West Lafayette, Indiana - Holiday retail sales should increase 2 to 4 percent over last year but retailers should not be expecting a similar profit boost. Purdue University retail management expert Richard Feinberg expects retailers will lose pricing power due to online competition.
National holiday shopping revenue is expected to be close to $850 billion, with $17 billion in Indiana. But growing online sales will keep pressure on storefronts as internet sales are expected to have another a double-digit increase (10 to 15 percent) over last year.
"While internet retailing has attracted significant popular attention," Feinberg said, "most consumers do not buy from the internet all of the time but they may research specific stores or search for products before shopping."
Feinberg said approximately half of all consumers will use the internet, and specifically mobile devices, before deciding where to buy. About the same number of consumers will look for better prices online before buying in person.
Feinberg forecasts continued struggles for traditional department stores with discount stores ruling the holiday season. He stressed the need for retailers to have a dynamic web presence. "For the first time since Purdue has been tracking consumer sentiment and holiday shopping, more than 50 percent of shoppers prefer internet holiday shopping," he said. "Local retailers must communicate something special or a good deal when consumers find their business on the web. Retailers need a 'good deal' to attract consumers to their stores."
Another retail lure, Feinberg said, is free shipping. Purdue research shows 90 percent of consumers will actually spend more for a product if shipping is free.
Closer to home, retailers need to give consumers a reason to visit since the internet means the world is their mall. "Just screaming we are a locally-owned and locally-operated business is not compelling to most consumers."
If retailers don't have a smooth and attractive internet presence they may be pushing consumers to outlets like Amazon. "Driving consumers to the internet because a store is out of stock, doesn't have the right size, color, or merchandise, costs store-based retailers billions of dollars during the season," Feinberg said.
And all of those Thanksgiving store closings in recent news reports is music to online retailers' ears. "People at Amazon are cheering every time they hear of a retailer not opening extended hours or over Thanksgiving," he said. "Anything a retailer does to make it difficult for consumers means that buyers are forced to go to Amazon and the internet to buy gifts."
Feinberg on other holiday shopping trends:
* Facebook and Pinterest are significant in influencing consumers on what and where they purchase.
* Retailers need to pay attention to online review sites. In-store experience must be pleasant, leading to positive reviews.
* Retail loyalty clubs have become increasingly important in communication and capturing consumers.
* Black Friday is no longer king. The Saturday or Sunday just before Christmas have been the biggest shopping days the past five years.
* For the past year gasoline prices have been a boost to retail spending. Gas prices have increased in recent weeks and could be an impediment to retail spending and could make the difference in overall holiday spending.