Worst holiday sales gains since '91 loom

ByABC News
September 17, 2008, 11:54 PM

— -- As if things didn't look bleak enough, two retail groups are predicting that this holiday shopping season could be the most severe since the 1991 recession.

The consulting and market research firm TNS/Retail Forward estimated Wednesday that retail sales this November and December will increase just 1.5%. That would make the 2008 holiday season the worst for stores since the 1.2% increase in 1991.

Meanwhile, consulting firm Deloitte predicts a 2.5% to 3% increase, which would still make this season one of the weakest since 1991. Holiday sales hit a 10-year high in 2005, surging 7%. In 2006, sales rose 3.8%, and last year, they were up 2.7%.

"The benefit from a letup in gasoline prices will be overwhelmed by the impact of rising unemployment, tighter credit and other hardships on households," says Frank Badillo, senior economist for Retail Forward. "Unfortunately, the trends in economic conditions offer no sign of an impending recovery."

One sliver of hope is expected to be online retailing, though it's still projected to fall short of the gains in online sales of the past few holiday seasons. A report issued Wednesday by Forrester Research and the National Retail Federation's shop.org said nearly three-quarters of online retailers polled say online sales are better positioned to withstand a slowdown than in-store sales are.

"Although the online sales growth rate will be lower than in years' past because of lowered consumer confidence and credit working against all of retail, the good news is that this growth will still outpace nearly every other sector of consumer spending," says Forrester analyst Sucharita Mulpuru.

As still-high gas prices keep many consumers close to home and shoppers become even more budget-minded, the Web will be increasingly attractive.

"With all of the challenges in the air this holiday season, bricks-and-mortar stores must entice the consumer like never before," says Christian Davies, a branding expert at design company FRCH. "Otherwise, it will be too tempting to click and surf."