The stagnant world economy continues to be a drag on consumer demand, even as the 2011 holiday season approaches. The growth rate for the upcoming holiday season will be 2.8 percent in total retail sales -- half of last year's 5.6 percent actual growth -- according to London-based Kantar Retail, a division of Kantar Group, the insight and consulting arm of WPP, the world's largest communications group.
The breakdown of where sales will come from is a true sign of the times -- and a warning to traditional retailers. Kantar predicts that U.S. online sales from October through December will rise 13.5 percent, to $60.4 billion from $53.2 billion last year. While this is lower than the percentage increase from 2009 to 2010, it speaks to the continuing growth in market share of online shopping.
Kantar's Mary Brett Whitfield says 45 percent of shoppers surveyed plan to do their shopping at online-only sites this year, versus 43 percent at Target and 52 percent at Walmart. While Walmart continues to be in the lead because of its value pricing, Whitfield says that "people are planning on spending more online than at Target. That's key for retailers to understand the importance and prevalence of online shopping."
This is all good news for e-commerce giants like Amazon and eBay, who will undoubtedly benefit. It is likely one of the reasons that Amazon just announced its new Kindle Fire, a $199 souped up eReader that some observers think could well present a serious challenge to Apple's iPad. Even before it goes on full sale on November 15, the Kindle Fire is currently the best-selling and "most wished for" device in the electronics category on Amazon.com, according to Mashable.
As for traditional retailers, dollar stores and jewelry stores are likely to see the strongest growth in the fourth quarter of this year versus last year (4.5 percent), according to Kantar. Department stores will see a 1 percent increase, and big-box and mass merchandisers will go up by 2 percent. Apparel and shoe stores will increase under 2 percent. Furniture stores, home furnishings stores and consumer electronics stores, however, will see a decrease in holiday season sales.
Kantar cited declining consumer confidence as a threat to holiday sales. Frank Badillo, senior economist for Kantar Retail, says "The probability is high that this will lead to another recession unless some positive shock -- such as government stimulus -- keeps the period of heightened uncertainty short and quickly starts to lift consumer and business confidence." A survey conducted by Kantar two months ago found that about half of consumers plan to spend the same as they did last year purchasing holiday gifts. However, 35 percent of those surveyed said they would spend less. Only 9 percent indicated they would spend more this holiday season, and 6 percent said they don't purchase holiday gifts at all.