Sales Forecast for Retailers Looks Bright this Holiday Season

Will it be a boom or a bust for retailers this holiday season? A new survey shows that steadily improving economic fundamentals should moderately boost holiday sales in the stores and online this year.

“Income, wage and job growth are positive indicators heading into the holiday season,” said Daniel Bachman, Deloitte’s senior U.S. economist, referencing the Big 4 consultancy’s annual holiday sales forecast. “Debt levels remain at historical lows, and stock market gains coupled with increasing home prices have a wealth effect on consumers, which may encourage increased spending compared with prior years. Although consumers are watching tensions unfold in the Middle East and Ukraine, the improvement in their economic situation should more than offset the foreign conflicts’ impact on consumer confidence and retail sales. Despite recent events in energy-producing areas of the world, gas prices have held steady, which may also sustain consumers’ spending power.”

Deloitte’s retail and distribution practice expects total holiday sales to climb to between $981 and $986 billionⁱ, representing a 4 to 4.5 percent increase in November through January holiday sales (excluding motor vehicles and gasoline) over last season. This growth rate is a moderate improvement over last year’s 2.8 percent gain. Additionally, Deloitte forecasts a 13.5 to 14 percent increase in non-store sales in the online and mail order channelsⁱⁱ during the 2014 holiday season.

“While online sales continue to climb, digital customer interactions through both virtual and physical store channels present greater sales opportunities than online or mobile commerce alone,” said Alison Paul, vice chairman, Deloitte LLP and retail and distribution sector leader. “Our research indicates that 84 percent of shoppers use digital tools before and during their trip to a store. Additionally, those shoppers convert, or make a purchase, at a 40 percent higher rate than those who do not use such devices during their shopping journey.”

Deloitte forecasts that digital interactions will influence 50 percent, or $345 billionⁱⁱⁱ, of retail stores sales this holiday season. This figure reflects the extent to which consumers’ use of desktop and laptop computers, tablets, and smartphones influence brick-and-mortar store sales.

Paul noted, “Retailers should focus on the right functionality, rather than more functionality, when creating digital experiences this holiday season. Rather than offer their full e-commerce site on a mobile device, for example, retailers may be more effective by helping consumers compare prices, scan through local assortments, and navigate the store. Retailers that better understand how consumers make purchasing decisions, then deliver tools that support that process in a way that is consistent and complementary across online, mobile and store channels — may have the advantage this holiday season.”