Chicago, IL – Soft consumer confidence and lingering unemployment have retailers looking to the 2011 holiday season with caution. According to a recent BDO USA survey, chief marketing officers at leading U.S. retailers expect a modest 2.9 percent increase in total holiday sales this year. This is a less optimistic point of view compared to the projected 3.5 percent increase in 2010 (and the actual 5.2% increase reported by the National Retail Federation). Overall, 41 percent of CMOs expect an increase, down from 2010 (52%) and 2009 (47%). However, CMOs at the top 100 largest retailers included in the sample are more optimistic, with 67 percent expecting an increase in overall holiday sales.
Retailers also fear another year of excessive discounting and markdowns to clear inventory. While 23 percent say they have increased inventory purchases for the holidays, the vast majority (65%) say their inventory purchases have stayed about the same compared to 2010. Overall, CMOs expect inventory levels to be up by less than one percent (0.7%) – a far cry from the 2.8 percent increase projected in 2010. Most CMOs (52%) also say they’re making no change in SKUs (stock keeping units). Overall CMOs project SKUs to be down slightly (-0.2%), meaning less variety for consumers.
"With a weak jobs outlook and the economy still in flux, most retailers are not expecting big sales increases this holiday season," said Doug Hart, partner in the Retail and Consumer Product Practice at BDO USA, LLP. "However, larger retailers appear to be more confident that their greater purchasing power and resources will allow them to be more competitive in this environment. Across the board retailers are dialing back the recent trend of expanding merchandise offerings, and are instead looking for a signal of recovering consumer spending before making big inventory investments."
These findings are from the most recent edition of the BDO Retail Compass Survey of CMOs, which examined the opinions of 100 chief marketing officers at leading retailers located throughout the country. The retailers in the study were among the largest in the country, including 12 percent of the top 100 based on annual sales revenue. The telephone survey was conducted in September and October of 2011.
Some of the major findings of the BDO Retail Compass Survey of CMOs include:
Holiday Same Store Sales Projected to Increase 2 Percent. More than half (54%) of retail CMOs project flat same store sales (which refers to revenues of retail stores open for a year) or more for the holidays, and just 37 percent expect an increase. These expectations mark a shift away from the holiday cheer predicted in 2010 when nearly half of CMOs said holiday same store sales would increase. Although expectations are less-than-jolly, CMOs still predict a modest 2 percent increase in comparable store sales.
Consumer Electronics will be Strongest Performers. With tablets, smartphones and e-readers topping consumers’ wish lists, it’s not surprising that CMOs overwhelmingly say consumer electronics will be the strongest performing category this holiday season (58%). This is followed by toys (16%), apparel (11%), home goods (10%) and lifestyle goods (5%). CMOs at the top 100 largest retailers in the sample are especially confident about gadget sales. Eighty-three percent cite consumer electronics as this years’ top performing category, followed by apparel (8%) and toys (8%).
Gift Card Purchases Gaining. Retailers expect a stronger tailwind for January 2012 sales as consumers begin redeeming holiday gift cards. Of retailers who sell gift cards, 57 percent expect an increase in gift card sales this holiday season, a notable jump from 2010 (47%) and 2009 (32%). Stronger promotion from retailers, greater convenience and a shift to delivery online are likely contributors to the increase in popularity of gift cards.
Unemployment is Greatest Risk to Holiday Sales. The high rate of unemployment, hovering around 9 percent, remains a driving factor in low consumer confidence and more than half (52%) of CMOs say unemployment will have the greatest impact on 2011 holiday sales. The weak housing market (19%), energy and fuel costs (17%) and global market volatility (9%) are also named as sources that will impact holiday sales.
The BDO Retail Compass Survey of CMOs is a national telephone survey conducted by Market Measurement, Inc., an independent market research consulting firm, whose executive interviewers spoke directly to chief marketing officers, using a telephone survey conducted within a scientifically-developed, pure random sample of the nation’s retailers.
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