Though a lot can happen around the world in the weeks leading up to Christmas, right now industry expectations for 2024 holiday sales gains are modest, at 2 to 3 percent.
Consumers, beset by inflation and lower savings and weighed down by presidential politics and wars overseas, are as choosey as ever and holding back on purchasing. Most discretionary product categories are weak, and the back-to-school season hasn’t been much of a winner. The U.S. unemployment rate is 4.3 percent, about a point higher than a year ago due to a slowdown in hiring and the larger labor pool. And retailers are on edge over a potential longshoreman strike that could disrupt shipments on the East Coast.
Also, the calendar isn’t favorable for retailers, with only 27 days for shopping from Thanksgiving to the day before Christmas — the fewest since 2019 — compared to 32 last year. But that may not be as bad as it sounds. As Macy’s Inc. chairman and chief executive officer Tony Spring told WWD, the shorter calendar would make the latter part of November more important, and should compress the extent of the usual spending lull that occurs after the Thanksgiving period and Cyber Monday until about 10 days before Christmas. Though Macy’s Inc. has lowered its sales guidance for 2024, Spring said, “We’re not planning holiday down because of the calendar change.”
Still, there are some positive indicators that should help retailers. Federal Reserve chairman Jerome Powell this month signaled cuts in the interest rate from the current 5.3 percent level will be made, though it’s uncertain when or by how much; retail sales in July 2024 were higher than expected, increasing 1 percent seasonally adjusted from June and 2.7 percent from 2023, demonstrating a resilient consumer. Also, the stock market is high, with the Dow Jones Industrial Average breaking 40,000, and there are forecasts for warmer weather this winter, which will help traffic at malls but hinder purchasing for cold weather apparel and accessories.
“The consumer is still cautious. No one is buying stuff unnecessarily, and when they do shop, they are approaching things much more strategically and that applies to the lower-end customer and the higher-end consumer,” said Craig Johnson, president of Customer Growth Partners, the research and consulting firm. “They are buying fewer units per basket, but consumers are resilient,” Johnson added, sounding slightly optimistic.
In a preliminary estimate, Johnson sees retail sales for holiday up between 2.5 and 3.5 percent. “That would be a so-so performance, but it’s positive, particularly in light of all the craziness with inflation and the whole jobs picture.” Virtually all of the sales gain, Johnson noted, is attributable to inflation, which stands at 2.5 percent. The objective of the Fed rate cuts is to set inflation on a path down to 2 percent.
Johnson’s early forecast of 2.5 to 3.5 percent is lower than last year’s 3.8 percent gain, and the 10-year compound annual growth rate of 4.2 percent.
Salesforce predicts year-over-year global sales growth of 2 percent for November and December, totaling $1.19 trillion. Salesforce reported that holiday sales last year increased 3 percent from the year before and totaled $1.17 trillion.
For just the U.S., Salesforce predicts a 2 percent year-over-year increase in 2024 holiday sales to $272 billion.
To forecast holiday sales, Salesforce, a big software company providing retailers with tools for customer relationship management, sales analysis and data, uses its Shopping Index to analyze data from more than 1.5 billion global consumers on retail sites including 29 of the top 30 U.S. online retailers. The calculations blend first-party and third-party data, as well as several market assumptions.
The firm’s latest research indicates that two-thirds of global shoppers feel prices will dictate where they choose to shop this year for holiday, with less than one-third prioritizing the quality of the goods.
“This season will be competitive, intense, and no doubt focused on pricing and discounting strategies. It’s never been more important to leverage technology like AI and rely on your customer data for guidance and insight into marketing campaigns — especially the holiday promotional calendar — that keep your loyal customers buying more and buying from you,” Caila Schwartz, director of strategy and consumer insights at Salesforce, said in a statement.
At the end of June, Coresight Research projected sales from October through December will be 4 percent ahead on average, and that retail-specific inflation will be slightly negative or, at most, approximately flat at a weighted total level. That seems somewhat more optimistic on the holiday season than the commentaries from Salesforce and Customer Growth Partners.
“In our latest holiday survey, a slightly greater proportion of respondents expect to spend more on the holidays versus last year than expect to spend less. However, the share of consumers expecting their personal financial situation to be better for the forthcoming holiday season than one year earlier has weakened since we asked in January 2024 and is lower than when we asked in June 2023,” Coresight reported. “Our surveys find consumer sentiment variable, but generally weak and having been on an approximate downward trend, likely due to the slower-than-expected unwinding of both inflation and interest rates.”
Coresight and other retail experts believe that Shein and Temu from China are likely to take a bite into U.S. retail sales this holiday season. TikTok “is likely to be a more meaningful sales channel, too,” Coresight wrote.
Johnson said back-to-school retail sales are tracking just under 2 percent, but could wind up a bit north of 2 percent. Still, he considers bts an imperfect predictor of holiday sales, providing a “directionally right” indicator of whether sales will be up or down, though not to what degree. “For individual retailers, if they perform well in the later part of the back-to-school season, meaning late August and Labor Day, it’s a good predictor of how they are going to do for holiday,” said Johnson.
Walmart is seen as a winner in holiday 2024.
Joe Raedle/Getty Images
Among the retailers Johnson expects to perform best this holiday, Johnson signaled out Walmart Inc., which is “hot,” Target Corp., which is “in the middle of a rebound,” and TJX Cos. Inc., which is “very strong.”
“Broadly speaking, the smart retailers are focusing on lowering prices, and in many ways footwear is out-distancing apparel,” Johnson said, citing On and Hoka as poised for good holiday seasons.
He sees “a changing of the guard” in the active and footwear categories from what was once a dominance by traditional leaders such as Nike, Adidas, Under Armour and Lululemon, to brands like Alo Yoga, Vuori, Free People Movement, On and Hoka taking share.
Johnson said home furnishings remains weak, though Fed rate cuts will stimulate home furnishings and home sales, while consumer electronics is experiencing “a little bit of a rebound” that could be speeded up if new products come out soon.
He said Macy’s is now hurting. “They are a wounded survivor but nobody knows Christmas like Macy’s. There’s a great history there.”
Among its holiday predictions, Salesforce expects:
- One in five purchases to be made on Chinese shopping apps such as Temu, Shein, AliExpress and TikTok.
- Two-thirds of shoppers holding out on making big purchases until Cyber Week, largely because they believe it’s the best week of the season for deals and promotions.
- Global discount rates will rise briefly in October and peak at an average discount of 28 percent during Cyber Week.
- In the U.S., the average discount rate is expected to reach up to 30 percent.
- Buy online, pick up in store stays popular and could drive 33 percent of global online orders the week before Christmas and Boxing Week due to the shortened shopping season.