By  on September 17, 2007

Holiday spending may mirror back-to-school trends, surging late in the season.

"This holiday will not be that bad for fashion," said Marshal Cohen, chief retail strategist at The NPD Group. "Customers will not be distracted by too many new, must-have electronics, and it seems like people will return to more traditional gifts, with women rebuilding their wardrobes."

Rising interest payments on mortgages, increased home-heating fuel costs and weather will all play a roll in consumer spending at retail this holiday, predicted Stanley Officina, president, Ultimate Financial Solutions.

The increase in foreclosures and "for sale" signs could translate into softer spending come the holidays, said David Reza, senior vice president, Milberg Factors.

"If consumers can't meet their mortgage payment, they are not going to buy new clothes," said Andrew Tananbaum, president and chief executive officer, Capital Business Credit LLC. "But it really depends on how deep the foreclosures run and the weakness of the economy. More data is necessary."

TNS Retail Forward expects holiday sales this year to grow at the weakest pace in five years. The weakness can be expected to spread beyond the home improvement sector into the apparel and accessories channels, as well as other home goods channels, the firm said.

While a strong b-t-s season typically correlates to a strong holiday, experts agree that overall expectations for the season are not "smashing." One of the biggest contributors to a possible mediocre holiday could be the continuing decline of impulse shopping, NPD's Cohen said.

Historically, 26 percent of holiday spending is derived from impulse purchases, which dropped to 19 percent last year. Impulse shopping, which includes buying a personal item that isn't expected or a gift for someone that wasn't on the consumer's list, is a substantial part of purchase power, making up about one-third of all fashion apparel purchases.

"When impulse is removed from the equation it can be the biggest contributor to a good holiday or bad holiday," Cohen said.

The rise of online shopping and gift cards has made impulse purchases less frequent and harder to push.

The navigation of many retail sites is not conducive to suggestive selling, and Cohen suggests companies, through their Web sites, should help the customer understand other items they should purchase. "If I buy this sweater, what other products would I like? No one in retail is utilizing suggestive selling online," he said.But Cohen does cite Ann Taylor, Lane Bryant and Victoria's Secret as retailers beginning to make use of Internet functionality.

Gift cards also have made holiday shopping too easy for shoppers, allowing them to enter the store and head straight for the cash register, bypassing other possible purchases. Instead, retailers should reward the customer for buying a gift card and give them a reason to buy more and shop the store, Cohen said.

"Stores are not driving impulse. There is so much self-service and discounting. Retailers need to create hot products and a forum where salespeople interact more with customers and educate them about the right gifts," he continued. "Everyone has sales, what else can you offer?"

Department stores are especially guilty of not making adjustments to bring back impulse, and are losing market share to specialty retailers and mass merchants, Cohen said.

Only some of the luxury retailers like Neiman Marcus or Bergdorf Goodman have made a concerted effort to create excitement with unique product and personalized customer service. "Since the designer market caters to a financially more stable customer base, I would expect that it will suffer less impact than the discount market," Ultimate Financial Solutions' Officina said.

But the biggest winners this holiday season will likely be in handbags and accessories, which are expected to take away sales from footwear.

"I have not seen anyone at a retail level put impulse into shoe shopping or speak to the customers," Cohen said. "I am watching the momentum in footwear from two years ago dissipate, with many people instead turning to accessories."

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