Strong Holiday Retail Sales Season Seen, But Growth Not as Good as Last Year

Source: https://sourcingjournal.com

While this year’s holiday shopping season might not see the growth it experienced last year, it is still shaping up for a strong retail performance.

The buoyant U.S. economy generally outweighs any negative factors, such as early-season promotions luring shoppers and cutting into actual holiday season sales. The pitched battle between traditional retail and e-commerce for consumer purchasing is expected to reach new heights in 2018, according to James Bohnaker, associate director for IHS Markit, in his analysis of the upcoming season.

“Rock-solid consumer fundamentals—low unemployment, rising incomes, lofty asset values and personal tax cuts—will underpin another cheery holiday retail sales season,” Bohnaker said. “Holiday retail sales are expected to grow 5 percent in 2018, a slight step back from last year’s rate of 5.3%, which was the best since 2005.”

Bohnaker said an increasing portion of holiday sales will be derived through online shopping. He projected $136.2 billion of the $722.1 billion in holiday sales, or 18.9%, will originate online compared to 17.8% last year.

In analyzing the upcoming holiday season, always a vital period for the sales goals and bottom lines of merchants, Bohnaker noted that holiday retail sales—defined as not-seasonally-adjusted November plus December total retail sales, excluding automobile dealerships, gasoline stations and food services—have seen varying levels of strength during the current economic expansion. He said factors including severe weather, gasoline price spikes, geopolitical influences and general uneasiness among U.S. consumers have hampered results in recent years.

Last year, risk factors were limited and consumers demonstrated more ability and willingness to spend thanks to improved employment prospects, job stability, real disposable incomes and asset values.

“Those consumer fundamentals have improved still further in the last year and propelled consumer confidence to elevated levels,” Bohnaker said. “Moreover, there are few conceivable downside risks that would prevent 2018 from being another merry season.”

But enough downside issues exists to curtail growth from reaching last years’ levels, despite the U. S. economy’s improved position—2.3 million jobs and $410 billion of additional real disposable income have been created since this time last year. Part of the difficulty is timing: In-store promotions are beginning earlier each year as retailers try to compete with online merchandisers, and this year might set a new status quo for how early the holiday displays are set up, since Black Friday falls on its earliest possible date of Nov. 23, the analysis noted.

“Consumers also have a little more disposable income in their bank accounts than usual due to the tax cuts, so they will not shy away from purchasing earlier in the season, especially if they are concerned that prices could potentially rise the longer they wait,” Bohnaker wrote. “That likely means that we will see more retail sales spread out over early November and even October, which would not count toward holiday sales based on our definition.”

One certainty this year, according to Bohnaker, is that online sales—defined as not-seasonally-adjusted November plus December electronic shopping and mail-order retail sales—will account for a larger share of the holiday pie. Online holiday sales have grown at double-digit rates in each of the last four years and show no signs of slowing in 2018, Bohnaker said.

IHS forecasts online sales growth of 11.5% this year compared with 11.4% in 2017. In addition, Cyber Monday—the Monday following Black Friday—remains the primary sales day, but online flash sales will be rolled out as early as October, Bohnaker, said adding that “the traditional delineation between shopping seasons has blurred due to the emergence of year-round online shopping promotions.”



Categories: Apparel, Brands, Business, E-commerce, Retail, USA

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