Posts filed under “Consumer Spending”

The Grinch Will Set you Straight About Holiday Retail Sales

Thanksgiving is next week. Along with the family and turkey and fixin’s comes the annual — and historically terrible — holiday shopping forecasts. One of my favorite traditions is to wait until the National Retail Federation posts its annual holiday spending forecast, and then write a few columns dissecting both the methodology (it’s pretty awful) and the forecast track record (it’s even worse).

There are not many data series in the world of finance and economics that actually can make you laugh out loud, but this is one of them.

The folks at the NRF, however, don’t have much of a sense of humor. Last year, they told the Huffington Post that my critique of their methodology was an “annual temper tantrum,” and compared me to the Grinch who stole Christmas. 

How awesome is that?

Just by way of background: Theodore Geisel, aka Dr. Suess, the author of the classic children’s book, “How the Grinch Stole Christmas,” awoke one Dec. 26 in a sour mood, annoyed by the excesses of the holiday shopping season. The book is the first by Seuss with an adult as its protagonist, and not coincidentally, the Grinch was the exact same age Geisel was at the time. Add to it that Geisel’s car had the personalized license plate GRINCH. Dr. Seuss wrote the now-beloved children’s book as a parable criticizing the commercialization of the holiday season.

Perhaps then, the NRF has a point: Like Dr. Seuss, I have issues with the wanton consumerism of the season, the commercialization of what was originally a spiritual holiday. Unlike the Grinch, however, I have no interest in stealing all of the toys and gifts from the good folks in Whoville.

Instead, I prefer to point out and hold accountable any trade group that makes misleading forecasts based on questionable methodologies on behalf of their members to promote even more commercialization and wanton consumerism. Although I suspect Geisel would agree with this sentiment, I doubt even Dr. Seuss could squeeze a book out of this.

Is it Grinch-like to note what history has taught us about retail forecasts for this time of year? The past decade has shown us that:

  • Sales predictions for post-Thanksgiving Black Friday will be touted by groups with a vested interest in seeing increased retail spending and whipping up a frenzy.
  • Consumer survey information — not actual sales data — tends to overestimate actual spending.
  • The survey is often read as the equivalent of actual consumer spending.
  • Forecasts based on this information will invariably be proven wrong.

Speaking of which, here’s the NRF’s latest: “The National Retail Federation announced it expects sales in November and December (excluding autos, gas and restaurant sales) to increase 3.7 percent to $630.5 billion — significantly higher than the 10-year average of 2.5 percent.”

I won’t make a holiday retail forecast, and given the drop in energy prices, a 3.7 percent gain is certainly one possible outcome. But based on the past decade of NRF forecasts, the smart bet is to assume it will be wrong.

Why make a big prediction that ultimately disappoints? I have no idea, but I can guess it’s part of a marketing plan to create a sense of urgency among consumers. If you are a retailer, shopping frenzies probably are good for business. Thus, I have dubbed the season between Thanksgiving and Dec. 25 “Shopmas.” Geisel would most certainly have approved.

This year, the NRF is trying to hedge its bets, seemingly attempting to extend Shopmas all the way back to Halloween (see “Goodbye Halloween, Hello Holidays”). Perhaps if the NRF defines the holiday shopping season as lasting from Halloween to Dec. 25, that will give it the flexibility to make the numbers look great.

Oh, and one other thing. I just want to once again dispel the misconception that Thanksgiving weekend is biggest shopping weekend of the year. That honor actually falls to the weekend before Christmas, when you have two non-workweek days to fill your shopping carts, real and virtual, with assorted, useless, merchandise.

Happy Shopmas. Grinch out.




Continues here: The Grinch Sizes Up Holiday Spending Forecasts



Category: Consumer Spending, Data Analysis, Really, really bad calls, Retail

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