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By Tom Ryan
Source: retailwire.com, September 2024
Early forecasts for holiday spending are generally mixed due to uncertainty created by inflation effects, potential interest rate cuts, and a volatile election season.
Salesforce last week predicted a 2% year-over-year increase in sales over November and December in the U.S. this year. That represents a sharp pullback from a 3.8% gain in the 2023 holiday season and the 10-year compound annual growth rate of 4.2%.
The software giant, basing its analysis in part on data from more than 1.5 billion global consumers on retail sites using Salesforce products (including 29 of the top 30 U.S. online retailers), said the selling season “could be especially challenging for retailers as they compete for shoppers with less purchasing power than in past years.”
Salesforce noted that 43% of consumers are carrying more debt than they were in 2023. Salesforce’s survey data found two-thirds of global shoppers report that prices will dictate where they choose to shop in 2024 (up from 46% of shoppers in 2020), with less than one-third prioritizing the quality of the goods.
Salesforce also noted that the calendar isn’t favorable for retailers, with only 27 days between Thanksgiving and the day before Christmas — the fewest since 2019 — compared to 32 last year.
“This season will be competitive, intense, and no doubt focused on pricing and discounting strategies,” Caila Schwartz, director of strategy and consumer insights at Salesforce, said in a statement.
In a preliminary estimate, Craig Johnson, president of Customer Growth Partners, the research and consulting firm, forecast a holiday gain of between 2.5% and 3.5%. In an interview with WWD, Johnson said his forecast would represent a “so-so performance, but it’s positive, particularly in light of all the craziness with inflation and the whole jobs picture.”
“The consumer is still cautious,” he added. “No one is buying stuff unnecessarily, and when they do shop, they are approaching things much more strategically and that applies to the lower-end customer and the higher-end consumer. They are buying fewer units per basket, but consumers are resilient.”
Coresight Research’s early outlook projects sales from October through December will expand 4% year over year, with its latest holiday survey finding slightly more respondents planning to spend more this holiday season than less, compared to last year.
On a cautionary note, however, Coresight found that the share of consumers expecting their personal financial situations to be better for the forthcoming holiday season than one year earlier had weakened versus surveys taken in January 2024 and in June 2023. Coresight said, “Our surveys find consumer sentiment variable, but generally weak and having been on an approximate downward trend, likely due to the slower-than-expected unwinding of both inflation and interest rates.”
Coresight also sees SHEIN, Temu, and TikTok Shop grabbing holiday share from domestic retailers.
Most optimistic so far is eMarketer, which is predicting a gain of 4.8% year-over-year in November and December. Specifically, it expects e-commerce sales to increase by 9.5% year-over-year.
eMarketer’s bullish sentiment reflects a still “relatively healthy economy with fair GDP growth, a relatively solid (albeit softening) labor market, and waning inflation.” The forecast also reflects the Conference Board’s Consumer Confidence Index hitting a six-month high in August, and this confidence will “likely continue to rise if and when the Fed cuts interest rates.” Also cited was a Basis Technologies survey showing that 92% of U.S. consumers plan to spend at least as much this holiday season as last year, including 36% expecting to spend more.
eMarketer concluded, “We expect consumers will seize upon opportunities to stretch their budgets as they hold out for value and hunt for deals. Some may also turn to credit and flexible payment options.”
