University of Wisconsin - Extension

The retail sales forecasts for the 2001 holiday season have become more optimistic according to some large retail stores, national retail associations, and national retail economists.

"Even before the September 11th terrorist attack on the United States, the upcoming holiday season was forecast to be the weakest holiday season in a decade," explains Hans Hanson, University of Wisconsin-Extension Area Community Business Development Agent.

Information about holiday forecasts come from a variety of sources, including the Retail Intelligence System of Price-Waterhouse-Coopers, International Mass Retail Association, Deloitte Consumer Business Research, National Retail Federation, Toy Manufactures of America, Senior Economist of Bank of Tokyo-Mitsubishi and Wal-Mart.

"All of the above organizations predict that holiday sales will be higher than last year," says Hanson. "Predictions for increases in retail sales this year range from 1.5 percent to 4.4 percent over last year's sales."

These forecasts are based on current conditions in the United States and the assumption that there will not be another major terrorist attack. "Organizations believe consumer sales will increase over last year's holiday season because consumers put off spending in September and early October. There is somewhat of a pent-up demand. And, there might be reallocation of consumer spending from other areas, such as travel," explains Hanson.

Retailers may have to offer discounts and offer more promotions through advertising. "Unfortunately, retailers' profitability on sales will decrease due to price cutting and increased advertising and promotion costs," Hanson adds.

Even before the September 11th attack on the United States, consumers were focusing on value pricing and convenience because of concerns over economic slow-down and potential job losses. The Sept. 11 attack accelerated this trend.

Consumers also are spending more money with discount stores than with traditional department stores. "In October 2001, Wal-Mart, Target, and Kohl's showed the healthiest growth, while specialty apparel and department stores sales continued to decline," Hanson says.

A recent consumer survey by the Consumer Federation of America clearly supports the above trend - 82 percent of the consumers surveyed said they planned to do a lot of their holiday shopping at discount stores. Sixteen percent said they planned to shop using the Internet.

The International Mass Retail Association predicts that the most popular items will be apparel, toys, books, consumer electronics, lower priced home furnishings, sporting goods, and power tools.

"This sounds like a somewhat typical holiday gift-giving season, the difference being that consumers will try to find many of these items at discount stores," Hanson adds. "Therefore, retail stores that are not discount stores will come under strong pressure to lower prices to achieve holiday sales."