Newswise — A Purdue University retail expert foresees a best case of only a small uptick in holiday retail shopping dollars this year, and there are some worrying possibilities that could reverberate negatively through the economy for months to come.
Richard Feinberg, director of the Purdue Research Institute, says the holiday shopping season has implications that last for up to a year.
"A strong holiday shopping season is thought to influence broader economic cycles," he says. "A strong season means retailers have money to stock shelves in the new year and don't have to borrow for the new year, which leads to more profits. This gets the next year's economy off on the right foot.
"On the other hand, a weak season means the retailer must borrow to stock the shelves, which means less merchandise, lower profits, less hiring, less expansion."
All of these effects bode poorly for retailers after New Year's, says Feinberg, who also is a professor of consumer sciences and retailing.
If a cold snap brings high heating bills to households before Santa and his reindeer arrive, it could ruin the season for retailers, Feinberg says. The upside for shoppers would be huge price cuts and sales - if they have anything left after paying the heat bill. The upside for retailers is that labor costs are under control, and even a mildly successful holiday season should bring increased profits.
Feinberg predicts an increase of 2 percent to 4 percent this year over last year's holiday shopping receipts. Also on the increase are Internet sales, which will rise to $26 billion, up 22 percent from last year's $21 billion - still only 10 percent of total holiday shopping receipts. American consumers will spend about $260 billion this holiday shopping season.
Related study and news release:
Notes on Holiday Retail Spending: http://news.uns.purdue.edu/html3month/2005/051115.FeinbergHoliday.html
Holiday shopping forecast: The good, the bad and the squeezed: http://news.uns.purdue.edu/html4ever/2005/051020.Feinberg.holi05.html
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