Nielsen Says Holidays Could Gain, but Barely and Maybe Not at All

The Nielsen Co. is looking for a very slight increase in sales for this holiday season, although one datum it revealed makes that seem less likely.

Nielsen didn’t quite cop to a flat holiday, predicting a miniscule .03 percent rise in sales. It further predicted that, like last year, folks giving gifts during the end-of-year festivities would focus on practical presents, in what Nielsen refers to as “essential gift giving.” The current consumer mood should reward makers – and retailers – of candy, beverages/alcohol and products associated with in-home entertainment including cookware, kitchen items, and bed and bath accessories. Overall, Nielsen expects about $90 billion in holiday-related expenditures.

What among Nielsen revelations makes the likelihood of even a slight gain in holiday sales seem unduly optimistic is its assertion 42 percent of consumers intend to spend less money in the season, up seven points from last year. All told, 86 percent of consumers polled said they are going to lay out the same or less cash than they did in the dismal 2007 holiday season.

Nielsen research on the holidays suggests that traditionally popular sectors including apparel, toys and technology will be consumer priorities this year, although enthusiasm will be restrained and focused on “value” sectors inhabited by bargain retailers. Locations where consumers can do a lot of shopping with a minimal commitment of time or money, such as dollar stores, online retailers, discounters/supercenters and club stores will attract an increasing share of holiday spending while office supply, pet stores, home improvement outlets and drug retailers seem poise to give up ground. Additionally, the market researcher anticipates that gift cards – which got a boost last year from consumers who wanted to give recipients the option of buying something fun or something practical – are an element of holiday sales that should draw especially strong interest this holiday season.

The company stated that all income groups plan to restrain spending and that 20 percent of households plan to do no entertaining either at home or away in the holidays.

To have any success, retailers must deliver conspicuous value for the entire holiday season and even in what once was the lull between back to school and Thanksgiving. Nielsen said consumers will have their eyes wide open for bargains well before the turkey hits the table. Retailers also should reach out to their best customers, make them feel special and give them every reason to shop at their stores during the season and into 2010.

By the way, a reader of this blog recently wrote to complain that Kohl’s had back cut on sending free shopping codes to its Most Valuable Customer cardholders. Any such practice might not a be a good idea, given what Nielsen is seeing.

The research firm warns that delivering a great price now is the minimum a retailer must do to interest consumers. To win sales, it says, retailers must effectively mine data to identify which consumers are most receptive to their overall and holiday propositions. Then they must communicate and build interaction with the right shoppers as active participants in driving growth.

James Russo, Nielsen vp of global consumer insights, noted, “Americans have undergone a fundamental change in how they spend their money, and the days of stretching finances to make purchases not deemed as necessary are over, at least for the time being. That said, our research has shown that consumers are looking forward to loosening their purse strings a bit, but only once they feel more confident about the state of the economy and their personal financial situation.”

So the chance that holiday sales will grow even a tiny bit or remain flat – something Nielsen described as akin to a moral victory – seems to depend on the economic news coming in better rather than worse. Given the mixed signals the economy is producing right now, better isn’t the safest of bets.