October 7, 2011
This holiday season will require luxury brands to create strong marketing campaigns if they wish to win a share of a tepid increase in holiday sales this year, according to the National Retail Federation.
Overall, holiday retail sales are expected to bring in $465.6 billion dollars this holiday season, increasing sales by 2.8 percent. While this is a drop from last year’s 5.2 increase in sales, it remains on-par with the average increase over the last 10 years of 2.6 percent.
“I believe it is consistent with an economy that remains somewhat cautious,” said Jack Kleinhenz, chief economist at the NRF, Washington.
“I think we should understand that the consumer remains to be an important ingredient in the U.S. economy," he said. "As we get closer to the holiday and as the weather changes, I think we’ll see that the consumers will hang in there and they certainly haven’t thrown in the towel yet."
NRF executives disclosed the holiday forecast yesterday during a conference call.
The NRF holiday forecast is developed through an economic equation that takes into account consumer confidence, consumer credit, disposable personal income and previous monthly retail sales releases.
Holiday sales are defined as retail industry sales during November and December 2011.
Stable sales
While the retail industry has seen steady growth in sales over the past 14 months, unstable consumer confidence will have a large effect on this year’s holiday sales, according to the NRF.
Unemployment and rising food and gas prices along with fears of a double-dip recession all need to be taken into account when projecting this year’s holiday sales and planning holiday campaigns.
Indeed, consumer confidence has been expected to hinder sales for the remainder of the year (see story).
Reaching an all-time low of negative 4 percent in 2008 and then exceeding expectations last year with an increase of 5.2 percent, holiday sales are expected to average out this year with a 2.8 percent increase.
“We think any gain should be perceived as a positive one and this number is slightly above the 10 year average," said Matthew Shay, president/CEO of the NRF. "I think in this environment is where you look at the glass half-full."
Overall, holiday sales will likely account for 19.14 percent of the retail industry’s total 2011 sales. This is a slight decrease from last year’s 19.36 percent of sales.
However, this decrease in holiday's share of total retail sales is largely due to a more successful year overall in the retail industry.
In fact, retail sales this year are expected to reach $2.43 trillion.
This is a noticeable increase since 2009 when retail sales only reached $2.26 trillion.
Interactive sales chart courtesy of the NRF
Verified value
Indeed, the projected increase in sales is estimated to create about 480,000-500,000 jobs this holiday season, according to the NRF.
This year marked the first time that the NRF created a projection for seasonal hiring. The estimate is about the same as last year’s 495,000 seasonal employees hired.
Additionally, the retail industry has also created approximately 100,000 new jobs overall this year.
This is a good sign not only for retailers, but for the U.S. economy as a whole, per Mr. Shay.
However, despite stable sales in the past few months for luxury brands, marketers cannot ignore the current economy’s effect on the affluent consumer.
“Luxury retailers, we know, have performed very well," Mr. Shay said. "Many of their customers are more insulated from some of the economic challenges that we face in terms of those that are commodity-related.
“But luxury consumers are the folks who are looking at these expenses as more off-the-balance-sheet at some level, and that has an effect on the psyche of those shopping,” he said.
This year, luxury brands are going to need to convince consumers that the value and quality behind the products are worth the high price points.
Additionally, a consistent customer experience will help to drive consumers in-store and increase brand recall this holiday season, per NRF.
“Even shoppers with money to spend still need to feel good about buying again," said Pam Goodfellow, senior analyst at BIGresearch, Worthington, OH.
"It’s up to retailers this year to provide a good shopping experience, either in-store or online, and customer service will be very important,” she said.
Final Take
Kayla Hutzler, editorial assistant on Luxury Daily, New York
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