Jeff Roster

Today the NRF released the below forecast for Holiday 2009

2009 holiday forecast, projecting holiday retail industry sales to decline one percent this year to $437.6 billion.* While this number falls significantly below the ten-year average of 3.39 percent holiday season growth, the decline is not expected to be as dramatic as last year’s 3.4 percent drop in holiday retail sales nor as severe as the 3.0 percent decline in annual retail industry sales expected for all of 2009.**

I had the chance to sit in on the NRF’s press and analyst’s briefing.  To say the tone was somber would be an understatement.  The positive points in the economic environment the NRF see’s include:

• The economy is beginning to recover but not out of the woods yet.
• Consumer confidence is stabilizing but we have a long way to go
• Stabilizing stock market-
• Consumer savings rates are increasing

I don’t disagree with any of those points.  However my major concern is unemployment.  It’s hard for me to see a scenario where consumer confidence improves dramatically until the unemployment rate gets down in the 6% range.  Why is this important?  A worried consumer is a thrifty consumer.  I would venture to say there are few if any consumers that don’t have a family member or close friend that has not lost their job in the last year.  That tension, in and of itself, will hold down spending.

So what does the NRF see retailers doing?

1.  Inventory control- Retailers have had a full year to prepare for this holiday season. There will simply be less merchandise in the stores this year.   This is much different from last years scenario where no one realized the extent of the economic crisis till early September.  By that point there was no time to respond except for deep discounting.  Retailers will be highly promotional this year.  But those promotions were planed and not ad hoc.

2.  Reduced labor in the stores -Retailers are simply not hiring the numbers of store associates that they have in years past.  On the plus side this reduces costs dramatically.  Obviously the negative is almost certainly a poorer customer experience.  How serious this is, only time will tell.

3.  Scaling Back new store openings -Capital conservation has been the key strategy this year so why open stores if there’s no customers for them.  Part of this store strategy is also to reduce store hours.  This is very similar to the idea of reducing labor in the stores.  Only time will tell if the cost savings are worth the potential negative impact on customer experience.

4.  Focus on promotions- Retailers are fully aware that they will be dealing with a very skittish consumer so look for promotions early and often.

Despite the seriousness of the subject matter there were a few light moments.  The best line was “Is this the year you can buy your wife a vacuum cleaner” highlighting the trend in practical gift giving.  For the record I won’t get getting Mrs. R such a gift.