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It's time again for the holiday shopping season, and retailers are already out with predictions. Let's separate the hype from the happening.
Hype: Sales will rise 6 percent over the same period last year
Sales will be better than last year -- only because the bar is so low. Retail sales in the 2002 holiday shopping period rose just 2.2 percent over 2001, while the sector logged its smallest holiday sales growth in more than 30 years. And despite surging consumer confidence, many pundits doubt that the actual sales rise will come in at 6 percent.
Still, a 4 percent rise over last year would not only be respectable, but warmly welcomed by retailers struggling with little or no pricing power -- the ability to raise prices and increase profits. Despite some recent good news, the Consumer Federation of America and Credit Union National Association survey released last week shows consumers still have lingering worries about the economy. It could be the burgeoning household debt level, or the decline in home refinancing activity that accounted for much of the newfound spending power.
The survey showed that among those polled only 15 percent expected to spend more this year than they did last year. About 50 percent - down from 61 percent last year - said they would spend the same amount of money, while 34 percent said they would actually shell out less for gifts this year than last year. A similar survey released by the Conference Board showed found that U.S. households on average expect to spend just $455 on gifts this year, down from an average of $483 last year.
So why are holiday sales so important? First, consumers directly account for two-thirds of the economic activity in this country. If consumer spending slows, so does the economy. For many retailers, shopping revenue from Thanksgiving through the end of the year may account for 25 percent to 40 percent of yearly sales, moving their bottom line from the red into the black. Hence the term "Black Friday" for the day after Thanksgiving and the official start of the holiday shopping season.
Hype: Black Friday is the shopping Super Bowl
Contrary to popular belief, Black Friday is not the busiest shopping day of the year. The media gives it a lot of attention, because, let's face it, there's not much real news to report immediately after Thanksgiving - thus, television stations give us the obligatory shots of shoppers and man-on-the-street interviews conducted by some reporter in the mall (Unless the president visits troops in Iraq. But I digress).
Despite the news reports, the busiest shopping day of 2002 was Dec. 21, the Saturday before Christmas. It must have something to do with all those procrastinators like me; I'm such a glutton for punishment that last year I waited until Dec. 23, the second busiest shopping day last year, to finish my list. The number three spot went to Dec. 14. The day after Thanksgiving was the fourth busiest for retailers in 2002.
Hype: There will be less discounting
If recent shopping trends hold true, consumers will be hunting for bargains and not throwing cash and caution to the winds. Department stores are expected to lose even more ground to the discounters, while retail discounting giants Wal-Mart and Target have warned that a fiercely competitive holiday period will force severe price cutting. Don't forget the warehouse clubs: BJ's, Sam's and Costco. Not only do they deal in bulk toilet paper, but fine jewelry as well, for those that just don't feel comfortable shopping in Tiffany's.
Also, there's no must-have item. This year has no Cabbage Patch doll, no Tamagotchis, no pet rocks. Okay, I admit that personally, I've got to have a flat screen television, either plasma or LCD, but I lack the conspicuous consumption gene that would allow me to drop thousands of dollars on one. Maybe Santa will reward my good behavior.
Happening: This will be a great shopping season
The aforementioned caveats don't mean that this holiday shopping season will be a bust. In fact, consumers want to shop and will spend -- great news for the economy and for the stock market, which is doing quite well so far this year. The Dow is up an impressive 18 percent year-to-date; the Nasdaq up 48 percent on the year; while the S&P 500 has risen 21 percent since the start of 2003. Any increase in year over year retail sales will be enough to push the indices higher. The Dow is just waiting for an excuse to pierce the 10,000 mark. While it may trade on either side of 10,000 for a bit, once that psychological level is penetrated, more money and buying will follow.
Remember that historically November through April is the best six-month period for the stock market. And given all the shocks to the system, it would take a major catastrophe to derail this juggernaut. So shop 'til you drop and enjoy the holiday season.
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