The NRF estimates US retail sales will rise by 4.1% during the holiday season

The NRF estimates US retail sales will rise by 4.1% during the holiday season

US retailers preparing for the upcoming holiday season - the biggest shopping period of the year - are likely to be hit by headwinds including the presidential election and concerns surrounding the economy. But consumer confidence seems to be picking up and forecasts suggest spending will rise, as Katie Smith reports. 

"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," says Matthew Shay, president and CEO of the National Retail Federation (NRF).

The NRF expects US retail sales will rise by 4.1% to reach US$586.1bn during the holiday season, despite political and fiscal uncertainties. The forecast is up against sales growth of 2.8% last year to $465.6bn.

The International Council of Shopping Centers (ICSC), meanwhile, is predicting sales will climb 3% between November and December compared with its estimates for a rise of 2.2% last year. And ShopperTrak sees sales edging up 3.3% over the period.

In addition, ShopperTrak expects retail foot traffic to grow 2.8% compared to an estimated 2.2% fall in 2011.

While analysts at Deloitte expect holiday sales to grow between 3.5% and 4% from November and January to reach US$920-925m, although this is slower than last year's forecast for gains of 5.9%.

Election impact
Market research company NPD Group says the majority of shoppers intend to spend the same or more than they did last year - but believes consumers will be sidetracked by current events.

"This year the election will be a distraction for the holiday business," says NPD Group chief industry analyst Marshal Cohen. "Consumers and the media will be thinking about the election more than shopping, but when the election is over consumers will get into the holiday spirit."

Retailers are expected to delay their holiday marketing campaigns as a result of the election, according to Deloitte analyst Ramesh Swamy.

Usually retailers launch their marketing operations at the end of October into early November, he says. However, there is going to be a delay this year because retailers will not "necessarily want to be spending their advertising money in competing with the election cycle".

"Once the election is done, I think people will have a clear indication of their prospects or how they view their prospects," Swamy tells just-style. 

However, Euromonitor's US research analyst Kailing Cai believes factors such as the economy and the so-called fiscal cliff of tax hikes and government spending cuts in the new year will not change consumers' shopping habits.

"I think the typical consumer is not terribly well-versed in the particulars of the overall economy or how the fiscal cliff might impact their spending plans, and more immediate concerns such as employment and discretionary income are bigger factors," says Cai.

"This probably translates into a general anxiety or concern about the state of the economy, but beyond that it's more business as usual for most."

Importance of omni-channel
The way shoppers buy their products during the holiday season will be important, Swamy tells just-style, adding that there will be "a big bump in online".

Deloitte expects non-store sales to be up 15-17% this year, with the majority of growth to come from the internet, catalogues and discount stores.

One reason for this predicted increase is the price of gas, according to Swamy. Gas prices are rising in the US at the moment, which is unusual for the time of year as they usually decline in the autumn. "I think that's going to potentially create a situation where people are less likely to drive [to] stores or at least combine trips to the stores," he says.

Cai believes many shoppers will order their Christmas essentials via the internet because of incentives such as free shipping. 

"Online sales will be a strong driver, as general merchandise retailers such as Amazon, eBay, Target Corp and others place greater focus on their apparel offerings," says Cai. 

Free shipping and returns from online fashion retailers such as Asos "remove a significant barrier to trying online apparel retailing," she adds.

Swamy agrees, describing it as a "huge driver" this year. 

Customers will also use their mobiles to check prices when they're shopping, he says, but they will not necessarily make their purchases online. 

With Deloitte expecting smart phones to influence over 5.1% of store sales, "mobile is going to have a much greater impact on peoples' shopping experience and influence of sales," explains Swamy. 

"For consumers, the tip is stay close to your onmi-channel media."

Consumer confidence
Fears surrounding the economy are still precedent, says Swamy. Factors such as the uncertain housing market and rising gas prices "are going to play into the level of confidence consumers could have in terms of how they spend this year".

NRF chief executive officer Matthew Shay agrees economic concerns will effect consumer spending power this year. 

"More than half of Americans this holiday season will feel the impact of the economy and will compensate by doing what they've been doing for several years - looking for ways to cut any corners, comparative shop online and in stores more often, and even planning to travel less or not at all," he says. 

However, shoppers will have an extra weekend to buy their holiday gifts between Thanksgiving and Christmas, which will benefit many clothing and footwear retailers.

As a result, Cai believes confidence among shoppers is high this year. "Consumer confidence seems to be picking up despite ongoing economic uncertainty."

Retailers hiring plans also indicate more optimism in the economy, according to analysts at Hay Group.

Department store group Macy's, discount retailer Target Corp and Wal-Mart have all revealed increased holiday hiring. Some 36% of retailers say they will be taking on more staff this holiday season, while 57% plan to employ the same number as last year, according to Hay Group's figures.