Two retail sales forecasts for the holiday season released today disagree on the shopping mindset of U.S. consumers, with one saying “optimism shines” and predicting a 4.1% increase in total retail spending, and the other saying the season will be “characterized by cautious spending” and forecasting a 6.9% drop in average household spending on gifts.
What the two forecasts—the former coming from the National Retail Federation industry group and the latter from the consultants at PricewaterhouseCooper’s U.S. retail and consumer practice—do agree on, however, is that the web and e-commerce will play a greater role in consumers’ holiday shopping this year than in previous years. Shop.org, the online division of the NRF, forecasts web sales will grow between 8% and 11% this year to as much as $105 billion. Shop.org says it makes its prediction based on U.S. Commerce Department data tracked in the non-store category, the vast majority of which is made up of online sales, but also includes direct-to-consumer sales and sales at kiosks. Meanwhile, the PwC group says 43% of holiday gift spending will happen online, up from 42% in 2013, and 41% of shoppers say they will increase how much they spend online this season. PwC’s findings are based on the results of a web survey taken by more than 2,200 consumers nationwide in July and August.
Last month consultancy Deloitte LLP predicted online and mail order sales in November and December will increase between 13.5% and 14%, while research firm eMarketer Inc. projected a 16.6% increase in online sales for November and December. Last year, eMarketer estimated web sales growth of 15.3%.
The 4.1% lift the NRF expects in total retail spending during November and December would have sales topping $616.9 billion. If that comes to pass, it would be the first holiday season since 2011 in which sales will have increased more than 4%. Matthew Shay, president and CEO, says retailers haven’t had a comparable season since 2005, prior to the recession. “November and December look very, very good right now. If our estimates are correct it will be the best [season] going back a decade,” he says.
This time a year ago, the NRF forecast a 3.9% increase in November-December 2013 total retail spending and 13%-15% growth for online sales. When results rolled in, total sales had grown 3.8% and online sales had grown 9.3%, according to the NRF. The U.S. Commerce Department, meanwhile, recorded $95.45 billion in unadjusted non-store sales for November and December 2013, an 8.5% increase when compared to $87.97 billion for the same period in 2012.
Shay says overall economic conditions are improving this year and there is some pent-up demand from consumers to spend. He also says retail spending has been up an average of 3.9% over the last few months, which positions retailers well for the holiday season to come. Further, issues that played on consumer confidence a year ago—the 16-day government shutdown, for instance—aren’t a consideration this year. “We’re at a good jumping-off point as we head into the holiday season,” he says.
Still, Shay concedes, the economic recovery has not reached all consumers, and that will affect confidence and holiday spending for some. “It is clear there is a great sensitivity to pricing,” he says. “The economy, while showing incremental, if modest, gains over the last few months, is not where we would like to see it, and not all consumers feel like they are experiencing a recovery.” That will put some pressure on retailers and lead to a more promotional season with retailers and consumers paying acute attention to price.
The PwC report digs into the economic and price factors. It splits consumers into two groups based on household income, characterizing households with incomes of $50,000 or less as “survivalists” and those with more than $50,000 in incomes as “selectionists.” Survivalists encompass 67% of U.S. shoppers, up from 65% a year ago, and they will spend on average $377 on gifts. Selectionists represent 33% of U.S. shoppers, down from 35% a year ago, and will spend $978 on gifts. PwC projects the average household spending on gifts will be $684, down from $735 a year ago. Its survey found that 72% of consumers believe the economic environment is the same or worse than a year ago.
Across all shoppers, 84% cite “best prices” as the main reason for choosing a place to purchase gifts, and 43% say they will shop based on the frequency and quality of seasonal deals. Survivalists and selectionists will disperse their shopping across more stores and sites to find the best prices; 53% of survivalists and 47% of selectionists plan to visit two to three stores or web retailers and 23% of survivalists and 28% of selectionists plan to visit three to four stores or web retailers.
The PwC report also says online research and showrooming will become a more integral part of consumers’ shopping behaviors this season. “2014 could be the turning point when consumers make online pre-planning an integral part of their holiday shopping tradition,” the report says, pointing to consumer behavior around the Thanksgiving holiday. It says 49% of consumers will search online and purchase on Thanksgiving morning.
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