Unfortunately, the analysis of holiday spending is more complicated
and less predictable than the experts seem to believe at present.
First, for Rhode Island and New England, the economic picture is a bit
less optimistic than it is nationally. Job growth here is slower than
it is nationally. Second, the combination of high gasoline and heating
costs will diminish holiday spending here somewhat. I expect holiday
spending in Rhode Island, as officially tabulated, to be about 3.5
higher than it was last year. While this is slower than national
growth, it isn’t all that bad. And, actual holiday spending, which is
different than the official tabulations, is likely to be even better.
What is the difference between official and
actual growth? While the “experts” who follow retailing consider the
official start of holiday shopping to be Black Friday, the actual
start for many persons occurs far sooner. In my family, July is often
the month when shopping begins. I’m sure we’re not alone in this. And,
while so much of the official tracking pertains to the “brick and
mortar” establishments, the growth of shopping on the Internet
continues to grow at higher rates each year. This is an important
consideration since many online retailers offer free shipping and do
not collect sales taxes. For Rhode Islanders, given our hefty 7
percent sales tax rate, the absence of shipping and sales taxes can
translate into substantial savings on purchases of several hundred
dollars or more, which includes many of the “hot” technology items.
Currently, we are not able to track online sales for Rhode Island,
which results in some understating of actual holiday sales here.
Another important consideration is that while
retailers would like to avoid discounting much this season, shoppers
have become far too accustomed to discounts. On Black Friday, stores
offering discounts and promotions fared well, while those who skipped
such inducements, most notably WalMart, posted disappointing results.
The existence of discounting has an important effect on the “official”
holiday numbers. When stores discount, it takes a greater number of
goods sold to generate the same revenue as last year. If, for example,
5 percent more items are sold, but the average discount is 10 percent,
revenue this year will be less than it was last year, leading analysts
to label this a disappointing season. So, the yardstick used by the
experts to define success implies a fairly high standard for success.
So, while official holiday spending in Rhode
Island may turn out to be disappointing, based on the “official”
standards, expect actual spending to be quite strong, and nothing to
really complain about.