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Pricing Is Key To Holiday Sale

11/18/2005 01:20:00 PM Eastern

New York — The verdict is in for holiday sales, and the outlook is positive — mostly. According to a variety of forecasts, holiday sales are expected to increase between 3 percent and 5.5 percent from last year’s levels. The caveat: If retailers wish to reap these increased revenues, all attention should be focused on pricing.

Indeed, a host of pre-season consumer surveys cited rising heating costs and gas prices as the single biggest cause of decreased sales; however, analysts predict that retailers who compete on price are likely to offset these decreases and emerge from the holiday season successful.

The International Council of Shopping Centers (ICSC), based in New York, anticipated comp-store holiday sales to rise by 3.0 percent to 3.5 percent, despite rising energy costs and lower consumer demand. The ICSC’s chief economist and research director Michael Niemira predicted that "sales will be uneven from retailer to retailer, and it is expected that those who compete on price will be the most successful."

Retail Forward, a global management consulting and market research firm, was more optimistic in its outlook, predicting that discount stores, supercenters, warehouse clubs and consumer electronics specialty stores, among other channels, will see a 5 percent increase in fourth-quarter holiday sales, and that seasonal growth should total 5.5 percent when home improvement, catalog and online retailers are included. The rate of growth, however, will still lag behind last year’s seasonal pace.

A consumer survey commissioned by Manugistics Group, a provider of synchronized supply chain and revenue management solutions based in Rockville, Md., gave further evidence of pricing’s impact on holiday sales. According to the survey, 71 percent of consumers agree that price will be the biggest variable in determining where they shop, and two-thirds will work harder to find the best prices compared to last year. The survey also cited higher energy prices as a primary factor for hindering sales, and it said that consumers are less likely than last holiday season to make big purchases of $750 or more on gifts this holiday season.

The National Retail Federation (NRF) also cites pricing as a leading force behind holiday sales. According to a recent consumer survey by the trade group, more than one-third of consumers said that sales or price discounts are the most important factor in their decision to purchase from a particular store. Consumers plan to shop at a variety of stores this season; top shopping destinations included discounters (71.4 percent) and department stores (59.4 percent).

Falling computer prices, according to a survey by Port Washington, N.Y.-based The NPD Group, will induce consumers to purchase the same number or more PCs than last year, albeit without spending as much. Consumers will spend the most money on clothing, toys, DVD and VHS movies, consumer electronics and technology, and books, in that order, NPD said.

But surveys conducted separately by Circuit City and Best Buy both forecasted good things for the consumer electronics industry, particularly for flat-panel televisions. Nearly 60 percent of consumers in Best Buy’s survey plan to purchase consumer electronics as gifts this holiday season, and 35 percent of survey respondents put technology items on the top of their lists. Flat-panel televisions ranked No. 1, with 25 percent of consumers choosing the item as what they would most like to receive as a gift.

Flat-panel TVs also lead the wish lists of respondents to the Circuit City survey, with 31 percent listing it as what they would most like to receive as a gift. After this, 17 percent listed a digital camera, and 13 percent cited DVDs and CDs.

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