One of the items that never seems to go out of style is the annual holiday sales forecast. Mix one part survey, one part “foot traffic” analysis, and an (un)healthy dollop of optimistic trade group spin, and the result is a cheery annual forecast.

As the WSJ noted, “A postmortem of seven leading forecasters’ holiday predictions since 2005 shows that whatever their methods, they tend to overestimate sales. Last year, following the economic crisis, even the most pessimistic forecast turned out to be optimistic.”

The problem is that it is typically Wrong. Every. Year.

Why? For a number of reasons, but mostly because we are narrative loving monkeys that do not care much for data. Incidentally, this flaw in our wetware provides a potentially huge advantage for those few moneys who like numbers. (The key word in that sentence is “potentially“).

Take for example, holiday spending surveys. We ask shoppers what they spent last year, and what they plan on spending this year. From that “data,” we then draw a big conclusion as to what sales will be this year. The issue with this methodology is we Humans are 1) bad at recalling what we spent last year and b) worse at forecasting what we are likely to spend this year.

You call that the basis for making a sales forecast?

As noted on Saturday, we do not have much of a clue how Black Friday retail sales were yet. And even if we did, we know that it is not very predictive of how the holiday sales will go.

So what do we know?

Foot traffic was up slightly. Cherry picking sales items was quite common. But we also know savings are up unemployment is up and consumer confidence is down.

Hardly the basis for a very merry retail season.

If I had to make a forecast, I would say this year will be a little better than last. Given that 2008 was the worse holiday season in 40 years, I am not too far out on a limb here. But beyond that, we really do not know much yet . . .

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Source:
The Flaws in Holiday Sales Forecasts
RACHEL DODES
WSJ, NOVEMBER 28, 2009

http://online.wsj.com/article/SB125936736754367317.html

Category: Consumer Spending, Data Analysis, Psychology, Retail

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

10 Responses to “In Stock! Bad Holiday Sales Forecasts”

  1. “In Stock! Bad Holiday Sales Forecasts” -title of Post, above

    BR,

    nice pun!~ within which, we’d find all we’d need to know about the existence of said: “Bad Holiday Sales Forecasts”

    (clue: Pump n’ Dump, you know, the Micro- vers. of Ramp n’ Crash)
    or, differently, a little Soma, can go a Long way..

  2. Onlooker from Troy says:

    Excellent stuff Barry. Really, the idea of surveying Americans, demonstrably the worst budget-ers on earth, to get their precise budget for this season of impulse buying on steroids; well that’s just absurd.

  3. flipspiceland says:

    I’m more intersted in Christmas sales forecasts for Xmas 2010.

    I’ll go out on a fragile limb and predict an even worse year than Dec, 2008.

    Where do we file these things for, ‘told you so’?

  4. ashpelham2 says:

    I’m interested, Flipspiceland. Why would you predict that ’10 xmas will be worse than xmas ’08 (and by default, worse than this year)?

    I think we are in for a few years of flat to only moderate increases in sales. Gone are the halcyon days of spending till your eyes pop out. We will look back on the “Roaring ’00′s with envy one day.

  5. AmenRa says:

    More people are out of work. So I think it will be worse. Right now people are reducing the amount of gifts to buy. If unemployment continues higher then holiday gift buying will be the last thing on folks mind.

  6. [...] also know savings are up, unemployment is up and consumer confidence is down,” he writes at The Big Picture. “Hardly the basis for a very merry retail [...]

  7. AmenRa,

    one might think so, but, in actuality, ‘holiday gift buying’, per the Author of “Scroogenomics”, is, rather, a Necessity–ranked just after Food, Clothing, and Shelter..

    “Santa Claus”, truly, is one of the last to ‘feel the Arrows’..

    see http://www.booktv.org/Program/11059/Scroogenomics+Why+You+Shouldnt+Buy+Presents+for+the+Holidays.aspx
    for further, and vid clip..

    past that, I will say ashpelham2 might want to check into the next wave of RRE resets, coming to a town near you, beginning in ’010–they’ll, at the minimum, give ‘Hang Ten’–a whole new meaning..

  8. Jojo says:

    I’ve always wondered about the how so many people know what they spent last year on holiday gifts. In my experience, 90% of the population couldn’t tell you what they spent last week, let alone last year!

  9. schodack says:

    At first read, I was mightily amused by the term “narrative loving monkeys,” but upon reflection, I must object to this unnecessary disparagement of monkeys!

  10. Ed Sanders says:

    Be sure to listen for the rise in same store sales. Of course there are fewer stores….

    Dean Baker noted this a few weeks back.