The splurge factor: The case for strong holiday sales

— -- This holiday season shoppers are focused on holiday gifts that will wow their loved ones, but they also have another thing on their mind: splurging a bit on themselves.

"In 2009 it was all about personal, practical gifts, and last year consumers wanted to treat their loved ones to something special — this year, it's a little bit of both," said Pam Goodfellow, director of Consumer Insights at BigResearch.

Shoppers are still looking for value and watching their spending closely, but they also will be doing something they may have skipped last year: they will be fulfilling their own holiday wishes by picking up an item or two for themselves, according to Goodfellow.

And those little treats could help boost overall spending this holiday season, despite the headwinds of an uncertain economy and high unemployment.

"Americans are going to spend a bit more because I think they are a little tired of the economy, unemployment and how tough things are," said Arkadi Kuhlmann, ING Direct USA chairman and president. "So I think they're going to spoil themselves a bit more."

Most retail industry analysts are expecting retailers to see modest sales gains this holiday season. Although there are a few like Kuhlmann who have more bullish forecasts of 5 percent to 6 percent sales growth, the bulk of the holiday retail sales estimates are calling for gains of between 2 percent and 3 percent, and retailers themselves are using words such as "cautiously optimistic" to describe their outlook.

There's good reason to be guarded. Consumers are sending mixed signals, and other factors such as gasoline prices could turn into a serious headwind.

Gasoline Prices Set to Rise

Richard Hastings, a consumer strategist at Global Hunter Securities, predicts retail sales in the November to January time period will rise 5.75 percent this year.

Hastings has been optimistic because consumers have been spending in recent months, but he recently trimmed its holiday forecast by 50 basis points to account for two factors: store traffic has slowed and crude oil prices have been on the rise and could cut into consumer spending.

Although average gasoline prices have fallen in recent weeks, they are higher than they were at this time last year and could climb even further if oil prices remain high. If this happens, refiners will want to pass along their increased costs to consumers.

Store Traffic Down

The West Coast may offer a glimpse of what's to come. According to the Energy Information Agency, gasoline prices in the West are averaging about $3.83 a gallon, the highest level ever for this time of year.

And while the number of shoppers hitting the stores has fallen 7.4 percent nationally in recent weeks, according to ShopperTrak, the slowdown is greater on the West Coast, where the number of shoppers is down 11.2 percent from the same time last year.

Hastings said the falloff could be a function of the higher gasoline prices in the region as shoppers look to consolidate trips to save on gas. At the moment, shoppers are still buying when they're there and are actually spending more per transaction.

However, ShopperTrak Chief Marketing Officer Ed Marcheselli said declining store traffic is part of another trend. Consumers have been doing more of their research, price comparison and browsing online before they come into the store, reducing the number of trips they make.