January 7, 2011
Following outstanding retail holiday sales of almost $600 Billion, which was up 5.5% over last year, consumers are still energized with pockets full of GIFT CARDS in their pockets to spend.
January White Sales (when sheets and towels were discounted) traditionally dominated the post-Christmas selling season. Not any more. Now we are watching its successor called GIFT CARDS producing more activity than sheets ever did.
GIFT CARDS are an accounting abnormality: We buy them and gift them in December and the retailer gets paid for them. However, the retailer cannot count the SALEuntil the giftee has turned the card into merchandise. Therefore, in excess of the $600 Billion in product sales lurks another layer of revenue yet to be recognized as revenue. The money is virtually in suspense from an accounting standpoint and is actually a liability because the retailer has to cough-up the product before it can post the sale as revenue received.
We guesstimate gift card sales ran around $91 Billion, an increase of 5% over last year. These quirky little gift cards puff-up sales in January as well as mall traffic which extends the holiday shopping season by another month or two.
ONLINE holiday sales are another phenomenon of our computer age. This year, an estimated $30 Billion was spent by online shoppers. This is an impressive increase of 13% over last year. This is the highest growth rate for online sales since 2007. Online sales now represent over 10% of total retail sales. Special online-only promotions as well as an abundance of free shipping offers are credited for strong web sales. Big Box retailers have also helped buoy these numbers thanks to continued integration of their online and in-store inventory and sales tracking systems. The increased use of mobile apps allows consumers to browse, check availability and even checkout all on their smartphones.
We expect consumers to keep shopping in 2011 because of their pent-up demand and conservation exhaustion. As we often preach: Retail spending is a good indication of the sentiment of the American consumer who represents 70% of US Gross Domestic Product. The Consumer has led theUSA out of most recessions. And here she goes again!
BY: Meredith Miriam Rosen