Tuesday, December 29, 2015

Member in the News: Jeffrey Dorfman

Christmas Sales Are Struggling, Get Used To It

December 29, 2015 on Forbes.com
According to information from both the National Retail Federation and firms that track retail spending, Christmas season sales are struggling to reach forecasts for this year’s gains. Tracking firm Customer Growth Partners had forecast a 3.2 percent increase over last year, and so far we are up 3.1 percent. The National Retail Federation had a more optimistic 3.7 percent forecast for holiday sales gains. The reason we keep struggling to hit Christmas season sales targets is not a “new normal” economy, not weak consumer spending, and not secular stagnation. Rather, it is a surprisingly overlooked fact which suggests retailers need to deemphasize the holiday season and expect a more even spending pattern throughout the year. The key fact: we are rich.

There was a point during the first internet bubble when nobody noticed that if you projected out the growth forecasts for some of the big firms like Cisco, they would soon have annual revenues equal to world GDP. Clearly, this was not sustainable and people should have realized these firms had to return to more normal growth rates as they got bigger. Unfortunately, it took a while for people to grasp that simple concept. Putting numbers into context is not a strong suit for most people (even, apparently, stock analysts).

The idea that we will forever increase our annual spending on holiday gifts suffers from the same sort of shortsightedness. Why should holiday spending rise every year?  It turns out there is no good reason.

It is certainly true that many people and families choose to spend more on the holidays when they see their incomes rise. As you move from starving college student to young professional to upper middle class family, your gift buying likely increases. However, this is not without limit. At some point, most families simply reach a natural gift spending limit.

In many families, the annual budget for Christmas or other holiday spending has reached a point where it may stay relatively fixed going forward because continued increases would just lead to wasteful consumption or spoiling the (grand)children. There are only so many presents we really want to see under the Christmas tree.

Read the entire opinion article on Forbes.com : http://www.forbes.com/sites/jeffreydorfman/2015/12/29/christmas-sales-are-struggling-get-used-to-it/


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