Survey results make it appear there's as much guess as science in sales forecasting

A chill in the air and the smell of hot mulled cider in the home can mean only one thing – it’s holiday sales prediction time. As is typical of this time of year, SNEWS® gets deluged with press releases from numerous retail, consumer and banking groups, all seeking to proclaim they know what’s going to happen when the consumer heads off to play Santa and spend hard-earned cash on holiday gifts.

This year, we thought we’d provide a summary of various surveys for you to read, and decide if, by reading between the lines and adding a few salient observations of your own, you can divine what will happen, or not, with retail sales that impact your part of the world. At the very least, you should find the reading entertaining and, when the final count is in, we’ll let you all know who was more on the money so, perhaps, you can decide who to trust next year.

Clear Thinking Group says holiday sales will increase only 4.5 percent over last year
This holiday season will bring some good tidings for merchants, but retail sales are forecast to increase by just 4.5 percent over 2005 levels, according to Clear Thinking Group, a retailing/consumer products and industrial manufacturing consultancy (this compared with a 6 percent increase in 2005 over 2004 numbers).

The firm attributes the change in part to oil prices, which are approximately 20 percent to 25 percent higher than they were during the same period in 2005.

Housing market slowdowns are also sparking a tendency among some consumers to curb holiday spending. Other issues seen having an impact at the retail sales counter include higher interest rates on credit card debt and variable mortgages, as well as steep price declines on certain electronic items – meaning retailers will have to sell significantly more numbers of units to match last year’s sales revenue.

Clear Thinking Group believes shoppers will purchase fewer big-ticket items this year and instead focus on buying less expensive gifts in larger quantities. Also, the lack of a “hot” must have item this year, like the i-Pod was last year, will fuel more modest spending.

While holiday sales will increase overall, the firm foresees particularly favorable results for retailers who offer “great gift values” combined with exemplary customer service and convenience. In terms of merchandise categories, the firm sees fashion footwear, fashion accessories, fragrances, personal care items, books and gift cards as ranking among the “winning categories,” while home improvement products, home furnishings, high-end electronics, sporting goods and toys should see weakness.

The Conference Board reports holiday spending will be down slightly from last year
U.S. households are expected to spend an average of $449 on gifts during the holiday season, down moderately from last year’s estimate of $466, The Conference Board has reported.

This survey of holiday gift spending intentions covers a nationally representative sample of 5,000 U.S. households. It was conducted for The Conference Board in November by TNS, the world’s largest custom research company.

The top holiday spenders will be New England households (Connecticut, Massachusetts, Maine, New Hampshire, Rhode Island, Vermont) who intend to spend $545. Lowest holiday spending will be in the Mountain region (Montana, Idaho, Wyoming, Colorado, New Mexico, Arizona, Utah, Nevada) where consumers intend to spend a mere $348 on Christmas gifts.

Slightly more than 31 percent of all households will spend $500 or more on holiday gifts, with 36 percent spending $200-$500 and the remaining 33 percent planning to spend less than $200.

About 35 percent of all consumers will buy holiday gifts on the Internet, up from 33 percent a year ago. Books top the list of online holiday buying, with 40 percent saying they will buy books as gifts. Toys/games came in second with about 37 percent of consumers intending to purchase these gifts online. Apparel and footwear rank third as online holiday buying choices, followed closely by music videos and DVDs.

Of the 33 percent who said they purchased holiday gifts last year on the Internet, 95 percent said they were satisfied with their online buying experience.

Other findings in The Conference Board survey:

>> Households headed by individuals 55-64 intend to spend the most this year, with $508 the average expenditure.
>> Households headed by those aged 35-44 represent the second largest spending group. For them, average expenditures are expected to reach $478.
>> Households whose incomes top $50,000 intend to spend $631 for holiday gifts.

Consumers will spend more moderately according to Boston Consulting Group
A Boston Consulting Group survey, conducted by Harris Interactive, of more than 2,500 U.S. adults suggests that Americans are entering the holiday shopping season with the intention to shop intelligently and cautiously.

However, the tendency toward thrift appears to be somewhat less pronounced this year than it was in 2005 — even though Americans are coming to terms with a softening in the value of their homes, according to Michael J. Silverstein, senior vice president at The Boston Consulting Group (BCG).

The BCG-sponsored survey, which was fielded in October 2006, found:

>> Nearly a third (32.4 percent) of Americans say they’re less likely to make a major purchase in the next three months. Fewer than a quarter — 22.6 percent — say they’re more likely to make a major purchase. This is better than in 2005 when a similar survey found 40 percent of consumers saying they were less likely to make a major purchase.

>> A substantial majority of Americans — 67 percent — say fluctuations in housing prices are having no effect on their spending this year. Still, nearly a quarter (22 percent) say they’re spending less as a result. Seventy-one percent said their spending would remain unchanged if housing prices dropped 10 percent next year.

>> When Americans do spend more, or “trade up,” over the coming months, it will be for their home or apartment itself (49 percent listed that as a category in which they’ll trade up); computers (47 percent); meat and eating out at sit-down restaurants (46 percent for both); and cars (45 percent).

>> When asked if they believe their lives will be better five years from now, 67 percent of respondents said yes.

National Retail Federation believes sales will be up 5 percent
The National Retail Federation’s 2006 Holiday Consumer Intentions and Actions Survey, conducted by BIGresearch, found that the average consumer plans to spend $791.10 this holiday season, up from $738.11 last year. Shoppers will also take advantage of sales and discounts during the holiday season to spend an additional $99.22 on themselves.

Consumers this year will shop at a variety of destinations for holiday gifts. While discount stores (70.3 percent) continue to be the most popular holiday shopping location, many people will also be shopping at specialty stores (48.4 percent), grocery stores (49.3 percent), drug stores (21.0 percent), and crafts or fabrics stores (20.5 percent). Additionally, nearly half (47.1 percent) of consumers said they plan to shop online this year, up from 36.0 percent three years ago.

This holiday season is likely to bring good news for department stores, as 61.6 percent of shoppers plan to shop there for holiday items, up from 53.1 percent in 2003. Department stores are likely to see much of their traffic from young adults with a whopping 79.1 percent of 18- to 24-year-olds planning to shop at department stores for holiday merchandise, up from 72.9 percent last year and 65.9 percent in 2004.

As usual, most holiday budgets will be allocated to gifts, with the average person spending $451.34 on family, $85.60 on friends, $22.40 on coworkers, and $44.52 on other people like clergy, teachers and babysitters. The survey also found that most Americans plan to increase spending on flowers ($18.98 vs. $15.78 last year) and decorations ($46.49 vs. $40.86 last year). Consumers also plan to spend $91.20 on candy and food and $30.57 on greeting cards and postage.

According to the survey, 40.4 percent of consumers began their holiday shopping this year before Halloween.

Most shoppers’ wish lists will include traditional favorites, from clothing and accessories (53.3 percent) to books, CDs, DVDs, videos and video games (55.2 percent). Gift cards will also continue to be a popular request, as 52.8 percent of consumers would like to receive a gift card this year.

While the majority of shoppers continue to say that everyday low prices (14.2 percent) and sales or price discounts (36.5 percent) bring them into stores, more shoppers this year said that other factors like customer service (4.4 percent), product quality (12.4 percent), and merchandise selection (24.3 percent) are the most important when determining where to shop. Additionally, 6.5 percent of shoppers said they choose stores with the most convenient location.

NRF is forecasting that holiday sales will increase 5 percent this year to $457.4 billion.