CGP’s Contrarian, Tepid Take on Holiday Selling
The Customer Growth Partners research and consulting firm has a 2023 holiday sales forecast that's lower than other prognosticators.
There won’t be much Christmas cheer this year for retailers.
Customer Growth Partners' annual U.S. holiday sales forecast for the Novemberto-December period calls for a sluggish 2.1 percent year-over-year increase to $928 billion, up from $909 billion in 2022, as the COVID-19 era's “sugar high” wears off.
“After two years of warp-speed growth, consumer spending on goods is easing to near-normal historic rates — and then some,” said CGP's president Craig Johnson, adding that the 2023 holiday season will be the slowest since 2012.'
Johnson's forecast, which is usually more optimistic, compares to 3.7 percent rise in 2023 holiday sales predicted by Mastercard; software giant Adobe's predicted online sales gains of 4.8 percent to $221.8 billion for the November-toDecember stretch, and Salesforce's predicted holiday sales in the low- to midsingle-digit range. Deloitte seems most bullish, with its research showing holiday spending surpassing pre-pandemic levels with consumers spending an average of $1,652 or 14 percent more than last year. On Tuesday, the government reported retail sales jumped 0.7 percent in September from August, beating expectations.
But CGP sees consumer spending slowing as holiday approaches.
The 2.1 percent predicted growth is well below the 10-year compound annual growth rate of 5.1 percent, holiday 2021's stellar 13 percent pace and 2022's 5.5 percent growth, CGP indicated.
“The sharp deceleration in retail growth is due to stubborn inflation in many sectors, spiking interest rates, a year-overyear decline in COVID-era federal stimulus, and the ongoing rotation of consumer spending from goods to services,” Johnson said. He also cited the resumption of student loan obligations as a factor in the reduced spending.
Apparel sales won't be as bad as the overall trend, Johnson said. “Apparel stores are gaining strength, bolstered by teen and young adult demand, and are predicted to see 2.5 percent growth.”
With the steep drop in the housing market, big-ticket home items are languishing at home furnishings and home improvement stores.
CGP's bases its forecast on a two-decadelong big data retail platform tracking spending, Census Bureau data, and field research at more than 100 benchmark shopping venues with 14,210 mall intercepts. CGP's forecast spans all categories except autos, gasoline and restaurants.
“The good news is that most consumers still have solid household balance sheets, with the Fed's Household Debt Service Ratio still in the healthy 9.8 percent range despite the recent rise in revolving debt,” Johnson said. “Employment levels also remain strong, notwithstanding continued weak labor force participation. Unless inflation spikes again, the mostly solid consumer fundamentals suggest a 2024 recession is less likely than more likely… If inflation eases going forward, and if job growth and real wages rise in 2024, we may well see retail sales return to a healthy pace of 5 to 6 percent.”
Among CGP's other holiday predictions: Beauty, health and personal care rise by 5.2 percent from last year.
The e-commerce/direct-to-consumer sector continues to slow, but posts a 5.1 percent gain.
Adult alcoholic and nonalcoholic beverages grow 3.1 percent
General merchandise slowing to a 1 percent gain.
Weaker categories, as CGP sees it, include home furnishings, down 6 percent; home improvement, down 4 percent; sports/toys/hobbies, down 2.8 percent, and consumer electronics and appliances, down 2.5 percent.