How’s the holiday shopping season shaping up for 2011? It could be better, market-watchers said, but it could be worse. “Business is never as bad as people say,” said Todd Slater, former managing director of Lazard Capital Markets, “or as good.”
Speaking on a panel at the Association for Corporate Growth’s annual Retail Conference, held last week at the New York Athletic Club in Manhattan, Slater noted that the pace of retail sales for the first part of November isn’t making analysts terribly optimistic, but modest growth is expected for 2011, and this year’s shopping season looks to be roughly on par with, and perhaps up slightly from, 2010, with sales expected to tick up about 3%. And, Slater notes, “Flat is the new up.”
That kind of measured expectation is actually good news, noted David Schick, managing director of Stifel Financial, as retailers battle through “one of the lowest levels of consumer confidence since 1980.” Indeed, retailers appear largely prepared to make do with a modest holiday season this year, declared Jeff Edelman, director of Retail and Consumer Advisory Services for accounting firm McGladrey—and consumers also appear prepared to spend at least something. Edelman suggested consumer spending was likely to remain sluggish until the housing mess is brought under control. But while unemployment is at 9%, he observed, the “91%” will spend this year, although how much could depend on a few, more fluid factors, such as inflation and gas prices.
But how holiday shoppers spend may be the big question this season. Following right on the heels of Black Friday is Cyber Monday. Of the likely 3% sales increase this season, as much as 2% could come from online sales, Slater noted, and the panelists agreed that online shopping is changing the retail game not just for holiday shoppers but for everyday shoppers. “Every day is now Cyber Monday,” noted Schick.
So what does the continued surge in online shopping mean for retailers? For one, while bricks-and-mortar stores face challenges from online retailers on price, the increasing cost of free shipping, which is now expected by consumers, and a push for collecting sales tax for online purchases may begin to level the playing field. A recent Best Buy statistic showed that 40% of customers who bought online picked up items from a store—evidence that there is value to having an online and a physical presence. “Whoever makes the most consumer-friendly experience will win,” Edelman noted.
Is the Internet stealing sales or adding incremental sales? Likely, the answer is both. But all the analysts agreed that, to survive, retail businesses must have an online presence. In the age of the smartphone, consumers now walk around with a store in their pocket, Schick said.
But technology also offers other benefits, the panel was quick to point out—like social media. Think what it means to your business, Schick said: free advertising. Savvy bricks-and-mortar stores can use sites like Twitter to replace costly advertising, but only if social media enhances the consumer experience. Merely blasting out news that a new product is in your store is worthless, Schick said. Stores must develop a trusted voice, an expertise.
In a final recommendation to local retailers, Slater advised, “Whatever you do, do something proprietary, and different.”