Retailers Expect Modest Gains this Holiday Season

The results are in from our ninth annual Retail Compass Survey of CMOs, in which we surveyed 100 retail chief marketing officers to gauge their 2014 holiday shopping season expectations. As it turns out, even after a challenging and unpredictable sales environment in the first half of 2014, and on the heels of drab back-to-school sales, retailers still maintain a positive outlook on the eve of the holiday season.

This year, retail CMOs forecast a solid 4.1 percent increase in overall holiday sales, which is directly on point with the National Retail Federation’s 4.1 percent expected increase, and a percentage point higher than actual retail sales gains in the 2013 season. A full 65 percent of retailers anticipate sales will increase this season, while only 12 percent expect sales to decrease.
Holiday Season Total Store Sales Forecasts
2014 2013 2012 2011 2010 2009
+4.1% +3.8% +4.7% +2.9% +3.5% +2.5%

What’s behind the upbeat projections? On one hand, there are some positive signs of growth in the broader economy: Housing markets are recovering across the U.S., while unemployment has continued its slow but steady decline this year, dropping below six percent for the first time since before the recession. At the same time, although consumer confidence has been trending upwards, shoppers remain skittish and price conscious, and retailers are already wooing them with deals to spur spending. As we noted last week, “Christmas creep” clearly crept up to Halloween’s doorstep this year, with major retailers such as Staples, Wal-Mart and Amazon already launching deals within the first few days of November.

In terms of popular products, as I noted yesterday in Media Post’s Marketing Daily, the significant rush of new consumer electronics releases this fall should carry over into the holiday season. Retail CMOs once again expect that electronics will be both the most discounted (58 percent) and top performing (73 percent) product category this year. Gift cards, on the other hand, will likely see a reset in sales growth following their surge in popularity over the past several years. Among surveyed retailers who sell gift cards, 38 percent expect sales to increase by a projected 2.7 percent—a substantial drop from 2013, when 61 percent of retailers expected sales to increase by 6.9 percent.

Despite positive signals for sales growth this season, challenges remain for retailers looking to capitalize on improving conditions. When asked which issue presents the biggest risk to holiday sales, a plurality of retailers (45 percent) point to unemployment, likely a result of long-term unemployment and underemployment and their effect on consumers’ disposable income levels. Also, a notable number of retailers (15 percent) cite energy and fuel costs as their top threat this year, despite the recent decline in gas prices. Meanwhile, with markets on the mend, fewer retailers (12 percent vs. 16 percent in 2013) noted housing market changes as their greatest risk to holiday sales.

Stay tuned in the weeks ahead as we release additional insights from our 2014 Retail Compass Survey of CMOs, including Black Friday and Cyber Monday sales projections, as well as expectations around promotional activity and tactics.