Deloitte: Retail holiday sales to increase by at least 4%

An uptick in consumer spending could drive sales as high as $1.05 trillion this holiday season.



Retail holiday sales should rise a healthy 4% to 4.5% over last year's shopping season — a factor that could drive sales between $1.04 trillion and $1.05 trillion between November 2017 and January 2018, according to the annual retail holiday sales forecast from the firm’s retail and distribution practices. (Holiday sales are seasonally adjusted, and exclude motor vehicles and gasoline.)



There will also be an 18% to 21% increase in e-commerce sales during the 2017 holiday season, compared with 2016. Overall, e-commerce sales are expected to reach between $111 billion and $114 billion during the holidays.



"The projected uptick in holiday sales ties to four primary factors affecting consumer spending, starting with anticipated strong personal income growth," said Daniel Bachman, Deloitte's senior U.S. economist.



"Last year, disposable personal income grew 2% over the year to the holiday period, and we may see that rise to a range of 3.8% to 4.2% this season,” he said. “Consumer confidence remains elevated, the labor market is strong and the personal savings rate should remain stable at its current low level.”



Of course, potential uncertainties could affect income growth and bring the forecast in at the lower end of the range. Among the biggest factors are an increase in the savings rate that would cause spending to expand more slowly. Another is the threat of a government debt ceiling crisis – which has loomed over prior holiday seasons – which could also cut employment and income growth.



The impact of the unusually active hurricane season remains too early to project. However, it could depress spending or increase it, particularly in the home improvement sector, due to rebuilding activity, according to the study.



"Sentiment and spending indicators are firing on all cylinders, but the question is: How will retailers respond given the profound disruption across the industry?" said Rod Sides, vice chairman, Deloitte LLP and U.S. retail and distribution sector leader. "The good news is retail is thriving, and it is the proliferation of new, niche retailers that is resulting in share constantly changing hands.



Faced with unlimited alternatives, consumers continue to bounce between brands, touchpoints and influencers throughout their shopping journey. This makes it increasingly difficult for retailers to attract shoppers without some level of customization.



“These disruptive factors are likely to combine to create a highly competitive and promotional holiday season, according to Deloitte,” Sides added. “Retailers should modify their assumptions about what drives traffic, engagement and holiday sales growth, and realign around customer experience, creating relevant, emotional and inspirational connections that go beyond just product, price and assortment."