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IU EXPERT: HOLIDAY SHOPPING OUTLOOK GOOD
FOR COMPANIES WITH YEAR-ROUND STRATEGY
BLOOMINGTON, Ind. -- A shaky financial market worldwide and political uncertainty at home had some companies holding their breaths in mid-October, but many retailers should breathe a sigh of relief this Christmas if they've been observant of market trends during the rest of the year, according to a retailing expert in Indiana University's Kelley School of Business.
"While every holiday shopping season holds a degree of doubt for some, hopefulness for others and general uncertainty, this year perhaps has been more questionable than most," acknowledged Theresa Williams, director of the Center for Education and Research in Retailing. "A healthy holiday shopping season is critical for most retailers, but for the companies that have had well-executed business strategies prior to the fourth quarter, business should hold true for the remainder of the year."
Williams said the last three months of the year are not the time to build customer loyalty, but the time when companies should reap what they have sewn throughout the first three quarters of the year. For example, solid retailers such as WalMart, The Gap and Target have had healthy same-store gains of 7 to 9.5 percent prior to November.
By contrast, a buoyant economy, upbeat customers, low interest rates and low unemployment will not be enough to keep afloat those retailers who have struggled consistently throughout 1998 with poor sales, sagging inventories, and vague "store as brand" identities.
"Historically, retailing has operated on reacting quickly to trends with more short-term tactics than long-term strategies," Williams observed. "In today's competitive arena, business trends emerging late in the year, which highlight the companies' strengths or weakness, should be aggressively addressed for the following year's plan."
For example, many companies are learning that customers are using the Internet to search for and even make more of their purchases this holiday season. To take advantage of this trend, a serious plan for Internet use should be incorporated for early business in 1999.
This year, discounters specifically have had the most reason to remain optimistic, Williams said. Their sales have been good for months, and it appears that customers have continued to use price as a key quality that draws them to specific stores. In addition, it becomes more evident each year that mid- to upper-single-digit November and December increases in retail activity are strongly correlated with positive increases from the other 10 months of the year.
"This year is not a great deal different from the past several years," she said. "Specifically, total year-end retail sales have dipped below a 4.1 percent increase only once since 1986. Within this same time period, year-end sales results from November and December directly correlate with sales results of January through October. The 1998 holiday figures will again be affected by solid sales numbers from earlier this year."
This year has been marked by plunging personal savings, but wealth has risen and spending has soared. Williams notes, however, that typically when business is good all year, a big surge at Christmas is not likely. This may be true because more customers are spreading their purchases throughout the year, including their purchases of Christmas gifts.
Holiday buying surveys this year indicate that most consumers will be spending between $800 and $900 on gifts -- about the same as they did last year -- but many could be "big ticket items" such as appliances and large-screen televisions.
Many consumers are choosing to purchase services instead of package items. Thus travel, gift certificates and entertainment sales should remain steady, as they have all year, Williams said.
Stores will post 4 to 6 percent gains, Williams believes, capitalizing on one extra shopping day this year but matching last year's increases. This forecast relates more to how customers have been spending all year than to any reaction on their part to the Asian crisis or political uncertainty in the United States, she added.
Recent market blips will not override this year's booming economy, Williams said, noting that people tend to look upon their investment accounts differently than their spending accounts. "Most investors are in it for the long haul, and when they have a drop of 20 percent on their investments, the balance is still up big time from where it was a few years ago," she said.
(George Vlahakis, Office of Communications and Marketing, 812-855-0846, gvlahaki@indiana.edu)