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A Glimmer of Hope for Holiday Retail 2013

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The contradicting retail forecasts coming out leave no clear picture of how this holiday will shake down. The stock market climbed back into record territory recently after Macy’s showed great gains on the stock market and gave an optimistic forecast for holiday sales. J.C. Penney, Nordstrom and Target also posted very positive numbers. The luxury segment is feeling its oats, too, with Tiffany’s sales continuing to rise, along with its retail peers. On the flip side, Wal-Mart, Kohl’s and Coach are in a slump.

According to the National Retail Federation, holiday retail sales will rise 3.9% over 2012 to $602.1 billion, fueled by consumers' demand for larger ticket items and online shopping deals. Also, many consumers started their holiday shopping in October this year – a significant change from previous years.

While it’s been noted that consumer confidence is down, consumer spending is up. Talk about mixed messages! Ron Florance, deputy chief investment officer for Wells Fargo, says, “When the consumer starts spending, it’s pretty much a rising tide.”

There seems to be a shift away from big-box discount stores to mall shopping, which has its own silver lining because up until now, mall stores have been taking a hit. Whether this is a trend or a temporary change of shopping patterns remains to be seen, but it’s clear that some retail sectors are feeling the punch while others are getting a boost from a middle-class presence—a presence that’s been absent for a while. In fact, the American middle class has been getting the big necessary purchases out of the way like cars, and are moving on to electronics, consumer durables, and more “frivolous” items like clothing. Brands like Michael Kors and Under Armour, which have strong department store presence and their own signature stores, have been experiencing phenomenal growth for several years in a row and their brands keep getting more popular.

The holiday shopping season can account for as much as 40 percent of retailers’ annual revenue, so early bargains that began appearing weeks ago not only reflect a still uncertain economy, but show that brick-and-mortar retailers are working harder to get shoppers’ attention in an era of increasing online competition. Also, the window between Thanksgiving and Christmas is shorter this year and when it comes to crunch time, shoppers will turn to e-commerce when life becomes too hectic. These early deals could also force retailers to up the ante when it comes to the Black Friday door-busters that consumers now expect.

While the purchase of gift cards is expected to rise about 7% this year, it’s anticipated that electronics will be the top-performing category over the holiday season, as well as the most discounted, according to the BDO USA survey of 100 chief marketing officers at leading U.S. retailers in September and October.

Best Buy has improved its inventory control and supply-chain organization, which means that the risk of having over-stocked inventory after the holidays is greatly lessened. Big-box stores aren’t that nimble and often have to order items four to six months in advance, so they have been more conservative with their holiday ordering.

A rise in consumer spending and great deals, coupled with the in-store experience and superior customer service, may keep retailers on track for a surprisingly profitable holiday shopping season.

TAGS: retail, retail trends, holiday spending, holiday sales,
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