The National Retail Federation is forecasting a very good season for retailers gearing up for shoppers likely to spend a bit more on winter holiday gifts this year.
NRF predicts that during November and December retail sales will increase between 3.8% and 4.2% compared to 2018. Collectively, U.S. retailers stand to bring in sales totaling between $728 billion and $731 billion.
Sales projections do not include automobile dealers, gasoline stations or restaurants.
NRF says this year’s projections are higher than the average holiday increase of 3.7%, as reported over the previous five years.
Last year was a rather dismal year for retailers with holiday sales growth of only 2.1% over 2017. NRF attributes the “unusually small increase” to the government shutdown, stock market volatility, tariffs and other issues.
NRF’s experts say the economy dictates the generosity of holiday shoppers.
For example, during a booming economy, as it was in 2004, holiday sales increased by 6.8%. But during an economic downturn, holiday sales can drop substantially, as they did in 2008, when sales decreased 4.7% compared to the previous year.
All these numbers are important to retailers who expect to receive about 20% of their annual sales during the winter holidays. NRF says for some retailers, holiday gift giving is even more important with hobby, toy and game stores bringing in about 30% of their annual income during the last two months of the year.
“The U.S. economy is continuing to grow and consumer spending is still the primary engine behind that growth,” said NRF president and chief executive Matthew Shay. “Nonetheless, there has clearly been a slowdown brought on by considerable uncertainty around issues including trade, interest rates, global risk factors and political rhetoric.”
Still, Shay says, “Consumers are in good financial shape and retailers expect a strong holiday season.”
NRF bases its holiday forecast on an economic model that considers a variety of indicators, including employment, wages, consumer confidence, disposable income, consumer credit and previous retail sales.
How much will shoppers spend?
According to NRF’s annual survey, consumers will spend an average of $1,048 this holiday season, up 4% from last year. Results of the survey by NRF and Prosper Insights & Analytics were released Oct. 24. The survey showed that shoppers between the ages of 35-44 plan to spend the most at $1,159.
“Consumers are willing to spend a little more on gifts for the special people in their lives this holiday season,” Shay said.
Those surveyed plan to spend an average of $659 on gifts for family, friends and co-workers, and $227 on non-gift holiday items such as candy, food, decorations, greeting cards and flowers. They’ll likely spend an average of $162 on other non-gift items to take advantage of deals and promotions.
“Younger consumers are helping drive the spending increase this year,” said Phil Rist, Prosper Insights executive vice president of strategy. “They’re not just spending on their immediate family members, they’re also treating their larger circle of co-workers and friends to gifts.”
More than half of shoppers ages of 25-34 (52%) plan to purchase gifts for co-workers, and 82% of those ages 18-24 plan to purchase gifts for their friends.
Most shoppers, 53%, will shop in department stores and 51% will go to discount stores, while 44% will go to grocery stores, 34% to clothing and accessory stores and 23% each to electronics stores and local small businesses.
Holiday wish lists
Gift cards were the most popular item with 59% of those surveyed placing them on their wish lists. Other popular items include clothing and accessories at 52%, books, movies, music and video games at 35%, electronics 29%, home décor 24%, jewelry 23%, personal care or beauty items 21%, sporting goods 18% and home improvement items 17%.
Black Friday and Cyber Monday
Black Friday, the day after Thanksgiving, is still considered the traditional kickoff to the shopping season, although it’s not as big of a deal today as compared to the past. Many stores open on Thanksgiving Day and others have what they call Black Friday sales well in advance.
“There’s no question that heavy discounting early in the holiday sales season — both online and in stores — along with retailers opening their doors on Thanksgiving Day has cut into Black Friday sales,” NRF says. “However, Black Friday remains the unofficial kickoff to the holidays and is an important tradition for millions of shoppers across the country. There is no indication this will change in the foreseeable future.”
Black Friday is actually part of a four-day shopping spree that ends on the following Monday, aka Cyber Monday, which is devoted to online shopping. NRF says the four days are some of the busiest of the year. In 2018, an estimated 165 million people shopped from Black Friday to Cyber Monday, spending an average of $313 each.
NRF expects online and other non-stores sales to increase between 11% and 14% this year and bring in between $163 billion and $167 billion, an increase from the $147 billion these shoppers spent last year.
Shoppers should keep in mind that Thanksgiving is six days later this year, cutting into the time you have to find that perfect gift, if you don’t start buying until Black Friday. And Christmas is on a Wednesday this year, so beware, the weekend before is expected to be one of the busiest of the year.
Most forecasters agree that the sales, deals and promotions will make the biggest difference both online and in store. Many shoppers have indicated they only plan to shop at sales and finding the biggest deals is crucial to their holiday shopping success.
Online shopping
Companies that track online sales, such as Salesforce, Practical Ecommerce, Retaildive, Marketingland and emarketer, predict that online shopping will be bigger than ever before, especially on mobile devices. And these online shoppers are expected to start early. More than half (56%) of NRF’s survey participants said they would shop online.
Some experts say shoppers taking advantage of “click-and-collect,” which is buying online and then picking up merchandise at the store, may tend to wait for last-minute deals since they won’t be as dependent on shipping deadlines. Forty-eight percent of those surveyed by NRF said they would use buy-online, pickup-in-store or ship-to-store services.
Free shipping will continue to be the big draw for any retailer hoping to up their game during the holidays. Among online shoppers surveyed by NRF, 92% plan to take advantage of free shipping and 16% plan to use same-day delivery. About 32% of online shoppers ages 18-24 say they plan to use same-day delivery.
Forecasters predict that Amazon will continue to dominate online sales through the holiday season.
According to mytotalretailer.com, Amazon had more traffic on Cyber Monday 2018 than Walmart, Target, Best Buy, Kohl’s and Macy’s combined.
Good news for job seekers
NRF expects that retailers will hire at least 530,000 seasonal workers this holiday season. In 2018, retailers employed 554,000 temporary workers during November and December. While some say fewer shoppers are actually going to the store to make their purchases these days, that’s not entirely true. Lots of people are actually shopping online but picking their merchandise up at the store. Retailers still need more employees to help with sales, stocking and shipping.
“Strong sales during the holiday season are fundamental to a successful year for Florida retailers,” said Scott Shalley, president and chief executive of the Florida Retail Federation. “With one in five jobs in Florida tied to this industry, this positive forecast is fantastic news for Florida families. Retailers are already stocked up and staffed to support the demands for this holiday season.”
