The holidays are the most important time of the year for retailers
as well as some shoppers: about a third of some stores' profits are
made in the last two months of the year, and discounts can make or
break those results.
A new forecast from market research firm NPD indicates that holiday
shopping could show the slowest year-on-year growth since 2009, and
a survey from consultant PricewaterhouseCoopers shows shoppers are
increasingly looking for deals. Both were provided exclusively to
Reuters.
High-end retailer Nordstrom ended the summer saying it planned 20
percent fewer clearance days this year than a couple of years ago,
with another 25 percent reduction next year, as it focused on
service and "differentiated" products.
Teen apparel retailers such as Abercrombie and Fitch and Aeropostale
said they would concentrate on offering more items at full price and
minimize promotions. Last year's deep price cuts reflected the need
to get rid of logo-centric clothes, which rapidly fell out of
fashion. Bohemian-style apparel and floral designs will be more
likely to sell at full price, they said.
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Retailers that can distinguish themselves with distinct or
personalized products and services have a better chance of boosting
margins than broad discounters, experts said.
PricewaterhouseCoopers expects health and wellness products,
athletic apparel and select electronic items like Apple Inc's iPhone
and high-definition televisions to be hot this year, for instance.
But better products and inventory management, two of retailers' most
talked-about tools for keeping prices high over the holidays, have
to compete with buyers' memories of years of price cuts of 50
percent or more.
"The consumer has been permanently conditioned to expect significant
discounts," said Steven Barr, who leads PricewaterhouseCoopers’ U.S.
Retail and Consumer team.
His firm's survey data show that 87 percent of consumers say price
will be the prime factor in deciding what to buy this holiday, up 3
percentage points from last year.
While the economy has picked up from last year, overall spending is
being crimped by stagnant wage growth and rising costs for
healthcare and education, according to the consultant.
"Since the economic recovery has been sluggish and episodic,
retailers can come to this season with strategies to not go
promotional, but it only takes one or two to begin going promotional
(to disrupt their strategies)," said Barr.
Early estimates are for a dip in sales growth, potentially to the
lowest in six years.
Retail researcher NPD's chief industry analyst, Marshal Cohen,
predicted 2.8 to 3.2 percent sales growth, down from 3.5 percent
last year, excluding groceries and autos, for November to
mid-January. The low end of that forecast would mark the slowest
growth since 2009.
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Consultants AlixPartners forecast 2.8 to 3.4 percent growth this
holiday season, compared with its calculation of 4.4 percent for
2014. The lower end would also mark the lowest since 2009 by that
company's methodology.
NPD's retail practice director, Noam Paransky, said shoppers have
saved about $100 billion from low gas prices since last year, but
middle- and low-income shoppers are holding on to those savings or
spending on travel and entertainment.
High income shoppers are scaling back due to oscillations in their
stock market portfolios, and the Federal Reserve's delay in raising
interest rates has also worried shoppers who see the hesitancy as a
reflection of uncertainty in the economy, analysts said.
DEALS START EARLY
Several analysts surveyed by Reuters said they had seen Christmas
décor and service offers already, as retailers try to bring in
shoppers before heavy discounts started.
Walmart announced its holiday layaway program two weeks earlier than
last year, dropping the price of eligible items from $15 to $10. The
National Retail Federation's Kathy Grannis Allen and Kantar Retail's
Leon Nicholas said they recently saw holiday items being put up in
CVS Pharmacy stores. The company, however, said it does not launch
nationally until November.
"In a good economy these types of promotions may not have come this
early," said Grannis Allen.
Research firm Kantar Retail's Leon Nicholas said retailers would
open the promotional floodgates in October, while NPD's Cohen
expects an early November start compared to last year's mid-November
kick off.
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That may be enough to get some attention, said Andrew Lipsman, vice
president of marketing and insights at media analytics company
comScore. But for shoppers, he said: "It doesn’t necessarily mean
they are going to be buying now."
(Editing By Peter Henderson and Bill Rigby)
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