Holiday outlooks and action
by Doug FleenerOctober 26, 2007 -- The annual holiday predictions have been coming out and to no one's surprise the outlook is less than stellar.
The National Retail Federation (NRF) expects overall holiday sales to increase 4% to $474.5 billion. "Retailers are in for a somewhat challenging holiday season as consumers are faced with numerous economic obstacles," said NRF Chief Economist Rosalind Wells. "With the weak housing market and current credit crunch, consumers will be forced to be more prudent with their holiday spending."
The 2007 holiday sales increase is expected to fall below the ten-year average of 4.8 percent. That would represent the slowest holiday sales growth since 2002, when sales rose 1.3 percent.
The International Council of Shopping Centers (ICSC) has an even gloomier prediction. They're predicting only a 2.5% comparable store sales increase for the nation's retailers in a year-over-year comparison for the combined November and December time period. The 2.5% prediction compares to 3% recorded in 2006; 3.6% in 2005; and 2.4% in 2004.
They cite five key factors driving the holiday shopping season: strengthening personal income, weakening consumer confidence, weakness in housing and mortgage markets affecting how much consumers are willing to spend, high oil and gas prices, sale of gift cards; retailer promotions, and early Hanukkah and Tuesday Christmas.
I like the folks over at Gallup Research. They conducted their annual holiday prediction survey at the same time as the NRF and their outlook is a lot rosier. They're predicting consumers will produce an overall increase of 5% to 6% over spending last year. What's funny is that they're reminding people that they had to decrease last year's prediction by mid-November and it might happen again. Well, I'm going with a prediction of 15% up but will revisit it in mid-November!
Gallup's poll results show the luxury segment staying strong with 35% of shoppers forecast to spend more than $1,000 this gift-giving season and upper-income ($75,000+ household income) Americans expected to spend an average of $1,309. There are some concerns this week because Coach told analysts that store traffic slowed toward the end of the quarter in North American stores and they're concerned that will carry over to the holidays.
If any one thing is for sure it's that the holidays are coming fast and it's time to get the A game ready.
As you may have already seen, many department stores are now in full holiday swing. Even though many consumers don't like seeing the Christmas decorations up before Halloween, by the end of October over 40% of all holiday shoppers have already begun shopping.
We all know that while Thanksgiving week is a brutal week of low prices, sales are only the fifth or sixth highest of the season. The week before Christmas is flat-out with most retailers at full capacity. These early shoppers, those from now until Thanksgiving, could be the icing on the cake for many of us.
Does this mean you need to walk into the store today and put your pumpkins away in favor of candy canes? No, but there are a few things you can do to create early sales.
1. Start easing into holiday right after Halloween. Gift stores should be flat out holiday on November 1st. Don't let your own dislike of early holiday decorations get in the way of mining those early holiday dollars. I doubt anyone will refuse to shop in a store that has Christmas decorations up early but you may cause some people to spend early. Clearly department stores wouldn't already be decking the halls if doing so had a negative impact on business.
2. Run some very aggressive specials the next couple of weekends. Take advantage of those who are already buying. Motivate them to take action the day they are in your store. Move from customers saying "we're just looking around to get some holiday ideas" to you saying "look at those people leaving our store with those holiday purchases."
3. Help people create an in-store holiday wish list that can either be taken home or mailed to the shopper's significant other. Focus on getting the customer's contact information so you can get them back into the store.
4. Start your holiday return policy now. Post a sign that all purchases made now are eligible to be returned after the holiday. I firmly believe that the more aggressive the return policy, the better the chance of making a sale.
5. Make sure your gift cards/gift certificates are highly visible and that everyone on the staff is suggesting them. Gift cards are now the number one items on people's wish list. The NRF said that about 54% of those surveyed hope to receive a gift cards or gift certificate. One interesting point is that NPD Group says that the popularity of these gift cards has hurt other retail segments, especially impulse buying. "In past years, impulse purchases have accounted for 26% of holiday sales. In 2006, that figure dropped to 19%, this year we'll be lucky to hit 17%," NPD says in its release. Make gift cards your impulse item!
6. Make sure your backroom is ready to go. Now is the time to get that backroom pristine and organized, ready to maximize your holiday opportunities. Most backrooms I visit waste between 10% - 25% of the space on clutter and plain old junk.
Here's what I recommend you do within the next week. Start with two large boxes and two large garbage bags. Take all of your non-inventory and put it into four piles.
The first pile is garbage. Into the bag and out it goes! The second pile, things that are in good condition but that you no longer need or want, is for Goodwill or a similar charity. The third pile is long-term storage items that you rarely use; things like seasonal decorations, etc. Put those neatly into a box and store it somewhere out of the way. The fourth pile is supplies and items that you regularly need access to. Box them up and label the boxes. Put them in an area that is accessible but not a prime spot.
Now is also the time to get rid of dead inventory. Sell it off this weekend for pennies on the dollar and use that space for product that is going to make you money. One step for retailers, but a giant step for your profitability!
Doug Fleener Doug Fleener is a veteran retailer with more than 25 years of hands-on experience with world-class retailers including Bose Corporation and The Sharper Image. Doug is now president and managing partner of Dynamic Experiences Group, a Lexington retail consulting firm. 
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