Studies from Deloitte, the National Retail Federation, and Booz & Co. all predict modest retail sales increases for the holiday period, with rises generally up in the vicinity of 3% or 4%. Online and mobile sales are expected to perform particularly well. But not every component of the retail sector can look forward to a jolly season ahead.
Here are a few areas, including some traditional holiday purchase staples, that are likely to underwhelm:
It’s not like shoppers have suddenly decided to quell their consumption habits and forego toy purchases entirely for the holidays. (Try explaining that change of heart to the kids on Christmas morning, around a tree devoid of dolls, action figures, and other playthings.) But, as CNBC reported, Goldman Sachs has downgraded shares of some toy manufacturers because of continued underwhelming sales of traditional toys—you know, the ones you touch in real life, not ones you play with virtually on iPads and smartphones:
“The nominal amount spent on traditional toys/games in the U.S. per capita is down 30 percent from $85 per person to $60 per person since 1998, and the pace of the decline has accelerated to 5 percent to 10 percent year to date,” said Michael Kelter, an analyst at Goldman Sachs who covers the industry, in a research note announcing the ratings changes.
Sales of board games and puzzles, as well as toys featuring brands like Transformers, Nerf, and Fisher-Price—all of which have been quite popular in the past—are expected to decline this year and next.
One might assume that if consumers aren’t buying as many tangible games, they’ll probably be purchasing games played on screens instead. That’s not necessarily the case. Retails sales of video games have been in a slump, according to MarketWatch, with retail sales of games and hardware down substantially through the first nine months of 2012—decreasing 27% and 35%, respectively.
New editions of top-selling games like “Halo,” “Call of Duty,” and “Assassin’s Creed” will hit the market soon, surely helping overall sales totals, and most signs indicate that Nintendo has a hit on its hands with the forthcoming Wii U video game console—Toys R Us had to stop taking orders for the system because demand was so strong.
And yet, analysts expect the overall sales slide to continue at least until Xbox and Playstation also introduce new consoles. The fourth quarter is usually huge for retail sales, but last year’s software sales were down 2% from the year before, per NPD Group data. In fact, such sales have been declining since 2008. Reasons cited for the decrease are many—the popularity of social networking, for one—but there is also the simple fact that gamers are likely to have purchased consoles and plenty of games fairly recently. In which case: They’re probably not all that game to drop a ton more money on another new system, as well as pricey games they’re already familiar with.
Electronics retailers such as Best Buy have been struggling for years. So it’s not all that surprising to see reports indicating that even as overall foot traffic at brick-and-mortar stores will be up this holiday season, shopper numbers in electronics stores are expected to decrease 8%. A big reason why this is so is the increased preference with making electronics purchases online.
But even when factoring in online sales, electronics purchases aren’t expected to be robust during the upcoming holidays. A Booz & Co. study suggested that electronics sales “may fade slightly” in the months ahead, explaining:
Sixty-two percent of consumers do not have consumer electronics items at the top of their personal wish lists, apparently because at least some demographic groups are approaching high-tech saturation.
That “high-tech saturation” theory also helps explain why video games aren’t selling all that well.
Everyday Low Prices
In early September, Target said it would employ a surprising strategy for the holidays—avoiding deep discounting in order to keep profit margins up. Yet before we’ve even reached Halloween, Target seems to have already nixed that idea; it recently heralded a new policy of matching online prices with Amazon, and executives proudly announced that Target stores would be “exceptionally competitive on price” through the holiday season.
It would seem as if retailers have no choice but to offer plenty of deep discounting for the holidays. That’s what shoppers expect, and without the presence of what seem to be exceptional deals, many shoppers won’t bite.
Nearly three-quarters of those surveyed in the Booz study anticipated finding “great deals this season,” up from 62% a year ago. According to the NRF survey, the most popular reason given for where someone chooses to shop is the presence of sales and discounts: 36% of consumers pointed to deals, while the second-most popular reason (selection of merchandise) got the backing of 16.1% of shoppers.
While Target and Walmart are known for everyday low pricing, they also offer weekly specials and assorted coupons and short-term deals, as well as policies guaranteeing to match competitor pricing. It will be especially interesting to see what will happen during the holidays at JCPenney, which has been experimenting with a no-coupons, everyday low pricing model for months—without much success.
The Apple Store, where Ron Johnson worked before taking over as CEO of JCPenney, may be able to get away with flat pricing during the holidays, or any season for that matter. But if Target, Walmart, Macy’s, and the rest are offering monster markdowns during the holidays, how can JCPenney compete by rolling out the usual (everyday) pricing?
Women, who do the majority of holiday season shopping, have already shown a disdain for JCPenney’s no-coupon model: According to one retailer survey, there has been a 13% drop over the last 12 months in the number of women who say JCPenney is their favorite clothing store. It’s assumed that the absence of coupons and deals plays a big role in why women are turning to other stores, where sales still exist in abundance—and where deals will be ubiquitous during the peak holiday shopping weeks ahead.