The National Retail Federation can’t wait to see Santa this year: It is predicting a 4.1% increase in holiday spending, with retail sales for November and December expected to hit $616.9 billion.
Last year, actual spending gained 3.1%, and on average, holiday sales have increased just 2.9% over the past 10 years. “If our estimates are correct, it will be the best it’s been in a decade, since 2005,” says Matthew Shay, president and CEO of the Washington D.C.-based trade group. (He excluded the 4% gain in 2011 as an anomaly, when post-recession spending was still trying to catch up.)
In addition to improving economic conditions and some pent-up demand, “the big observation is that consumers are not in the middle of a government shutdown, or facing the same pressures they were last year, either from tax increases or horrendous weather,” Shay says, in a webcast for the media.
In addition to lower unemployment and higher income and consumer confidence, NRF chief economist Jack Kleinhenz also says that thanks to steady gas prices and a mild summer, “households will have a little bit more of a possibility for spending, because of lower energy costs.”
The NRF numbers are in line with consulting company Deloitte, which recently predicted a gain of 4 to 4.5%. But PwC is bucking the trend, and with its just-released forecast of a drop in spending: It expects average per-household holiday budgets to fall to $684, from $735 last year. PwC says consumers are still cautious on the economy, worried about both disposable income and rising costs.
Shop.org, the online arm of the NRF, expects online spending to increase by some 8 to 11% this year to as much as $105 billion. But increasingly, Shay says, the distinction between online and physical spending is fading, speculating that this may be the last year retailers bother to differentiate.
With so many consumers shopping across devices and channels, “there is a general sense that these distinctions will go away. With the blurring of these lines, it gets harder and harder to determine who gets credit for a sale, and how you charge for marketing,” he says.
Both retailers and consumers alike are approaching “sensory overload,” he says. “While stores are spending more on tech, it’s not about more technology, but about the right technology. Stores don’t have the capital to explore 50 options — they need the five that give the greatest return.”