Consumers’ income gains — and their propensity to spend it — should make for a jolly holiday season for merchants.
According to Deloitte, the financial services firm, consumer spending will likely lead to a healthy 4 to 4.5 percent increase in retail sales between November and January, for a total haul of more than $1 trillion.
Adding fuel to the holiday fires will be digital sales, which are forecast to rise upward of 21 percent, to as much as $114 billion for the season.
However, possible headwinds from the North Pole could dampen shopping sprees, Deloitte cautioned, including an increased savings rate, another government debt crisis, or an extended hurricane season.
The good news, said Deloitte vice chairman and U.S. retail and distribution sector leader Rod Sides, is that “retail is thriving, and it is the proliferation of new, niche retailers that is resulting in share constantly changing hands.”
“Consumers have unlimited alternatives and often bounce between brands, touchpoints and influencers, making it more difficult for retailers to attract shoppers without some level of customization,” he noted. “These disruptive factors are likely to combine to create a highly competitive and promotional holiday season.”
Deloitte’s advice? “Retailers should modify their assumptions about what drives traffic, engagement and holiday sales growth, and realign around customer experience, creating relevant, emotional and inspirational connections that go beyond just product, price and assortment,” Sides said.
Meantime, the National Retail Federatiion cited a steadily improving economy and relative strength within the retail sector contributing to a solid holiday selling season.
The trade group is calling for a year-over-year increase of 3.6 to 4 percent in sales for November and December, for a total of $678.8 billion holiday dollars. The tally includes online, kiosk and direct-to-consumer sales, but excludes gasoline and restaurants.
Also contributing to the projected increase: an extra calendar day between Thanksgiving and Dec. 25, and Christmas falling on a Monday, giving procrastinators an extra weekend to complete their rounds.
“Although this year hasn’t been perfect, especially with the recent devastating hurricanes, we believe that a longer shopping season and strong consumer confidence will deliver retailers a strong holiday season,” said NRF president/CEO Mathew Shay.
Indeed, this year’s expected holiday sales growth will either meet or exceed last year’s 3.6 percent gain, and also tops the five-year average of 3.5 percent.
“Consumers continue to do the heavy lifting in supporting our economy, and all the fundamentals are aligned for them to continue doing so during the holidays,” added NRF chief economist Jack Kleinhenz. “The combination of job creation, improved wages, tame inflation and an increase in net worth all provide the capacity and the confidence to spend.”
NRF’s forecast is based on an economic model using several indicators including consumer credit, disposable personal income and previous monthly retail sales.
This year the trade group issued a sales range rather than a fixed percentage due to the unknown impact of the recent tropical storms.