Deloitte forecasts 2.5% to 3% increase in holiday sales

Brick-and-mortar store still essential to shopper experience

NEW YORK — Retailers should expect small gains in 2011 holiday sales, according to a Deloitte forecast issued Monday.

The company’s retail & distribution practice expects total holiday sales to reach between $873 and $877 billion, representing a 2.5 to 3% increase over last season.

"Consumer spending was on the rise for several months despite dampened confidence in the economy among U.S. households," Deloitte's chief economist Carl Steidtmann said. "Those earlier gains have begun to flatten and may be tempered by persistent weakness in the housing and employment sectors and pressures from the European debt crisis. Despite some relief in energy prices, consumers may feel the strain from food, apparel and other categories where prices are markedly higher compared to the previous holiday season. Additionally, retailers will face tougher comparisons this year after last year's substantial increase in holiday sales."

Additionally, Deloitte forecasts a 14% increase in nonstore sales, with nearly three-quarters of the sales resulting from the online channel with additional sales coming from catalogs and interactive TV.

"Double-digit growth in the nonstore channel has given the industry a major boost, and retailers that put online channels to work for their physical storefronts have the advantage," said Alison Paul, U.S. retail and distribution sector leader and vice chairman for Deloitte LLP.

Paul noted that the brick-and-mortar store is still central to the shopper experience.

“Retailers that integrate the power of the sensory experience in-store with relevant, timely information via their websites and mobile applications are well-positioned to lead the way this holiday season,” she said. While economic events have the potential to soften consumer spending this season, businesses are already operating at lean and efficient levels and positioning themselves to weather a period of slow growth, according to Paul. But she warned that retailers should be prepared with contingency plans.

"Retailers need to be nimble enough to quickly adapt and adjust their inventory, assortment, pricing and promotional strategies when consumer demand fluctuates,” Paul said.

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