Electronics & Gift Cards Top Holiday Shopping Lists

Looking at early releases of Black Friday ads, one category is dominating ad space: electronics. The explosion of tablet and mobile usage, the recent release of new iPads and the declining cost of flat screen TVs are just a few of the factors driving consumer electronics sales this holiday season. Given the circumstances, it makes sense that the retail CMOs we surveyed in September and October forecasted that electronics would be both the top performing and most discounted category this holiday season.

According to the Consumer Electronics Association, electronics sales are projected to increase four percent this holiday season, and Wal-Mart reported in October that tablets already accounted for four out of its top five items in layaway. This marks a notable shift in consumer preference from traditional toys to modern consumer electronics as holiday gifts. The number of retailers expecting consumer electronics to be the hottest category has increased from 24 percent to 69 percent from 2009 to 2013, while those citing toys have decreased from 39 percent to three percent over the same period. While traditional toys remain popular choices for shoppers, retailers know that electronics deals are a top draw for consumers, particularly over Thanksgiving weekend. And retailers are competing heavily for those shoppers, looking to get them in the door with price-matching programs and store gift cards to incentivize purchases.

In addition to electronics, gift cards are expected to be another bright spot this holiday season, as they continue to be a popular purchase for busy, discerning shoppers. Among surveyed retailers who sell gift cards, 61 percent expect gift card sales to increase this season, marking a significant rise since 2009, when just 32 percent of CMOs projected an increase. Overall, retailers forecast a 6.9 percent increase in gift card sales, which could provide a boost to sales in January and February as consumers begin redeeming. The gift card promotions retailers are running over Thanksgiving weekend with big ticket electronics may also incentivize early season and Thanksgiving weekend shoppers to return later.

Despite optimism in some categories, retailers are still proceeding with caution when it comes to inventory levels. They are readying and optimizing shipment processes to meet increased demand if it comes, but, overall, most retailers (64 percent) report that they have kept their inventory levels consistent with last year. CMOs report a 0.9 percent increase in overall holiday inventory levels, which is consistent with their 2012 increase— a sign that they expect similar demand levels this holiday season. While holiday discounting is a key driver of sales, retailers remain wary of oversupply, which could lead to slashed prices at the end of the season to move merchandise.

Next week, the latest findings from our Compass Survey of CMOs will be released, which cover retailers’ specific projections for Black Friday and Cyber Monday sales, as well as how they’ll be looking to attract shoppers in stores and online this year.