Holiday spending spurt is expected

<b>Shoppers</b> get an early start on the holiday season at Warwick Mall last Tuesday.
Consumer spending is expected to see modest gains this season, economists say.
Shoppers get an early start on the holiday season at Warwick Mall last Tuesday. Consumer spending is expected to see modest gains this season, economists say.

Economists forecast moderate sales gains

The holiday window display at OOP! is ready to go.

Inside the company’s two stores, the staff is being prepped for the impending sales rush and has been equipped with “Holiday Survival Belts,” said owner David Riordan.

And based on historical sales figures for the artsy gift store, all this preparation is necessary, Riordan said. “From the day after Thanksgiving to the day before Christmas, we can do 28 percent of our annual sales,” said Riordan.

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The holiday shopping season is about to hit full steam, and retailers and economists are expecting to see a rise in sales. Just how big a rise, however, depends on whom you ask.
Ten-year historical data provided by the National Retail Federation shows that holiday sales generally make up about 20 percent of retailers’ total annual sales. In 2004, the U.S. Department of Commerce reported a 6.7 percent growth in sales from the previous year’s holiday season, with consumers spending more than $414 billion.

This year, the NRF is projecting a 5-percent increase in sales, with consumers spending more than $435.3 billion.

“I’m really optimistic,” said Paul DeRoche, executive director of the Rhode Island Retail Federation. “There’s just a lot of consumer confidence out there.”

Recent weeks have helped buoy his expectations, DeRoche said, and the mild weather the region has received throughout October and November should help push consumers to the stores. A year ago at this time, he said, the region had 5 inches of snow and was “miserable.”

Items such as iPods and plasma televisions should help drive sales, DeRoche said, while sales of clothing will remain about where they were last year.

William B. Sweeney, a professor of economics at Bryant University, is also anticipating slight gains in sales. All the economic indicators point to a shopping season that will see about a 2 to 3 percent increase from last year’s figures, Sweeney said.

The months leading up to the holiday shopping season are generally a strong indicator of what the season will look like, Sweeney said. In October, sales of retail and food services dropped 0.1 percent from the previous month, according to the Department of Commerce.
“I don’t think it’s going to be a banner Christmas by any means. … The momentum factor doesn’t seem to be present in the numbers or the statistics,” Sweeney said.

At least three factors are working against retailers this year, he said. Food and fuel prices soared earlier this year, and while they have recently dropped, he said, those costs may eat away at a portion of consumers’ budgets.

Additionally, Americans are heavily in debt, he noted – in some cases overpowered by it, with reports showing many have credit card debts that exceed half of their annual income.
A third factor Sweeney sees playing a role in shopping trends this season is America’s “graying population.” As society gets older, the holidays become less important than it once was, Sweeney said. There are fewer children to purchase for overall and less emphasis being placed on buying presents.

He also sees a “lack of pent-up demand” for products, something evident in the automotive industry. Auto sales dropped off 3.6 percent from September to October. Combined with drop-offs in prior months, Sweeney said, there isn’t much demand right now.

One thing, he said, that could’ve aided holiday sales in the state was the proposal of Gov. Donald L. Carcieri to create a “sales tax holiday” for the weekend after Thanksgiving, traditionally the biggest shopping weekend of the year.

The proposal, suggested after the Rhode Island General Assembly had recessed this summer, would have given consumers a break from the state’s 7-percent sales tax rate on any goods purchased on those days.

But the Legislature never reconvened, and the proposal ultimately fizzled.

“Tax holiday weekends have been very successful (in other states),” Sweeney said. “It would’ve really had a great impact.”

If retailers start to get jittery about their sales this season, consumers will start to see big slashes in prices, Sweeney said.

Wal-Mart, which just recently turned in its smallest quarterly increase in four years, may be a prime example to watch. Always priding itself on providing quality products at low prices, Sweeney said the company may cut their prices further, thinning its profit margin.
“They’re going to use their winning strategy to try and boost Christmas sales,” Sweeney said. “And the only way to do that is to get more people into the stores.”

But being a smaller business owner, OOP!’s Riordan said the best way to get customers into his store is to “deliver an exciting environment.” Details such as the “Holiday Survival Belt” – which include trivia and other items aimed to alleviate shoppers’ stress levels – and the store’s corporate gift program can help the atmosphere at the shops, located on Thayer Street and in Providence Place mall.

Optimistic about this season, Riordan said his sales will likely be led by jewelry, a product that has grown at OOP! where others have lagged.

“It’s going to be another banner year,” Riordan said.

In North Kingstown, Wilson’s of Wickford’s Jim Wilson said the upscale clothing store expects to see moderate gains this holiday season.

After a slight lull in September and October, he said he has witnessed business start to bounce back this month.

Wilson said he is not concerned about reports that show the economy may be lagging – reports that he said seem to bounce back and forth between positive and negative.

“That may be reflective,” he said. “The economy may be a little erratic right now.”

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