November 2008: Holiday Shopping

Industry Stats & Data by eMarketer

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Online holiday season sales will reach $32 billion in 2008, up 10.1% over 2007. Although this is a sharp decline from growth rates in the low-to-mid-20% range seen over the past few years, it is far superior to the dismal 0.5% to 3.0% growth rate that analysts forecast for the entire retail industry this holiday season.

The holiday season runs through November and December. To be clear, the term holiday season sales refers to all retail spending—purchases related as well as unrelated to the holidays. This inclusion of both kinds of purchases is a practical consideration because of the difficulty of separating one type of purchase from the other.

Consumers, besieged by high energy and food prices, tightening credit and rising unemployment, have less discretionary income to spend this holiday season. The financial crisis and a volatile stock market have further eroded consumer confidence. These factors add up to a glum prognosis for the upcoming holiday shopping season.

Traditionally, the holiday season is the critical time for retailers to achieve their sales and profitability goals for the year. This year, the stakes will be even higher for a number of retailers that stand on the brink of bankruptcy.
Holiday sales will rise 2.2% this year, falling below the 10-year average of 4.4%, this would represent the slowest holiday sales growth since 2002, when sales rose 1.3%.

The National Retail Federation (NRF) stated that it did not foresee an economic turnaround until the second half of 2009.

eMarketer estimates that online sales during the holiday season consistently represent almost one-quarter of annual retail e-commerce sales, evidence of the importance of this time of year to retailers.

Financially strapped consumers will use a variety of strategies to save money on holiday gifts. More than ever, they will turn to the Internet to get gift ideas, find bargains and locate retailers that stock desired products. Shoppers will shift a larger share of their purchases from stores to the Internet to save gas money and avail themselves of retailers’ free shipping offers.

Meanwhile, in competing for consumers’ shrinking gift budgets, Web retailers face a balancing act. On the one hand, they are under pressure to reduce costs by cutting inventories and staff. On the other hand, they must spend money on promotions and advertising to acquire and retain customers.

E-commerce sites that help consumers find good deals or cater to less-price-sensitive customers will be this year’s holiday winners.