Even with gas and fuel costs declining a bit, "there's a financial retrenchment going on in households that hasn't been felt since the early 1990s," says Frank Badillo, senior economist for the Columbus, Ohio-based TNS Retail Forward. "While the recession in 2001 hurt investors, it didn't affect consumers the way this economy is--there's still of lot of pain from the credit crisis, more people are unable to sell their homes or delinquent on mortgages. They're worried about job loss."
As a result, consumers will likely be saying no-ho-ho: TNS predicts sales growth of just 1.5% compared to 2.7% last year, 3.8% in 2006, and 7% in 2005. Back in 1991, he says, growth was 1.2%.
The retail winners, he says, are likely to be supercenters, warehouse clubs, and dollar stores that have been outperforming other channels in recent months, as well as the consumer electronics category. And the losers are likely to be luxury marketers, mainstream department stores, and home furnishings. Even online shopping is going to soften, the company predicts. "We expect to see a gain of 9% in Internet sales, to $42.5 billion, the first time it's been in the single digits since 1999," he says. Last year, Internet sales increased 19%.
The company expects to see a decline of 1.3% in apparel and accessories, compared to flat results last year, with the biggest drag on department stores, "as upper-income households become increasingly vulnerable to economic pressures." In furniture and home improvement stores, still pressured by an increasingly troubled real-estate market, it expects downturns as well.
One bright spot, he says, is likely to be consumer electronics, with a gain of 4%, compared to 3.5% last year (That's not just fueled by gadget-loving gift givers, he says, but also by the conversion to digital TV signals.)
The fourth quarter is likely to be especially blue for upscale department stores, he says, particularly Saks, Neiman, and Nordstrom: "They held their own last year, but now, we're even seeing these upscale shoppers pull back."
How marketers will win these shoppers over, he says, remains to be seen, but it likely won't be with massive markdowns on the cashmere rack. "Retailers are going into this season with much leaner inventories, and I'm not sure that retailers are going to be that aggressive, since it's unlikely that deep discounts will generate a strong response."
A forecast from Deloitte Services LP is also predicting bad news-- looking for an increase of between 2.5 to 3% in retail sales during the November-to-January period, "less than last year's 3.4% increase, and one of the smallest gains since 1991's 2% uptick."
Pam Danziger, whose Unity Marketing tracks the spending and consumer confidence levels of the luxury market, agrees that high-end retailers are going to have to work harder to tempt shoppers.
"Yes, the value of their home is declining, and their portfolio took a hit. But these people still have plenty of money in their pockets, and earn hefty salaries," she points out. "The issue is that none of them need anything. Their basements are full, their closets are full. They are only going to buy what really excites them--and having another sale isn't going to do it," she says of the nation's 28 million affluent households. Unity's Luxury Index "has been declining steadily since mid-2007, and now, about 80% of these affluent consumers feel the economy is going in the wrong direction."
For now, higher-demographic consumers are content to sit out for a few shopping seasons. "Consumers can find excellent quality products at all price points. But luxury marketers have stopped talking about the quality of their materials or craftsmanship, and stopped making a case for the value of their products. Why is that Dolce & Gabbana handbag worth five times a comparable one from Coach or Dooney & Bourke?" she says. "Luxury is the easiest thing to do without."