Retailers Ready For Rough-And-Tumble Fourth Quarter: Deloitte

NEW YORK — Macroeconomic headwinds may cause Americans to pull back on holiday spending this year, but retailers will be ready, having already put inventory and head count controls in place to better manage costs.

That's the call from Deloitte Research, a subsidiary of financial services firm Deloitte & Touche. According to Stacy Janiak, the company's U.S. retail leader, "Retailers have done a very good job anticipating economic conditions, so they shouldn't be caught by surprise. They have kept their inventories lean, their payrolls low and other costs in check, which will likely cushion them somewhat from a mixed holiday season. Retailers will be most successful by conducting innovative promotions to bring shoppers into stores and increase share of wallet, and by carefully managing inventory to maintain fresh selections throughout the season."

Retailers can also learn from past holiday seasons, Deloitte said. A survey commissioned by the firm last January found that retailers lost sales during the holiday season due to customer service, store navigation and inventory issues. Out-of-stock items, long lines at registers, unavailable or unhelpful sales help, and confusing store layouts caused many customers to leave without making purchases. "Retailers need to minimize these missed sales opportunities," Janiak said. "Creating a positive customer experience is within a retailer's control and, importantly, helps create long-term customer loyalty."

Janiak added that consumers will likely consider a broader range of factors when making purchasing decisions next quarter, such as the country of origin of the products. "If, as we expect, consumers will be more selective in their shopping this year, then retailers might also want to communicate with shoppers about product integrity, brand image and company reputation so that shoppers feel good about buying from them," she said.

Deloitte's Retail group expects holiday sales to increase 4.5 percent to 5 percent during the November to January period, less than last year's 5.1 percent increase, and a more modest holiday selling season compared to the past decade. "A number of unsettling factors in the economy, including the declining housing market, a volatile stock market and rising unemployment claims, will likely add up to a mixed holiday season for retailers this year," said Carl Steidtmann, chief economist for Deloitte Research. "Despite the recent rate cut, we expect that the past tightening of credit for mortgages and refinancings will continue to have a negative impact on housing sales and also deplete a source of cash that consumers have come to rely upon."