Cotton: The Fabric of Our Lives

The words “faith” and “hope” are often used around the holidays, and retailers are no less likely to invoke them when looking ahead to the biggest retail push of the year.

Retailer faith is in consumers, and their hope is shoppers will continue to be the cog that has kept the skittish economy moving.  With that Holy Grail of shopping days — Black Friday — just weeks away, the outlook is cautious yet positive.

Kantar Retail forecasts overall retail growth of 2.8%—compared with 5.6% in 2010—for the holiday fourth quarter.  It expects apparel and accessories sales to increase 1.9%, compared to 4.8% in 2010. 

“Online retailing is forecast to record more double-digit growth,” says Frank Badillo, Kantar’s senior economist. “Dollar stores and other small-format value stores should see relatively healthy growth among the mass channels.  As households curb spending in discretionary categories, the homegoods and softgoods retail channels will be the focus of the holiday growth slowdown.”

More than 8 out of 10 consumers (81%) are very or somewhat concerned about a reduction in their annual household income, according to the Cotton Incorporated Lifestyle Monitor™ Survey.  And those earning less than $75,000 per year are significantly more likely than those earning more to be “very or somewhat concerned” about an income reduction (84% versus 73%).

However, just (64%) plan on spending the same amount of money on holiday gifts this year compared to last year, according to Monitor data.  More than two-thirds (68%) of consumers plan to buy gift cards, followed by apparel (49%), toys (41%), electronics (30%), and jewelry (26%).  Among those planning on purchasing apparel gifts, 62% plan to spend the same amount of money as last year.

Holiday sales generally account for about one-fifth of overall annual revenue for retail stores. ShopperTrak expects apparel and accessory sales to rise a somewhat modest 2.7%, which means apparel sellers may have to drop prices to drive sales.

“As the consumer looks for price as well as value, we expect them to hit the discounters like TJX stores and even department stores,” she says. “But it’s not just about price, it’s really about value.  Consumers want to make sure that what they buy lasts.  That goes for both holiday gifts and personal purchases.  Better private label goods really boosted the popularity of department stores and should bode well for holiday.”

On average, the Monitor survey finds consumers plan to spend approximately $497 on holiday gifts this year.  Among those planning to buy, consumers say they plan to spend $319 on electronics gifts, followed by gifts cards ($201), apparel ($168) and toys ($155).

Grannis says luxury shoppers have a level of confidence that a lot of Americans lack.  “Even though the economy is pinching millions of Americans, and the stock market is all over the place, luxury shoppers probably won’t regress completely from where they love shopping, which is high-end retailers.” 

BIGreach/BIGinsight’s Pam Goodfellow, senior analyst, says luxury’s advantage is that its core shopper base has been more “recession-proof” than the buying public at large.

“This year though, consumers who may not consider themselves to be regular ‘luxury shoppers’ may be a little more tempted to make a purchase within this segment. It’s up to retailers to coax these shoppers into their stores and really make them feel good about spending money on an item like this.”

Online sales are expected to be a bright spot.  comScore does not release its holiday forecast until November, but the firm is hopeful that double-digit growth rates will continue.

“That is, of course, dependent on economic conditions remaining stable or improving,” says comScore’s Andrew Lipsman, vice-president, industry analysis.  “I would expect [apparel and accessories] to continue to perform in line with the total e-commerce market as we get into the holiday season.”

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