Written by Mary Buffett
Might this finally be the year? This year the National Retail Federation (NRF) is projecting a 4.1 percent increase in holiday retail spending, nearly twice last year’s anemic increase of 2.3 percent. After several years of holiday spending that produced lumps of coal, there is hope that the Christmas shopping season may pivot where Retail goes beyond mere survival and instead finds room to thrive.
Economists point out that The Great Recession actually started in the fall of 2007 and officially ended in the summer of 2009, but the lingering impact of what took place still haunts us today. Scarred by the rise of job losses, personal bankruptcies, and home foreclosures, Americans held on to their purse strings and only barely opened their wallets a crack. That may change this year.
This has been a Swiss Cheese Recovery, thanks in large part to a massive infusion of federal dollars. Thanks to TARP, the Financial Industry found it’s footing after staggering through 2007 until one weekend of September 2008, where Washington Mutual and Wachovia failed. Thanks to reorganization through bankruptcy, GM was able to reemerge as a smaller and leaner behemoth. The stock market, which took the brunt of the beating, more than recovered and the Dow has set several record highs.
Yet recovery proved elusive on Main Street, especially with holiday retail figures. In a world where personal spending drives 65 percent of economic growth, each successive Black Friday over the past couple of years produced one sour report after another. Even though ecommerce sales rose by double digit increases, consumer confidence remained timid. While some of the basic economic fundamentals improved as we dug out of our financial mess, the numbers for the 2012 holiday retail shopping season barely registered an increase at .7 percent. Back then, analysts were hoping for a 3 percent increase.
Aside from the stories where a father camps out at a Best Buy for a deal on a large screen television, holiday retail numbers follow the psyche of the American spender. When the economy fell apart in the fall of 2008, holiday retail spending actually declined by roughly 3 percent, which is catastrophic for retailers who depend on that season to stay alive. Subsequent holiday numbers showed anemic increases but when analysts peered below those figures, it was discovered that these increases came at the cost of substantial product discounting.
So what makes 2014 different? Just as it took time for the economic damage that started in the fall of 2007 to work its way through the economy, it takes just as long (if not longer) for American consumers to embrace that a recovery is real.
5.1 million new jobs had been created since January 2009, but nearly 3.8 million of those new jobs have emerged in the first years of Obama’s second term. It means that the ripple effects of the recovery that slowly began in early 2009 have finally made it out to Main Street. It means that American shoppers may begin to feel more comfortable about opening their wallets, knowing that their jobs will still be there in January.
However, things won’t return to 2005 or 2006. While the news is far better than what was found in years past, the dynamics of shoppers spending has changed. According to the NRF report American shoppers are still more strategic when it comes to buying what eventually ends up under the tree. They will spend about 6.5 percent more on their own families but they will also begin to purchase gifts for loved ones that have gone giftless during these trying times. Nearly 40 percent of Christmas shoppers will have done some of their holiday gift buying before Halloween arrived on the calendar. What we are seeing is a wiser holiday shopper, one burned by the pain of The Great Recession, but still willing to remember those loved ones with a gift under the tree.
While the initial numbers showed that this year’s Black Friday proved a bit quieter than past years, most analysts are confident that the underlying fundamentals are poised for a holiday rebound. Unlike past years where we all felt like Charley Brown moments after Lucy pulled the football out from under us, this year feels different.
So what am I seeing out there? Like many, I wandered into the maelstrom of Black Friday with my adult daughters and we intuitively noticed that shoppers were more open to spend than in years past. The aisles and the shopping baskets seem to be far fuller than 2009 or 2010. The attitudes about spending seem to be a little more relaxed. The pieces seem to be in place for a resplendent recovery. We may be at a place where the Great Recession can move from the forefront and into our rearview mirrors. It could be the year when Santa adds something extra to the bottom line of retailers everywhere.
We shall see. Don’t forget, today is Giving Tuesday.