Research Firm Foresees Soft Holiday Sales

Retailers are in for another slow holiday season this year, with revenue projections for Dec. 1-31 expected to grow 3.4 percent over 2012 totals, to a projected $68.9 billion, according to research firm IBISWorld.

SPENDING CATEGORY	2009($m)	2010($m)	2011($m)	2012($m)	2013($m)	% change
Gifts	45,689	47,651	49,966	51,685	53,291	3.1
Food	5,266	5,355	5,690	5,964	6,250	4.8
Decorations	5,335	5,357	5,567	5,801	5,971	2.9
Cards & Postage	3,136	3,127	3,203	3,219	3,428	6.5
TOTAL	59,426	61,490	64,426	66,669	68,940	3.4

Gifts represent the single-largest expenditure category during the holidays, generating 77.3 percent of total revenue for the season. In 2013, IBISWorld forecasts the category to grow 3.1 percent to $53.3 billion. In an effort to reduce expenses, consumers are expected to purchase presents for a smaller network of people.

Americans are returning to the heart of the holidays, spending time and money on family, friends and loved ones that matter most. The people that they do buy gifts for are likely to get more high-value gifts like electronics and jewelry. In fact, these two product categories are anticipated to grow 6.6 percent and 7.0 percent, respectively, from 2012 levels.

Conversely, the Los Angeles-based research firm foresees less-than-spectacular growth for cosmetics, personal care items and clothing. The cosmetics and personal-care items category is anticipated to grow only 0.2 percent over 2012, while purchases in the clothing category are actually expected to decline 0.5 percent this year. 

GIFT CATEGORY	2011($m)	2012($m)	2013($m)	% change
Electronics	7,299	7,804	8,318	6.6
Jewelry	4,921	5,217	5,583	7.0
Toys, Sporting Goods & Hobby Goods	3,368	3459	3,723	7.6
Clothing	8,890	9,120	9,072	-0.5
Personal Care & Cosmetics	5,094	5,218	5,229	0.2
Gift cards	6,088	6,352	6,556	3.2
Other	14,305	14,516	14,809	2.0
TOTAL	49,965	51,686	53,290	3.1

Food
Revenue generated from food and alcohol purchases is expected to grow faster than total holiday revenue this year, increasing 4.8 percent from 2012 to $6.3 billion. As noted above, many consumers are opting for gatherings with close family and friends, particularly over food and drinks, instead of exchanging gifts with an extensive network. IBISWorld estimates that 111.7 million U.S. households will celebrate the holiday season this December, spending 3.9 percent more on average for a celebratory dinner than they did in 2012.

Decorations and Cards
Spending on holiday decorations is expected to underperform average holiday spending this year, growing only 2.9 percent from 2012 to less than $6.0 billion. Tight budgets and weak economic confidence are encouraging consumers to reuse decorations from previous years or make some themselves instead of buying new decorations.

Spending on greeting cards and postage, on the other hand, will jump a hefty 6.5 percent in 2013 to $3.2 billion. The reason for this strong growth is twofold: Some consumers will send cards to friends and family in an effort to get back to the roots of the holiday season, while others will send cards in lieu of gifts to save money.