Rapaport Magazine

Holiday Sales: Ho-Ho or Ho-Hum?

Distracted and discouraged, holiday shoppers simply and suddenly stopped buying, leaving most retailers with stocked shelves and dashed hopes for a better year-end.

By Karolyn Schuster

No one is quite sure whether consumers were peering over the fiscal cliff, shoveling out from Hurricane Sandy or sympathizing with the victims of Connecticut’s
Sandy Hook School massacre during the 2012 holiday season. What is certain is that they were not shopping.

   It was hard to find a silver lining in the early sales totals trickling in for the critical
year-end retail season. Final tallies are not expected until mid-January but preliminary estimates agreed that retail sales growth in holiday 2012 was the lowest since 2008, the year of the economic collapse.

   MasterCard Advisors SpendingPulse, whose original growth forecast was 3 percent to
4 percent, reported the final sales increase would come in at .7 percent. The International Council of Shopping Centers (ICSC) said early totals were lower than its original forecast of 3 percent growth. ShopperTrak, the Chicago-based research firm that tracks store traffic, saw the declines early on and didn’t even wait until Christmas to lower its projected increase from 3.3 percent to 2.5 percent.

From Buoyant to Bust
   When American Express Publishing and Harrison Group, a YouGov market research and strategy consulting firm headquartered in Waterbury, Connecticut, began interviewing consumers in the fall for its annual Survey of Wealth and Affluence in America, they found respondents “buoyant.” It was not to last.
   “There was the looming of the cliff and the fact that the language of the cliff was so stark,” says Dr. Jim Taylor, vice chairman of Harrison Group. “When faced with that kind of news, people got real resourceful and they pulled back, especially compared to what they had planned to do. And then there was Hurricane Sandy and Sandy Hook.”
   In response to those tragedies, Taylor says he sensed a transition in consumers’ minds from giving to themselves and their families to giving to their communities. “Charitable contributions in December went way up and astonishing amounts were sent through relief agencies. The Bruce Springsteen concert alone raised more than $250 million worldwide.”
   Cara David, senior vice president of corporate marketing and integrated media at American Express Publishing, agreed that Hurricane Sandy depressed holiday spending, noting that “The money used to increase charitable contributions may displace something else they were planning to spend it on.”
   “The Sandy Hook tragedy threw the country into a tailspin,” Taylor told Rapaport Magazine. “It put people in a prayerful mood. It made for a different kind of Christmas
this year.”

   “It was more like a pall over the country,” says David, in explaining why people stopped shopping. “There was a reluctance to go to the mall. Consumers didn’t want to deal with the crowds, they didn’t want to hear the holiday music. There was a lack of enthusiasm for being too joyful. It was almost tough to celebrate.”

Not Just Sales Were Down
   It wasn’t just retail sales numbers that were off as the year drew to a close. Other economic measurements that have been used to track the progress of economic recovery and the return of optimism also were off — way off. To make bad news worse, in many cases, the December 2012 measurements were down not just from the previous month of November but also from the December numbers of 2010 and 2011.
   In the years since the economic recession, forecasters have reaffirmed their belief that consumer confidence is an absolutely critical factor in economic growth and consumer activity. That said, consumer confidence, which had reached a five-year high of 82.7 in November 2012, plummeted almost ten points to 72.9 in December, based on Thomson Reuters/University of Michigan data. The same survey found that personal financial expectations fell to their lowest levels in a year. And, despite the improved unemployment rate of 7.7 percent, the survey found that the number of people expecting additional layoffs in the next six months had risen to 35 percent — the highest level since the summer of 2011 — from 19 percent in October.
   BIGinsight, a Worthington, Ohio–based research firm, reported that the 90-day outlook by consumers, as measured in December, was “downright frosty, for month over month and for year over year.” In a video briefing, the company said it was a battle of The Grinch over St. Nick for the consumer in holiday 2012 and it appeared from early totals that The Grinch had won. “Practicality pulled at consumers’ purse strings and their shopping lists were focused on needs rather than wants,” the company said. “It’s not uncommon to see practicality and a focus on needs rise from November to December but these are steeper climbs and remain elevated from December 2010 and December 2011.”

Impact of Holiday Numbers
   There’s no denying that robust holiday totals would have put pretty much everyone
in a good mood. The period of November 1 to January 1 accounts for anywhere from
25 percent to 40 percent of annual retail sales and consumer spending represents 70 percent of the national economy. A healthy increase would have been felt not just by retailers —
it also would reverberate with manufacturers, wholesalers, distributors and just about everyone else along the supply chain.

   Going into the holiday season, the projections for growth were modest, especially when compared to 2010 and 2011. The fact that the preliminary totals came in considerably lower than the conservative forecast was a bit like everyone in that supply chain finding coal in their stockings.
   The hope is that the final fourth-quarter totals released later in January will reveal
some bright spots and that holiday 2012 is not a harbinger of what the national economy, the luxury sector and the diamond industry will look like in the New Year. 

Article from the Rapaport Magazine - January 2013. To subscribe click here.

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