Blog: Leonie BarrieIt's grim out there

Leonie Barrie | 19 September 2008

With financial markets facing their worst crisis since the 1920s, and the global meltdown unfurling by the day, the question many are asking is whether or not it can get any worse? For retailers unfortunately, one thing is for sure: it's going to be a grim holiday season.

TNS Retail Forward, for example, expects US holiday sales this year to be the weakest in 17 years – that is, since 1991 – with sales at apparel and accessories stores 1.3% down on last year.

Apparel and other specialty stores where many holiday gifts are traditionally purchased are likely to see flat growth this holiday season, it says, but department stores will be hard hit as shoppers seek out more bargains.

Deloitte Research also believes US retailers face a "challenging" holiday season, with sales up 2.5-3% between November and January. 

It points to the end of the tax rebate cheques, rising unemployment (up 28% on this time last year), a 1.3% drop in the hourly wage, and falling house prices as curtailing consumer spending in the months ahead. And all may well offset the positive impact of lower gas and energy prices.

Analysts believe retailers, who have already spent the best part of this year trying to keep inventories low as well as tightly managing labour and other costs, will have little option except turning to heavy discounting or promotions to draw in consumers.

And with the holiday season starting with Thanksgiving Day on 27 November – little more than two months away – there are fears it could turn into one of the worst on record. And, typically accounting for 25-40% of a retailer's annual revenue, this is worrying news indeed.

But perhaps even more worrying is that, bad as they are, forecasts for the holiday season haven't yet included the latest economic turmoil from Wall Street. And of course there are real fears this could drive sales even lower.



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