Deck the halls with pink slips because Berkeley Research Group is predicting lukewarm holiday sales.
The West Coast-based management consulting firm just released its “2016 Holiday Retail Outlook” report and said that despite shoppers across all age groups feeling positive about their personal finances, they’re not ready to splurge.
According to a recent survey of 1,000 U.S. adults, nearly half (49 percent) said they felt good or very good about their financial situation, but 76 percent of respondents said they plan to spend about the same or less than last year. In fact, only 15 percent of those surveyed plan to spend more.
Beyond the survey, Berkeley mentioned that other factors in the U.S. economy could lead to tepid sales, including the fact that 46 percent of Americans consider themselves underemployed.
“Additionally, consumers will enter the holiday season more leveraged than they have in recent years. Personal savings rates are trending downward, and based on Federal Reserve statistics, total revolving credit held by consumers has reached its highest level in years,” the report said, noting that total credit card debt in the U.S. could top $1 trillion by the end of the year.
Berkeley said both could be cause for consumers keeping a tight rein on their wallets. When the group asked shoppers why they expected to spend less on holiday gifts this year, 30 percent cited rising household expenses, 27 percent said their income had decreased and one-fourth said they had too much debt.
“Retailers have been facing a new and more challenging environment in recent years,” managing director Keith Jelinek said, adding, “The convergence of five major trends—value shopping, channel shift, technology, mobility and delivery, and the rise of millennial spending power—has had a dramatic impact on the landscape.”
That being said, there are several steps retailers can take now to improve sales and traffic conversion.
• Reignite loyalty programs: Berkeley discovered that loyalty programs are most influential for consumers when shopping at mass merchandisers (55 percent) and department stores (48 percent) and less so at apparel retailers (33 percent).
• Cater to local preference: Nearly 80 percent of millennials and 66 percent of Generation X (36-51) said it’s important to them that stores carry goods that cater to the local community. The research group said that adding about 5 percent more locally relevant goods, particularly in African American or Hispanic areas, can make a significant impact.
• Accentuate visual merchandising displays: 56 percent of respondents believe that window signage is very or extremely influential in getting them in to physical store locations.
• Improve store planning and execution: Consumers told Berkeley that the biggest reason (60 percent) they leave a store without making a purchase is that they couldn’t find what they were looking for. The second biggest reason (51 percent) was high price, followed by the store not having the right size in stock (39 percent).
• Transform the shopping experience to resonate with today’s shoppers: Nearly three-quarters of shoppers said they still visit traditional malls at least occasionally, with 47 percent of millennials admitting to shopping there a great deal. To boost that number, retailers need to find more effective ways to lure them in, particularly baby boomers who have more disposable income.
“The retail landscape has changed, but it still comes down to delivery of a compelling value proposition and great shopping experience,” the report said. “Retailers can take action to enhance their assortment, connect with customers via effective programs and marketing, and execute in store more effectively to meet and exceed customer expectations.”