Holiday Sales Expected To Big This Year, But What If They’re Not?

The holiday sales predictions are starting to roll in, and most seem to be very optimistic that this year’s largest shopping season will be a merry one for retailers.

But what if sales aren’t as strong as most forecasts predict this year?

On Tuesday (Oct. 4), the National Retail Federation predicted that holiday sales would climb 3.6 percent this year to $658.8 billion. That’s a big jump from the 10-year average of a 2.5 percent increase in annual holiday sales and the 3.4 percent average over the past seven years as U.S. consumers recovered from the Great Recession and seemed more willing to open their wallets than usual.

Online sales are expected to be the largest growers this year, jumping 7–10 percent to $117 billion.

“All of the fundamentals are in a good place, giving strength to consumers and leading us to believe that this will be a very positive holiday season,” NRF CEO Matthew Shay said in a statement. “Our forecast reflects the very realistic steady momentum of the economy and industry expectations.”

The National Retail Federation’s prediction is in line with an August report from Kantar Retail that predicted a holiday sales increase of 3.8 percent. Kantar Retail predicted that brick-and-mortar stores would see a 2 percent increase in holiday sales, while online retailers would see a 16 percent sales increase.

The National Retail Federation predicts that retailers will add between 640,000 and 690,000 temporary workers for the holiday as well.

PricewaterhouseCoopers also recently released its 2016 holiday prediction, and those numbers are also looking quite rosy. PwC is predicting a 10 percent growth in holiday sales this year and that the average shopper will spend $1,121 this holiday season.

That growth will be fueled by families with a $50,000 or less annual income, who are expected to increase their spending this holiday season by 23 percent (compared to 4 percent for higher-earning families).

“The great news for all retailers is consumers are much more optimistic this holiday season,” Steven Barr, PwC’s U.S. retail and consumer leader, said in a statement. “They are expected to spend 10 percent more on gifts, travel and entertainment.”

But Barr also cautioned that brick-and-mortar retailers will struggle with growth this holiday season because a larger percentage of holiday sales are expected to move online. PwC expects online holiday sales to grow 25 percent this year.

“The clear winners will likely be the major dot-com destinations, including select store and leading brand websites,” according to Barr. “The challenge for store-based retailers will likely be to leverage their distinctive advantages to stay relevant. Small, independent retailers and local artisans are expected to compete for consumers by offering personal service, as well as unique and handmade gifts. And the larger-format retailers are expected to provide the services and value that matter most to shoppers, including knowledgeable store associates, speedy checkout options, well-stocked stores and great prices.”

Another recently released holiday forecast by the International Council of Shopping Centers (ICSC) predicted more modest growth of 3.3 percent in holiday sales at physical stores this year, up from 2.2 percent last year. This survey polled 2,000 U.S. shoppers from Sept. 19 through Sept. 22 and found that the average U.S. consumer expects to spend $683.90 this year on holiday gifts.

Last year, as The Wall Street Journal noted, the National Retail Federation badly missed on its holiday sales increase forecast, predicting a jump of 3.7 percent, but that final number came in at an only 3 percent sales increase.

The NRF acknowledges that there is still room for error in its forecast, as factors like a global crisis or disaster, the tumultuous presidential election or even the weather all could change shoppers’ confidence in the strength of the economy before Christmas even rolls around and makes them less willing to shop.

“Consumers have seen steady job and income gains throughout the year, resulting in continued confidence and the greater use of credit, which bodes well for more spending throughout the holiday season,” according to NRF Chief Economist Jack Kleinhenz. “Increased geopolitical uncertainty, the presidential election outcome and unseasonably warm weather are the main issues at play with the greatest potential to shake consumer confidence and impact shopping patterns.”