With just about a month away from Black Friday, which is considered the official kick-off of the holiday shopping season, sales forecasts are all over the map.
At one end is PwC’s estimate of a 7 percent increase in sales over last year and a 15 percent gain compared to 2022. On the other hand, there is a more conservative projection of a 2.5 to 3.5 percent gain from the National Retail Federation. Estimates from Deloitte are in line with the NRF as the analysts at the firm expect a 2.3 to 3.3 percent gain but with e-commerce forecasted to grow between 7 and 9 percent year-over-year.
On a WWD webinar earlier this week, Ethan Chernofsky, senior vice president of marketing at Placer.ai, described the current consumer spending and retail landscape as “bifurcated.” Chernofky said there are a lot of variables affecting consumer spending, and how and where they’re shopping this holiday season. He said retailers need to go deep into the consumer mindset and focus on merchandise curation that meets consumer demands for value and style.
Looking at recent sales data points to a holiday shopping season that may beat expectations — but not all categories will be winners. David Silverman, senior director at Fitch Ratings, said September retail sales (released last week) remained healthy, “with sales, [excluding] auto and gas, up about 3.7 percent relative to 2023; declines in auto and gas pulled down overall retail sales growth to 1.7 percent.”
Silverman said the sales results reveal a consumer “who remains resilient albeit thoughtful in their purchases, as seen by continued weakness in discretionary categories like consumer electronics, furniture and home furnishings.”
He said Fitch continues to expect sales to remain reasonable in the near term, “with choppiness across many discretionary categories as demonstrated in recent months. Holiday sales for those exposed to categories like home, apparel, jewelry are likely to be sluggish, but conservative inventory planning across the group should somewhat limit unplanned markdowns — although there will of course be plenty of promotions. Companies best positioned should be those with flexible expense management and strong customer connections to inspire traffic and loyalty in a crowded marketplace.”
Retail analyst Nikki Baird, vice president of strategy and product at retail technology company Aptos, said that given current conditions, retailers need to focus on creating a great shopping experience. “Retail right now is a mixed bag — some winners and some losers,” Baird said. “And a lot of that comes down to the experience offered. Consumers today have higher expectations for what a retail experience — particularly in the store — needs to offer than it did five years ago.”
Baird told WWD that while the American consumer has been more resilient than anyone could have expected, “that isn’t a free pass for retailers to underinvest in their stores. Investments in labor, investments in customer experience tech, investments in digital transformation of the store…it’s been too easy to kick the can down the road until you suddenly realize there’s no road left.”
Retailers need to focus on value proposition and customer experience — if they expect to win, Baird added. “Retailers aren’t just competing with other retailers when it comes to consumers’ discretionary spending,” she said. “If consumers feel like the shopping experience isn’t worth their time and effort, they are going to spend their money elsewhere. A trip to Italy, a dinner out, catching the latest Blake Lively and Ryan Reynolds films — there is no shortage of ways that consumers can spend their discretionary dollars.”
Matt Pavich, senior director of strategy and innovation at pricing optimization solutions provider Revionics and formerly an executive at Target, told WWD that this holiday season does offer more “normalcy” for retailers with inflation cooling. “Still, there is no doubt that consumers continue to seek value,” he said. “Promotions in general will play a larger role in the 2024 holiday season. Retailers are dealing with shrinking shopper loyalties, a larger number of competitors across more channels — and, of course, a more dynamic landscape where prices are shifting more frequently to win over consumers who are looking for great deals.”
Pavich said there are tools available that can help optimize sales. “Retailers can leverage advanced analytics to understand which items are the most important for consumers and how that importance might differ across locations and channels,” Pavich said. “Once these KVIs [key value items] are identified for the season, a retailer can better focus on where to invest in price perception.”
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