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Research: Holiday retail outlook is positive
November 9, 2009
This holiday season could be a make or break year for many retailers as most cannot survive another year of suppressed sales. However, on the bright side, the overall holiday retail outlook is positive, according to industry research firm IBISWorld, especially since food is expected to be one of the biggest earners this season.
"The recession has caused people to go back to family values as opposed to simply buying presents," said Toon van Beeck, senior analyst with IBISWorld. "Consumers just don't have the money to fork out on unnecessary gifts and luxuries such as traveling. Instead, they'll cherish time spent with close family and friends."
This year's Thanksgiving sales are expected to grow 3 percent from 2008, reaching $29.9 billion. Although this is positive for the retail industry, sales are still below the robust $30.69 billion logged in 2007.
Of total 2009 Thanksgiving sales, 92.5 percent, or $27.64 billion, will be spent on food and drinks alone. Turkey is the single biggest purchase, with 47.1 million birds expected to be consumed this holiday — up from last year's level of 45.3 million birds. In fact, turkey consumption during Thanksgiving will account for nearly 19 percent of all turkeys produced in the United States during 2009.
Total retail sales on the traditional Black Friday weekend are expected to increase 2.8 percent from last year, totaling $42.9 billion. With 76.9 million people estimated to swarm into retail stores on Black Friday alone, shoppers are expected to take advantage of this day to ensure they get all the items on their gift lists.
"Consumers have become accustomed to sales and deep discounts during the past year, but retailers have low inventory levels this season and will try to keep prices high," said van Beeck. "Shoppers will need to purchase before the stores run out if they have specific items on their gift lists."
But if retailers try to avoid discounting key goods for too long, it could spell disaster. People do not have the disposable income and will look elsewhere for their gifts, making the competition fierce and pricing crucial this year.
Consumers are not expected to drastically change their spending patterns from last year. But Christmas sales are estimated to grow 0.19 percent to $128.1 billion across four traditional categories:
"Retailers will look to generate sales in any way possible, with more emphasis on Black Friday, mid-December sales, and a strong online presence offering free shipping," said van Beeck. "It's all about exposure as shoppers look to snatch bargains, while still getting what they want."
IBISWorld estimates overall Christmas sales will be up 6.7 percent, to $136.7 billion, in 2010 — as the U.S. economy slowly climbs out of the two-year recession, the worst in more than four decades. Gift sales are expected to rise 9 percent, but will still be $17 billion shy from the solid 2007 levels, while decorations will increase 14 percent as people make up for the lack of spending in the past couple years.
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