gift purchases.”
Clear Thinking Group believes gift cards will be a particularly strong category this year, with sales projected to grow by nearly 10% to 12% compared to the 2004 holiday season and the average consumer expected to receive three to four gift cards. The increased availability of gift cards at the point-of-sale is pushing the envelope, Diercks said, noting that almost every retail chain has implemented a gift card program. “Consumers can even buy one retailer’s gift card at another, non-competing merchant’s stores,” he pointed out. “For example, CVS drug stores sell Best Buy and Target gift cards, and some convenience stores carry a plethora of other retailers’ gift cards.”
While holiday sales will increase overall, the firm expects that there will be numerous winning and losing retail segments. Consumer excitement about flat screen television sets and monitors, iPODs, MP3 players, digital cameras, video games, DVD players and lower prices on laptop computers will mean good news for discount retailers. “The major discounters are more properly positioned than ever in the electronics category, and, due to the pressure on consumers’ pocketbooks, should fare well this season,” Diercks stated. “Certainly there are also high expectations for the big box electronics retailers, such as Best Buy & Circuit City.”
Conversely, the firm foresees holiday sales difficulties for merchants in the sporting goods, toy and apparel segments, where there is a dearth of “must have” items this year. Department stores will struggle somewhat as well, Diercks said, while specialty apparel retailers will face sales challenges early on, especially if temperatures do not drop significantly and in the absence of early snow falls
Further, the firm predicts that retailers who have implemented a multi-channel strategy comprising stores, direct mail and an Internet presence will find themselves best positioned to generate sales to time-starved consumers. “Merchants like Best Buy, Barnes & Noble, Victoria’s Secret and Nordstrom have truly dynamic Web sites and are transacting increasing volumes of business on the Web,” Diercks observed.
“Convenience is still a major factor for consumers; and Web shopping is the great equalizer as far as price goes,” he concluded. “Consumers who shop on line can use numerous comparison shopping sites to determine which retailers have the best price, and many Web sites offer values on shipping through the holidays. What’s more, consumers are figuring out that if it costs $10 to $15 in gas to run to the mall or the nearest big-box strip center, it is just as easy and convenient to shop online and pay the shipping charges.”
About Clear Thinking Group: Clear Thinking Group, LLC provides a wide range of strategic consulting services to retail companies, consumer product manufacturers/distributors and industrial companies. The national advisory organization specializes in assisting small- to mid-sized companies during times of growth, opportunity, strategic change, acquisition, and crisis. For further information, visit the firm’s website at www.clearthinkinggrp.com.
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