Des Moines Business Record, IA
10-08-06
Holiday sales growth looks bright
By Sarah Bzdega
sarahbzdega@bpcdm.com
Gas prices, a housing slump and other economic pressures that have worried
analysts this year haven't stopped them from believing that consumers will open
their wallets wider than ever this holiday season.
The National Retail Federation predicts that holiday retail sales will increase 5
percent from last season, and Kenneth Stone, a retired Iowa State University
economics professor, believes there will be a 4 to 5 percent increase. Although
this sales growth prediction is less than last year's 6.1 percent growth, it is
comparable to the 10-year average of 4.6 percent, according to the NRF.
"Consumption overall is relatively steady," Stone said. "It doesn't have the huge
dips and rises every other year like some things do."
Strong holiday sales are important for retailers, given that about 20 percent of the
industry's sales occurred in the months of November and December last year.
For many retailers, the holiday season can be between 25 and 40 percent of their
annual sales.
Managers at many Greater Des Moines malls believe their sales will increase
slightly more than the national average. So far, Jordan Creek Town Center has
doubled national sales growth this year, and Randy Tennison, senior general
manager of the mall, believes holiday sales will continue to be stronger than the
average.
"It seems that the economy is pretty strong," he said. "You have gas prices
coming down right now, and Jordan Creek in particular has a great merchandise
mix that the Des Moines customer is really wanting."
Last year, Merle Hay Mall's sales growth nearly doubled the national average,
mostly because Target Corp. opened a store there, but Elizabeth Holland, CEO
of Chicago-based Abbell Credit Corp., which manages the mall, expects about a
7 to 10 percent increase in holiday sales this year. These figures include
January, because most consumers use mall gift cards during that month, Holland
said.
Stone believes economic factors don't affect holiday spending as much as other
areas of people's spending habits. "Even though gas prices may be high," he
said, "they've saved on other things."
Holland agrees and said last year the national trend was that when gas prices
went up, people made fewer shopping trips but bought more per trip.
But Stone said Iowans may spend a little more this season because they are
more hopeful about the state's future, including the potential to be the renewable
fuels capital of the world. "I think when you have hope for the future, you're more
optimistic about spending," he said.
So far, mall managers have not pinpointed one product or retail sector that will
boost holiday sales this year. However, Holland said Mattel Inc.'s Fisher-Price
division is introducing the T.M.X. Elmo in honor of the doll's 10th anniversary,
which may drive some sales.
Retail jewelers typically see the biggest boost during the holidays, according to
the NRF. Last year, jewelry stores made 32.5 percent of their total sales during
November and December. Stone said big-box retail stores should continue to do
well, too. Although they make up about 10 percent of retail stores overall, he
said, they receive 90 percent of all retail store sales during the holidays.
Tennison expects the teen and women's ready-to-wear stores will continue to
drive sales at Jordan Creek, especially with the introduction of new stores. Aldo
Shoes, Clark's Shoes, the Body Shop, Panera Bread Co. and Wet Seal recently
opened shops in the mall and Brooks Bros. will open a store this month. In the
village, Fab'rik opened this month and Creative Kidsstuff will open in November.
"These are stores we know the customer is wanting," he said, "and they've all
started out doing very, very well, exceeding our expectations."
He also said the mall will expand store hours beyond last year's holiday hours.
Holland expects Merle Hay Mall gift card sales to increase over last year. She
also said the mall will continue its traditional Christmas theme, but will only add a
few more pieces to the half million dollars' worth of decorations it bought last
year.
Paul Stender, general manager of Valley West Mall said the mall is focusing on
community outreach, including the Shoes that Fit and Make a Wish programs.
Malls' biggest competition this year may come from online retailers. Last year
73.4 percent of consumers surveyed said they shopped online to avoid crowds,
according to BizRate Research for Shop.org. Stone believes online spending will
continue to expand at a double-digit rate, but believes it won't affect malls' profits
dramatically, considering it still only makes up about 5 percent of all retail sales.
Increased sales growth also will affect employment. Nationally, 629,000 new
workers were hired last year for the holiday season. Tennison said mall retailers
generally increase their staff by about 20 to 30 percent and he already has seen
some of that at Jordan Creek.
Given that 40 percent of people started holiday shopping before Halloween last
year, according to studies conducted for the NRF by BIGresearch, it's likely
stores will start showing signs of the holiday season early again this year.