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Tis The Season- A Look At The 2007 Holiday Shopping Season

Nov 23, 2007
With gas prices soaring, the value of the dollar falling and the stock market concerns of consumers, as well as the ongoing credit crunch in the U.S., what impact will these and other factors have on the 2007 holiday shopping season?

According to the Commerce Department, retail sales last month (October 2007) posted the weakest showing since last August, with just a minuscule 0.2% increase, as consumers continue to struggle with the slumping housing market and tighter credit conditions.

According to a forecast by the National Retail Federation in September of 2007, they predicted that sales for the 2007 holiday season will rise to 474.5 billion dollars, which would represent a 4% increase over the previous year. But this holiday sales increase falls below the ten-year average of 4.8% and would represent the slowest holiday sales growth rate since 2002, when sales rose 1.3%

Additionally, eMarketer a trusted market research firm, expects that online holiday sales should exceed 30 billion dollars (excluding online travel), which would represent an 18.5% increase over 2006 figures. But this would be a drop from last season's growth rate of 25%. However, these estimates surely beat the low single digit growth rate that was forecast. This drop-off is the lowest growth rate in the past four years with 2003 e-commerce holiday season sales representing a 25.7% growth rate over the previous year. In 2004, the growth rate was 25.4% over 2003 and 2005 came in at a 21.5% rate over 2004 (with e-commerce holiday season sales at 21 billion) while sales for 2006 were at 26.2 billion and represented a 24.8% increase from 2005.

Moreover, emarketer reports that online sales in 2007 will be driven by the increased spending habits of existing online purchasers who have confidence in the e-commerce system and that they will shop at unfamiliar web sites to find what they are looking for. It is also reported that these "seasoned" shoppers will shop later in the season and that they have faith that the e-tailers will meet their delivery demands.

Furthermore, Ian Shepherdson, who is the chief U.S. analyst at High Frequency Economics, reports that the core retail sales have risen over the past three months, but at the slowest annualized rate in five years and predicts that this weakness will only intensify.

"We expect a further deterioration as consumers cut back in the face of soaring gas prices, falling stock prices and the continued disaster in housing," Shepherdson explained. "The holiday season will be terrible."

In fact, a survey by Deloitte & Touche reports that Milwaukee, Wisconsin shoppers plan to spend less than they did last year and that those who were polled have a dimmer outlook on the economy than they did at the same time last year. (The poll was conducted online from September 24 through October 4, 2007, with a total of 14,135 people responding to the survey across the U.S., which included 306 in the Milwaukee metro area) Furthermore, only 6% of those polled said they plan to spend more this holiday season, 51% reported that they plan to spend about the same amount as last season and a woeful 42% are planning to spend less this year.

Additionally, according to the same poll, some of the reasons for spending less this holiday season are higher energy costs (59%), higher food prices (53%), higher debt levels (34%), concerns about the economy (33%), their perception that the holidays are just too commercial and expensive (29%), job loss/pay reduction (20%), concerns about their employment (15%), higher mortgage payments and interest rates (15%), credit problems (7%), declining value of their home (7%), the aforementioned volatility of the U.S. stock market (6%), bankruptcy/foreclosure at 2%, while "other" factors came in at 20%. Another survey, this one from the American Research Group in Charleston, S.C. reports that 58% of consumers will be more price-conscious this holiday season.

So what do all these elements tell us about the 2007 holiday shopping season? From all indications, there is a bleak outlook for the 2007 holiday shopping season as consumers continue to struggle with out of control gas prices, inflation, higher food and energy costs, stock market uncertainty, higher debt levels, the housing problems, and the credit and lending standards being imposed by financial institutions in the wake of a serious credit crunch. Online retailers will have to endure the tighter wallets from their customers with the online sales growth being the lowest in five years.
About the Author
Robert Benson operates a unique shopping site http://www.ezshoppinghere.com where a consumer can do all their holiday shopping at one spot. Robert also writes about vinyl record collecting at http://www.collectingvinylrecords.com and an ebook called The Fascinating Hobby Of Vinyl Record Collecting
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