Retail sales in the United States are expected to increase 2 percent to 4 percent this holiday season over last year, which is surprising given the state of the economy, says Richard Feinberg of the Purdue University Retail Institute.
"With 9 percent unemployment and 7 percent underemployment - people who have given up or are working below the radar and are not counted as unemployed - the fact that we will have an increase in holiday sales is a miracle," he says.
Last year's sales were up 5 percent over 2009, and holiday spending this year is expected to total $475 billion.
Feinberg, a Purdue professor of consumer science and retailing, says retailers should have a profitable season because they have learned how to control costs and inventory. However, small local retailers will be under pressure as economic circumstances force more consumers to shop at the larger discount and value-oriented retailers.
The No. 1 gift item will be gift cards, Feinberg says. The electronics category will be led by tablets such as the iPad and by smartphones.
The good news for consumers is that, as in years past, the season will be highly promotional, with near-constant sales. New this year, Feinberg says, is that retailers have found out that direct email has a big payoff.
"While we expect 0.5 percent positive response to traditional mail promotions, we have found in our research that a well-done email promotion can get a 5 percent positive response," Feinberg says. "Email also is easier and less costly. We expect many retailers to be sending out email promotions on a regular basis."
E-retailing will continue to be the bright spot for the holidays, with year-to-year sales expected to grow by about 15 percent.
"Retailers are beginning to realize that their online presence has the potential to be their biggest store. This has led them to pay attention to their Internet presence in ways they have not done in the past," Feinberg says. "They also are finding that a well-designed website not only leads to online purchases but to more store visits, too."
Not surprisingly, "free shipping" continues to be the magic phrase for Internet sales.
Looking ahead, Feinberg says that while mobile retailing is limited currently, it will be increasingly important for retailers.
"Smartphones account for only about half of all mobile phones right now. Of those who have smartphones, we estimate that only 10 percent make regular purchases using the phone. Unless your customer is 18-25 years old, it will be a small part of overall holiday spending this year," he says. "But retailers are just beginning to learn what can be done with a smartphone. Experimentation with mobile commerce and broadening the consumer experience will make mobile retailing significant in the next five years."