NRF: Holiday spending projected as high as $682 billion, up 4%

Consumers have the ability to spend more this holiday season, but the golden question is how much more?

Jack Kleinhenz, chief economist for the National Retail Federation (NRF), said the trade group expects holiday sales in November and December to increase between 3.6% and 4% over last year.

Matthew Shay, CEO of NRF, said during a conference call Wednesday (Oct. 4) this is the first time the NRF has issued a range in spending. Last year consumers spent $655.8 billion and this year spending is expected to range between $678.75 billion and $682 billion. Shay said given the impact the recent hurricanes are having on some key regions, the data may be late coming in this year, which is largely why the range was issued instead of a single projection.

“Our forecast reflects the very realistic steady momentum of the economy and overall strength of the industry,” Shay said. “Although this year hasn’t been perfect, especially with the recent devastating hurricanes, we believe that a longer shopping season and strong consumer confidence will deliver retailers a strong holiday season.”

He said the calendar for the holiday season from Thanksgiving to Christmas includes one extra shopping day, as Christmas falls on a Monday. He said that will give shoppers a full weekend more to complete their shopping.

Shay also said this year’s bottom-range growth forecast of 3.6% is in line with last year’s forecast, and it’s better than the five-year average growth of 3.5%. He told the media the NRF is encouraged by the forecast as economic growth is solid and expanding at a modest but steady rate.

“The state of retail is positive, despite the attention-grabbing headlines (store closures and layoffs). We are strong as an industry with some exceptions in a few categories and lines of businesses. But, across the board the industry is very strong and making big investments as brick and mortar retailers try to get better selling online and e-commerce retailers are trying to dabble in brick and mortar,” Shay told the media during the call.

He said consumers have shown resilience in their willingness to spend, evidenced by the way they are accessing credit and taking on additional debt which is fueled by low unemployment and modest increased wages.

LOWER PRICES
Despite consumer’s wherewithal to spend, Shay also described a very competitive climate for retailers, saying there are continued pricing pressures. As a result, consumers will likely see lower prices during the holiday shopping season.

He said there is disruption in retail, but as technology improves it’s also happening in other industries such as finance, entertainment and healthcare. He added there are lower barriers to entry for startups.

“I don’t think we can say e-commerce is the root cause of this. It is simply transitioning, going on in part because of better technology and changing demands from consumers,” Shay added.

He said retailers are trying to find a new equilibrium that has a different level of physical and digital presence. Shay quoted Marc Lore, CEO of Wal-Mart U.S. e-commerce, who recently spoke at an NRF event as saying, “Online is intended to make us better merchants.”

Shay that is a profound statement from the executive who founded diapers.com and Jet.com and now heads up Wal-Mart’s online business.

“E-commerce is a means to an end rather than the end itself,” Shay said. “Those who bridge the gaps will figure out a way to be successful. Retail is dynamic and we are energized by the conversations taking place across the industry. We are seeing retailers across the spectrum figuring out how to win.”

ONLINE SALES RISING
When asked to comment on forecasts on online commerce growth this holiday season of as much as 12% from Forrester Research, Shay was quick to say retailers today are not really as interested in separating out the online and in-store sales. The NRF sales projections are total sales, regardless of where they were made.

The Forrester report expects online commerce to reach $129 billion this year, up 12% from a year ago. The projections for offline retail was 0.3% growth to $549 billion this year.

Forrester found the number of online holiday buyers in the U.S. to be 3% higher than in 2016. The report anticipates online spending per capita will be up 8% to $689 this year.

Deloitte also recently forecast holiday sales growth of 4% to 4.5% over a year ago. The Deloitte forecast was more aggressive with total holiday spending approaching the $1.05 trillion level. That forecast included an 18% to 21% growth in online sales which they said will range between $111 billion to $114 billion.

“Sentiment and spending indicators are firing on all cylinders, but the question is: How will retailers respond given the profound disruption across the industry?” said Rod Sides, vice chairman, Deloitte LLP and U.S. retail and distribution sector leader. “The good news is retail is thriving, and it is the proliferation of new, niche retailers that is resulting in share constantly changing hands.”

Kleinhenz agreed consumers will continue to do the heavy lifting in supporting the economy and the upcoming holiday shopping season is no exception.

“The combination of job creation, improved wages, tame inflation and an increase in net worth all provide the capacity and the confidence to spend,” he said during the NRF conference call. “Consumers are pragmatic, looking for value, price and convenience.”

When asked about categories that will see increased spending during the holiday season, Kleinhenz expects technology to do well behind the release of several new iPhones and an expanded update of several video games. He said apparel is always a hot category for the holidays and this year will likely be no different. He did caution that consumers opting to purchase expensive technology might have less money to spend in other categories.

NRF also expects retailers will hire about 550,000 seasonal workers this year, down from 570,000 a year ago. Shay said government data does not reflect online hiring which skews the number.

Wal-Mart Stores has already said it will not make additional hires this holiday season, but instead will provide its employees with more hours to cover the stores’ labor needs.