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By Jennifer Yousfi
The holiday shopping season has come to a close and while final sales figures won't be released until mid-January, retailers fear they will fail to meet even the most modest of expectations.
Sales reports released so far have demonstrated that the 2007 holiday shopping season has shown the slowest growth in retail sales in five years. And it seems unlikely that after-Christmas bargain hunters will be able to make up for the lackluster same-store sales results that were posted ahead of the holiday rush.
This is no small matter: The holiday shopping season can account for as much as 60% of a retailer's sales for the year, so a bad holiday can translate into a lackluster full year. And since consumer spending accounts for between 60% and 70% of U.S. economic activity, a lackadaisical consumer can translate into a stalled economy.
With housing already in a full-fledged downturn, and the financial sector riddled with holes, a reticent consumer couldn't come along at a worse time for the U.S. market.
Not that this was wholly unexpected. In September, the National Retail Federation (NRF) released sales expectations for the 2007 holiday shopping season [defined as retail sales occurring in November and December]. Sales were predicted to grow 4%, below the yearly 4.8% average, making 2007 the slowest growth year in the past five years. However, it appears that holiday sales will not meet those expectations, and will likely even come in a bit lower than expected.
Many retailers are hoping that the large number of gift card purchases this year will give holiday retail sales a last-minute boost. Gift card sales are not recorded until the recipient actually redeems the card for merchandise.
"Gift card redemption is a huge traffic driver this week," Burt Flickinger, managing director at New York-based Strategic Resource Group, told Bloomberg News. "Otherwise, people would be sitting home unwrapping Christmas and Hanukkah presents, or going to the movies."
Retailers like gift cards for a number of reasons. For one thing, they can drive store traffic – and overall sales. That's because gift-card recipients often spend more than the face value of the card, making up the rest with their own money. With more gift cards sold this year than ever before, sales in the week after Christmas should be higher than in previous years. Stores are doing their best to lure in late shoppers by slashing prices and offering new merchandise. But prior to Christmas, same-store sales only rose a meager 2.4%, leaving a large shortfall for gift card sales to overcome in just one week.
Online Retailers Score
Online retailers had much better results to report. Leading ecommerce tracker, comScore Inc. (SCOR), announced that almost $28 billion had been spent online through Dec. 27, representing a 19% increase in sales over the same period in 2006.
"Even as the holiday shopping season winds down after Christmas, we continue to see some relatively strong online spending days," comScore Chairman in a statement. "For example, the day after Christmas saw online sales of $545 million, more than double the sales on the same day last year. This would appear to indicate that consumers were willing, and able, to take advantage of the attractive late-season promotions and price discounts offered by retailers this year."said
Despite the positive gains in online sales, for most consumers the continuing uncertainty behind the subprime mortgage crisis, the shaky housing market, and $3 per gallon pump gasoline led to cautious spending habits this year.
"The ingredients were not there for a blockbuster season," Michael McNamara, vice president, research and analysis of, told MSNBC. "And retailers, in many respects, got the most out of the season that they could, based on the environment."
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