Survey Finds Local Retailers Concerned About Holiday Sales

12/3/2007

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Survey Finds Local Retailers Concerned About Holiday Sales

By Jeremy Hill
Georgia Southern University

Retailers in Georgia's Coastal Empire and South Carolina's Lowcountry share consumer expectations of a down holiday sales season this year, according to a recent survey by the Bureau of Business Research and Economic Development.

This article is the second of a two-part series looking at holiday expectations for the retail sector. The first, a survey of local consumer confidence, appeared in the Nov. 26 issue of the Business Report and Journal.

The findings of the consumer survey showed that residents in the area expected to spend less than last year, due to household financial debt, uncertainty about gas prices and issues with products containing lead paint. To better understand the retailers' expectations in the context of the consumers', we need to first look at their perceptions of the economy and the retailers' financial status going into the holiday season.

When businesses were asked about the current economy, only 15 percent of the area retailers thought that the economy was better in 2007 than in 2006 -- an 18 percent drop in confidence compared to the 2006 survey. In fact, it is the lowest confidence recorded since the COBA Holiday Poll was first implemented four years ago. Moreover, 52 percent of the retailers thought that the economy was worse this year. The two sectors with the best outlook for the economy were Clothing, Sporting Goods, Music & Hobby stores at 23 percent and Home Furnishings, Electronics & Appliances stores at 17 percent. (See figure 1)

When business people were asked about their companies' financial status, retailers were only slightly positive. Approximately 11 percent of the retailers said that their companies were worse in 2007, which is up 3 percent from the 2006 survey and up 6 percent from the 2005 survey. The two sectors with the strongest performances, however, were Motor Vehicle Dealerships and General Retail, both at 36 percent indicating better.

In order to further validate these reports, businesses were asked whether they hired additional full-time employees during 2007. Sixty-seven percent of the retailers did not hire new full-time employees to their staffs, a definite indicator of a slow market and a cautious outlook.

The growth in aggregate U.S. retail sales between 2003 and 2004 was 6.1 percent, according to the U.S. Census Bureau's Annual Retail Trade Survey. In 2005 the rate was at 7.4 percent, and in 2006 it was 5.4 percent. The primary cause of the high rates of growth in 2004, 2005 and part of 2006 was due to a stronger dollar and significant increases in household debt. As shown in the latest consumer survey, it is unlikely that the residents in the Coastal Empire and Lowcountry will increase debt to pay for the holiday shopping.

When businesses were asked about the 2007 holiday season, retailers gave a rather mixed answer. Approximately 37 percent said that holiday sales would be either better or the same in 2007, which is a 7 percent decrease from the 2006 survey. Interestingly, the worst category increased significantly this year to 22 percent, a 13 percent increase from the previous year. When examined by sector, the three sectors anticipating better sales by the highest percentage were General Retail, Food & Beverages, and Clothing stores at 45, 42 and 34 percent, respectively.

This year the COBA Holiday Poll asked some additional questions about how some current issues may affect the holiday sales of the company. The overall perception of the business people surveyed in the Coastal Empire and Lowcountry was that gasoline prices, the value of U.S. dollar and inflation were the areas they were most concerned about at 53, 52 and 41 percent, respectively. The next three important issues were the national household credit card debt at 30 percent, the Iraq war at 29 percent and housing values at 29 percent. It is important to note that the consumer survey indicated that consumers were most worried about gasoline prices, lead paint and products made in China.

The two other items that are important to look at for holiday sales are based on the structure of the business and its ability to meet the changing demands from consumers. The ability of a small business to sell products over the Internet is one of those items. More consumers each year are purchasing items over the Internet, and the percent of their holiday purchases over the Web have increased each year; however, the percent of businesses within the Coastal Empire and Lowcountry with Internet shopping capability has remained flat over the last three years at about 19 percent. Unlike the overall holiday sales outlook, 55 percent indicated better sales. Additionally, only 2 percent said that sales would likely be worse. This, as reported last year, is a segmentation of the market that locally owned businesses should consider for long-term viability.

Another important item to look at for holiday sales are gift cards. The amount of money spent on gift cards has increased over the past several years, and the types of cards have changed over time. One of the more popular trends in gift cards are the credit card gift cards. The three most popular types of cards, according to the consumer survey, are cards for general purchases at 31 percent, for clothing at 22 percent and for electronics at 16 percent of total demand. Fifty-two percent of consumers in the Coastal Empire and Lowcountry are planning on purchasing gift cards this year, and only 14 percent indicated that they might spend less this year. Businesses in the area are in line with the consumer demand. Forty-two percent of businesses sell gift cards, and of those businesses, 86 percent expect those sales to be the same or better this year.

Conclusions

This survey now has four years of data to refer to when looking at the expectations of the holiday season. Both in 2004 and 2005, retailers and consumers were in line in their expectations of the holiday season. Last year, consumers were dogmatic about spending only slightly more than the previous year, yet retailers were optimistic about growth. As the data now shows, consumers were right about only a slight increase in spending.

The survey also asks the retailers in the Coastal Empire and Lowcountry their expectations of their sales in 2007. When asked if they expected sales to increase, decrease or stay about the same in the coming year, retailer's responses were more mixed than in the past but still positive. Fifty-eight percent indicated sales would increase and 8 percent said that sales would decrease. When assessing the confidence by sector, it is clear sectors such as Building Materials, Home furnishings & Electronics, and Motor Vehicle Dealerships stores were more optimistic, with responses of 68, 62 and 57 indicating a better sales outlook in 2008, respectively. See figure 2

Another assessment of economic outlook for the retail sector is offered by gauging expected increases in employment. When companies were asked if they were expecting to hire additional full-time employees in 2008, the response was the lowest recorded. About 29 percent of the retail sectors expected an increase in additional full-time employment, down 9 percent from the 2006 survey.

If you are interested in becoming a sponsor or want more information about the COBA Holiday Poll, then visit us at www.Livingoak.org.

The author would like to acknowledge the assistance provided by Jackie Eastman and her marketing research class: Garrett Alford, Kristen Cole, Erin Fletcher, TJ Hillard, Kyle McGinnis, Candice McNeal, Chad Mock, Cameron Oneal, Mallory Ruiz, Sabra Stevens, Scott Trapani, and Steve Waldron.

Jeremy Hill is assistant director of Georgia Southern University's Bureau of Business Research and Economic Development. He has conducted research projects for businesses, local governments and nonprofits in southeast Georgia for more than seven years. He can be reached by e-mail at hill@georgiasouthern.edu.

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