Shopping Centers and Retailers and Retail

Analysts predicting slow holiday shopping season

October 1, 2013

Retail analysts are predicting a lackluster holiday shopping season, but they disagree on just how slow it will be.

Richard Feinberg, a Purdue University professor of consumer sciences and retailing, predicted retail sales this season won't be as strong as last year's. He expects sales ranging from flat to 5 percent lower than last year, he said in a report issued Monday.

Feinberg cited the end of a Social Security tax reduction this year along with lingering high rates of unemployment and underemployment as causes for stagnant spending.

Consumers spent roughly $590 billion during the 2012 holiday retail season, making up about 20 percent of annual retail sales and 35 percent of profit, according to Feinberg.

The end of the Social Security tax reduction means most families have $700 to $1,000 less in income this year, he said.

"That translates to anywhere from $82 billion to $117 billion that consumers had last year that they don't have this year," Feinberg said in a prepared statement. "And this hasn't been made up by any rise in income or employment."

Feinberg predicted online ordering would increase in the range of 10 percent to 15 percent over last year. Online shopping represents less than 10 percent of all retail sales.

Meanwhile, the International Council of Shopping Centers predicted revenue will rise 3.4 percent during the all-important November and December holiday shopping months, when many mall retailers realize up to 40 percent of their annual sales. Last year the figure rose 3 percent.

The period is particularly important this year since spending was weak during the back-to-school shopping period, the second-busiest shopping months of the year.

While the job picture has been improving in the U.S. and the turnaround in the housing market is gaining traction, the improvements have not been enough to sustain higher levels of spending for most Americans. Most continue to juggle tepid wage gains with a higher cost of living.

"We're going to see a more subdued spending mood from consumers, but what counts is that we're on track to have a better holiday sales season that last year," said Michael Niemira, vice president of research and chief economist for ICSC.

The outlook was somewhat brighter than one from Chicago-based research firm ShopperTrak. Earlier this month, ShopperTrak predicted that retail revenue would rise 2.4 percent during the holiday shopping season, down from a 3-percent rise last year.

This year, there's a shorter shopping window between Black Friday — the day after Thanksgiving, which is usually one of the top two biggest shopping days of the year — and Christmas. Last year there were 32 days during the period and this year there are 25.

The retail industry is still waiting for a widely watched holiday forecast from the National Retail Federation, the nation's largest retail trade group, which will be issuing its report in early October.

Feinberg all holiday sales predictions are subject to many factors that can change at the last minute.

 "Any number of external events can significantly affect holiday retail sales,” he said. “Consumer spending is sensitive to poor weather, government inaction leading to shutdowns, gasoline prices, and geopolitical situations at home and abroad."
 

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