Market Analysts Predict Moderate Upturn for Holiday 2012 Shopping Season
October 23, 2012 | Toy companies and retailers can expect a moderate upturn during the Holiday 2012 shopping season, according to market analysts. Factors impacting fourth quarter sales include uncertainty regarding future economic growth among consumers, tax increases and rising gas prices.
Chief economists at the International Council of Shopping Centers (ICSC) are forecasting a 3% sales increase at chain stores for the November-December holiday period, even amidst a “softening economy (…) rising gasoline prices, a presidential election (…) and tax increases slated for January 1, 2013.”
“Despite the cautiousness displayed in our forecast for the 2012 holiday season due to the uncertainty about the automatic spending cuts, Congress has a real opportunity to resolve the issue quickly and amicably to assuage consumer fears, which, in turn, could propel this season’s performance far above ICSC’s current expectations,” says Michael P. Niemira, VP of research and chief economist for ICSC.
The National Retail Federation (NRF) released a report in October, predicting that holiday sales this year will increase 4.1% to $586.1 billion. The outlook is based on an economic model using several indicators including consumer confidence, consumer credit, disposable personal income, and previous monthly retail sales releases. Additionally, NRF’s digital division Shop.org has announced that online holiday sales are expected to grow 12% over last year to as much as $96 billion.
“This is the most optimistic forecast NRF has released since the recession,” said NRF President and CEO Matthew Shay. “In spite of the uncertainties that exist in our economy and among consumers, we believe we’ll see solid holiday sales growth this year. Variables including an upcoming presidential election, confusion surrounding the ‘fiscal cliff’ and concern relating to future economic growth could all combine to affect consumers’ spending plans, but overall we are optimistic that retailers promotions will hit the right chord with holiday shoppers.”
Shoppers are expected to remain “conservative” with their holiday gift budgets this year. In an Oct. 17 press release, the NRF forecasts a slight increase in consumer spending – holiday shoppers will spend $749.51 on gifts, décor, greeting cards and more, up slightly from the $740.57 they spent last year. Retailers are expected to continue to look for ways to stand out with “attractive deals on toys, electronics and apparel, even well before the ‘official’ start of the holiday shopping season – Black Friday and Cyber Monday,” said Shay. [Read the full press release]
Sean McGowan, Senior Analyst at Needham & Company, told the Toy Industry Association (TIA) that modest retailer inventories and post-election shopping will have a positive impact on the toy industry during the holiday season.
“After disappointing results last holiday season, major retailers worked to get inventories down as the year went on, and I believe inventories are now more aligned with where they should be,” explained McGowan. “This should allow for products with decent sales velocity at retail to benefit from re-orders. And when we get to the other side of the election, many shoppers are going to realize they have a lot of shopping to do – fortunately, there are two extra shopping days between Thanksgiving and Christmas Eve this year compared to last year.”
McGowan added that the North American toy industry can expect to see a surge in demand for toys in developing global markets: “Companies fortunate enough to be operating in developing markets such as Brazil and Russia are seeing very strong increases in demand for toys in those markets, as the middle class not only grows in size and purchasing power, but as consumers become more inclined to spend their new wealth on their children,” he said.