Deloitte: Holidays won’t be quite as happy as last year

NEW YORK — Holiday sales will increase between 3.5% and 4%, slower than last year’s 5.2% growth, as favorable economic tailwinds are offset by lingering negatives, according to an annual forecast by Deloitte’s Retail and Distribution Practice.

 

Deloitte tends to be one of the first to share its predictions about holiday sales and consumer behavior so its outlook is closely observed. The firm’s forecast of 3.5% to 4% growth is solid, but not spectacular, as economic forces that would normally augur well for robust growth are offset by negative factors elsewhere.

 

“An improving labor market, increasing home values and relief at the pump gave more Americans reason to believe the economic recovery was gaining real traction this year,” said Daniel Bachman, Deloitte’s senior U.S. economist. “Those recurring improvements helped buoy sentiment and spending over the past several months. Housing and employment tend to create a more meaningful wealth effect than that of the financial markets, so the recent stock market fluctuations and instability overseas should not have a marked impact on shoppers’ holiday spending intentions. However, while retail holiday sales are expected to rise, the increase may be smaller than last year due to the lingering effects of flat personal income growth in the first quarter.”

 

If Deloitte’s forecast proves correct, what’s at stake for retailers this holiday season is a share of sales pie that measures between $961 billion and $965 billion and an overall market that will decelerate from the prior holiday season when sales increased by 5.2% while continuing to shift online. Deloitte forecasts an 8.5% to 9% increase in non-store sales in the online and mail order channels.

 

“Online sales continue to be a growth channel, but more importantly, we’ve passed the tipping point where online and mobile engagement play a greater role generating sales in the physical store – where more than 90% of retail sales occur – than in digital channels alone,” said Rod Sides, vice chairman, Deloitte LLP and retail and distribution sector leader.

 

Deloitte forecasts that digital interactions will influence 64%, or $434 billion, of retail store sales this holiday season. This figure reflects the amount of traditional brick-and-mortar retail sales impacted by shoppers’ use of digital devices including desktop and laptop computers, tablets, and smartphones, according to Deloitte.

 

“Our research shows that people who shop on their phones, tablets and other devices while in stores are more likely to make a purchase and spend more overall,” added Sides. “Also, nearly 80% of shoppers say they engage with a retailer or brand through digital channels before setting foot inside the store. These interactions are retailers’ opportunity to engage shoppers seeking inspiration, reviews, product locators, or the option to buy online and pick up in the store. Retailers that are likely to come out ahead this holiday season are the ones connecting the dots between their digital channels and their stores – rather than focusing solely on the online ‘buy’ button.”