US Insights

These Retailers Will Win the Holiday Shopping Season

Doug Hermanson

Principal Economist

Retail 09.14.2017 / 08:00

holiday presents

The divide between 'have' and 'have not' shoppers will define the season.

The focus of the retail industry will be quickly turning in September from the back-to-school season to the winter holidays. Kantar Retail’s newly minted holiday 2017 forecast indicates retailers and suppliers should look to the holiday with divided expectations. Upscale and value-based retailers should be at an advantage given a widening Have and Have Not divide this holiday.  Most other retailers will be on the losing end of these bifurcated shopper trends unless they can deliver an elevated online or omni channel experience for shoppers.

Top-line growth in the fourth quarter holiday period will improve to 3.7% growth, up from a relatively modest pace of 2.9% in the 2016 holiday quarter. While promotions have been, and will continue to be a big part of the holiday period, prices last holiday fell at a historically steep pace. Turning to this holiday, pockets of inflation in some food categories and better inventory discipline will keep prices from falling as steeply on an aggregate level, contributing to stronger nominal growth.

Holiday Forecast 17

Meanwhile, unit-demand growth will slow this year as shoppers find fewer deals, especially in the food aisle, and wage growth remains moderate. Additionally, households are shifting more of their spending toward services and experiences, rather than goods. In some cases, such as healthcare, households have little choice but to trim their holiday budgets to offset the rising cost of essential services.

Retailers and suppliers that appeal to upper-income households should feel relatively more optimistic this holiday. This shopper segment has gained momentum in recent months, reflecting rising home prices and growing investment values. Improved spending by this segment on toys, consumer electronics, and jewelry categories will drive aggregate brick-and-mortar growth at specialty retailers and department stores of 2.5%, up from 0.5% in 2016. But department stores and specialty retailers that miss the mark on store experience and assortment will see online erode most these potential gains. Online is expected to grow 16% this holiday, mostly at the expense of apparel and homegoods specialists.

On the other end of the income spectrum, competition for low-to-middle income holiday shoppers will be heightened by less savings on food during the holiday period. Some of these shoppers which shopped traditional department stores, specialty retailers, supermarkets and drugstores last year will likely trade into the mass/value channel this year to fit more into their holiday budgets.

Potential changes to government budget policy should also be noted. While many of these polices seem to lack the consensus needed to implement them before the holiday period, previously floated policies which would cut income security programs and lower taxes in 2018 could further divide holiday shoppers along income lines. 

Source: Kantar Retail

Editor's Notes

Kantar Retail’s clients can gain access to these and two dozen other U.S. channel forecasts in the Macro Data and Macroeconomics Insight Center sections of our KRiQ website. Customized holiday webinars and publications leveraging Kantar Retail’s macro, shopper, and retail experts are also available.

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