2009 Holiday Retail Forecast: "It's Going To Be a Disaster."

Consumers will be decking the halls with fewer boughs of holly this year -- unless there's a two-for-one special or they can find a 10-percent-off coupon online. In other words, this is going to be a grim holiday retail season, according to several analysts and sales forecasts. C. Britt Beemer, chief executive officer of America's Research Group and author of The Customer Rules, predicts a 1 percent drop in sales compared to last year's holiday season -- Beemer's first negative forecast in 23 years of conducting holiday surveys. "It's going to be a disaster," Beemer says.

According to Beemer's research, 35 percent of consumers interviewed plan on giving fewer gifts this year -- and 40 percent plan to spend less overall. Beemer was able to get that 40 percent segment to break out its various rationales for belt-tightening:

  • 28 percent are concerned about the economy;
  • 22 percent are trying to cut down spending;
  • 16 percent have higher credit-card debt;
  • 14 percent are impacted by gas and grocery prices; and
  • 11 percent are insecure about their jobs.

Beemer says one survey response that surprised him involved the use of gift cards. Last year, about 70 percent of consumers were thinking about purchasing gift cards for family and friends. This year, however, that figure dropped to 40 percent. Beemer says the drop is likely a reflection of shoppers' fear of buying gift cards at stores that might not be existence come springtime. This all began, he says, when Sharper Image declared bankruptcy earlier this year and voided a reported $20 million in outstanding gift cards. What Beemer calls the "Gift Card Effect" will trickle down and make for even poorer results in the early months of 2009, when retailers might traditionally be expected to rely on the use of gift cards to make their margins. The cumulative impact may be severe: "I think you will see a six-point drop in sales for those first three months," Beemer says.

On the other hand, Cathy Hotka, principal at retail firm Cathy Hotka and Associates, maintains that she has seen figures showing that consumers will be purchasing gift cards this year. Regardless, Hotka says that the potential drop in sales may be even more dire than Beemer's prediction: The sector may see a 2 percent hit compared to last year's sales -- maybe even 3 percent. But Hotka maintains that it's difficult to simply characterize the shortfall by saying "shoppers are cutting back" -- it's more complex than that, she says."The theme of the year is ‘change of behavior,' " Hotka says. "We think that people will make some major, major changes." For example, she says parents will try to sustain gift-giving levels for their children, but won't be giving presents to one another. 

Beemer's research also indicates significant shifts in consumer behavior: People will be eating at home more; giving more experiential gifts, rather than inessentials; and will not be shopping as a form of entertainment.

Hotka says the new behavior raises new questions: "Do retailers then have an incentive to get to know the customer better so they can tailor offers? When you ask [most retailers], ‘Do you have a plan in place?' The answer is, ‘No.' " However, Hotka maintains that retailers do seem to be making an effort to reach out to existing customers with offers and promotions, especially online and through email. She adds that e-commerce has expanded its footprint and she imagines a continuation of that trend this year, especially as consumers look to the Web for price comparisons. "Incentives are not to be underestimated," she says.

In Beemer's survey, 50 percent of respondents say they will spend more time scouring newspapers for ads than they had in the past. The planning and strategy that consumers will devote to buying will be huge, he says. "Normally one-third of people make a shopping list. Today, that's up to almost 63 percent." And Beemer says shoppers are likely to stick to the list -- and only the list -- unless retailers pull out the stops with truly irresistible deals. The customer experience matters, too. "If customers are treated nicely, and if you can make the shopping experience positive -- you've helped them get through the buying process -- consumers love that," Beemer says. The problem is that, with staffing levels low and more shoppers hunting for bargains, the experience isn't likely to be at a level of quality that consumers would like it to be.

In terms of the customer experience, Hotka says emerging technology could potentially transform the retail experience. One such technology would enable retailers to put actionable coupons on a customer's cell phone. The customer will then be able to purchase an item using a credit card and a phone. That kind of innovation can lead to repeat business, Hotka says, adding that while overall retail IT spending has dropped, some technology purchases don't require a whole lot of capital. All in all, she says, retailers are going to be trying everything -- and on the flip side, customers are going to be trying everything to stay afloat.

Along those lines, Yahoo! is debuting a new tool today to help consumers tackle the bargain-hunting season. The Web powerhouse's Yahoo! Shopping channel has unveiled a beta version of Yahoo! Deals (http://deals.yahoo.com/), which, according to technology blog TechCrunch,

lists daily deals in different categories (computers, home & garden, clothing). It also offers online coupons, notices of storewide sales, and a place to browse through digital circulars. The daily deals are syndicated from sites like Amazon, DealNews, and Woot! The coupons are from retailers such as Home Depot, Land’s End, Dick’s Sporting Goods, and Sony Style. The storewide sales include deals at iTunes, Gamestop, Guess, and Sephora.... Digital coupon clippers can even save their coupons if they are signed in with a Yahoo account.

Not everyone is preaching with doom and gloom. In other holiday-retail news, industry analysis firm Yankee Group today released a new report, They Want Their Anywhere for the Holidays, recommending consumer electronics suitable for five different consumer segments:

For consumers who constantly crave connectivity:

  • The Amazon Kindle
  • The Slingbox PRO-HD
  • TomTom x40 GO LIVE

For consumers who want a rich and productive technology experience, both on the go and at home:

  • Gift certificates for iPhone applications
  • Eye-Fi Explore SD Card
  • Logitech Squeezebox or Squeezebox Boom Music Players

For consumers who seek to enhance their home hardware:

  • The Roku Netflix Box/Xbox 360
  • SlingCatcher Universal Media Player
  • Peek Wireless E-Mail Device

For consumers who look for cutting-edge technologies at bargain prices:

  • Linksys Ultra RangePlus Wireless-N Broadband Router
  • Slacker G2 Personal Radio
  • Asus Eee PC S101

For those who have little interest in technology for the sake of technology but want gadgets that simplify activities they're already doing:

  • Kodak EASYSHARE W820 Wireless Digital Frame
  • Lexmark Z1480 Wireless Printer

"With plummeting retail sales, a very tight focus on the right Anywhere products is essential to tease dollars from consumer pockets this holiday season," Joshua Martin, senior analyst at Yankee Group, said in a statement. "Positioning the right...products to receptive types of consumers will make the holiday season much brighter for vendors and consumers."

But the appeal of consumer electronics may not be enough to salvage the season. Beemer's advice to consumers: Get up at the crack of dawn the Friday after Thanksgiving and pick up a bunch of coffees on your way to the mall. Pass around hot drinks to those next to you in line, make friends, and enjoy the experience. It'll be worth it: "On Black Friday you will see the most incredible deals you will see in the next five years," Beemer says. "Retailers know if they don't win on Black Friday, it's over."

News relevant to the customer relationship management industry is posted several times a day on destinationCRM.com, in addition to the news section Insight that appears every month in the pages of CRM magazine. You may leave a public comment regarding this article by clicking on "Comments" at the top; to contact the editors, please email editor@destinationCRM.com.

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