AMR: Don’t Let the Early Predictions Lull You into an Unprepared State During the 2008 Holiday Season

Written by Debbie Hauss

While some of the forecasts indicate consumers are planning to spend about the same amount of money during holiday 2008 as they did in holiday 2007, retailers should be on the lookout for sudden shifts and changes. A presidential election, war, natural disasters, rising gas prices and the volatile current state of the economy should have all businesses on their toes.

“Retailers have to be prepared both for a normal shopping season and a highly abnormal one,” notes Janet Suleski, research director, retail at AMR Research. “Given the volatility in the stock market and uncertainty about the economy, I believe consumers can and will change their strategies very quickly as their personal situations warrant,” Suleski adds.

Additionally, if consumers take the advice of financial experts such as Suze Orman, they may decide to pull back on spending this year. In a recent appearance on Oprah Winfrey’s talk show, Orman asked consumers: "People, stop living the financial lies that you have been living. If you don't have the money to pay for something, can you just not buy it?”

To date, though, consumers appear to be planning a similar spending season to 2007. In a recent survey of 130 shoppers, AMR found that 73% of respondents are planning to spend the same amount in 2008 that they spent in 2007. That adds up to more than $900 per person, according to statistics from the National Retail Federation.

Agility Will Be Key
While retailers must prepare their marketing and promotional strategies well in advance of the holidays, recent technology improvements may help them adjust plans if necessary, says Suleski: “Retailers have gotten a lot more agile in the last five to 10 years, aided by better access to real-time information, better demand forecasting tools, and expanded collaboration with their suppliers. I am sure that many have “plan B” in place in case of an exceptionally difficult shopping season.”

Smart retailers will get a jump on promotional and sales activity to pull at consumers’ heart strings before they feel too much of a crunch. Wal-mart, for one, recently announced a price cut on specific toys and will open its holiday ornament and décor shops nationwide by October 10, Suleski reports. Many retailers also are taking precautions by limiting their inventory and beefing up assortment planning, she notes.

Internet intelligence A Must
No matter what the total spending number turns out to be, more consumers will be researching products and shopping online, and retailers need to be prepared for that reality. The AMR survey revealed that 26% of respondents plan to do more or a lot more shopping online in 2008 versus 2007, and 16% are doing so to avoid the spending money on gasoline to drive to stores.

But the competition will be fierce because consumers are shopping smarter. “Retailers’ strategies need to take search and price comparison websites into account and be very aware of how their key promotions stack up to the competition,” says Suleski. “59% of the shoppers we surveyed plan to use Google, Froogle, Yahoo, PriceGrabber, Shopzilla or other sites to locate the best deals for at least some of the items on their holiday shopping lists.”

Once consumers decide on a product, they need to know their product will be available when and where they choose — in some cases by shipping and in other cases by picking up their online purchase in a local brick-and-mortar store. “Those (retailers) who have developed strong cross channel integrated capabilities will be able to shift their inventory where the customer wants it,” says Kevin Stemeckert, research director, retail for AMR Research. “Order online/pickup in the store and other capabilities will also be helpful in increasing sales and capturing larger shares of the wallet.”

As retailers focus on consumers’ wants and needs, they are making better use of available technology. “The role of technology in satisfying shopper demand is increasing and will play a key role in the success retailers have in meeting consumers' needs this season,” adds Mike Griswold, VP and content lead, Retail at AMR. “Assortment planning, lifecycle pricing, and inventory management and visibility (particularly cross-channel visibility) technologies will play key roles in creating successful shopping experiences for consumers.”