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Wednesday, October 6, 2010

2010 Holiday Sales Expected to Rise

After two anemic years of retail sales for the November-December holiday season, two retail associations are predicting a modest improvement in retail sales this year.

Holiday sales are expected to increase 2.3 percent this year to $447.1 billion, according to the National Retail Federation. While that growth remains slightly lower than the ten-year average holiday sales increase of 2.5 percent, it would be a marked improvement from both last year’s 0.4 percent uptick and the dismal 3.9 percent holiday sales decline retailers experienced in 2008.

Meanwhile, the International Council of Shopping Centers predict that holiday sales this year will rise 2.5 percent over last year’s season, a considerable improvement over last holiday season’s 0.5 percent gain.

“While many consumers will be wishing for apparel and electronics this holiday season, retailers are hoping the holidays bring sustainable economic growth,” said Matthew Shay, NRF president and CEO. “Though the retail industry is on stronger footing than last year, companies are closely watching key economic indicators like employment and consumer confidence before getting too optimistic that the recession is behind them.”

As in previous years, retailers are expected to focus on supply chain efficiencies and inventory control this holiday season to limit their exposure to excess merchandise and unplanned markdowns, the NRF said. Companies are also expected to leverage new channels—like mobile—to drive sales and provide added service to customers who want to shop anytime, anywhere.

“While consumers have shown they are once again willing to spend on what’s important to them, they will still be very conscientious about price,” said Jack Kleinhenz, NRF chief economist. “Retailers are expected to compensate for this fundamental shift in shopper mentality by offering significant promotions throughout the holiday season and emphasizing value throughout their marketing efforts.”

The ICSC say that much of the growth will be led by discounts.

“Prices and uncertainty will weigh heavily on the holiday outlook,” said Frank Badillo, an economist with consulting firm Kantar Retail. “Ongoing price competition among retailers, led by Walmart, is more likely to take a toll on sales gains than boost unit demand among shoppers who remain value conscious. We expect shopper demand to remain modest as job and income gains remain constrained by reluctance among firms to invest and hire amid an uncertain outlook. If that uncertainty turns to confidence in the weeks ahead, however, then holiday sales could climb more than forecast.”

The soft-sales trend will continue into the first half of 2011, Badillo says.

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