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Retailers Need 'Promo Mojo' to Survive Holiday 2010

Retailers need to get their “promo mojo” in order to woo shoppers this holiday season, said analysts from retail consultancy Kantar Retail.

The group issued their 2010 Holiday forecast, which calls for fourth-quarter retail sales to rise 2.5 percent, which is much better than the 0.5 percent gain logged during the same period a year ago.

But Kantar's senior economist, Frank Badillo, said it's quite possible the growth will feel much more sluggish than it actually is, and that's one reason why retailers will need to use smart promotions to get shoppers in the door.

According to Badillo, there's a bit of a perception problem.

"The pace of spending feels much weaker even though the spending is actually much stronger than we had a year ago," he said.

That's because sales were robust in the first half of 2010 as economic stimulus programs such as the appliance rebates and the homebuyer's tax credit gave retail sales a boost. As those programs expired, sales slowed, creating an image that the economy was slowing down.

This means that even though sales will be stronger than the year-ago period, they will still be softer than they were earlier in the year.

What's more, consumers have real concerns about their jobs as companies have been reluctant to hire and invest.

"The job weakness has been somewhat of an anomaly. The pick-up in the economy should be creating more job growth," Badillo said. He expects there will be job growth ahead, but it won't come in time to rescue the holiday season, and he suspects consumer spending will remain weak in the first half of 2011.

But although the holiday will be a "soft spot" in the recovery, it is not a signal that we're slipping into a double-dip recession, he said.

At the moment, Kantar's preliminary estimate for 2011 sales growth is somewhere between 2.5 and 3.0 percent, he said.

The mood will keep consumers in a thrifty mode, and that means consumers will be looking for discounts and deals, and shopping at dollar stores and small-format value retailers, he said.

The group expects consumer demand will be the strongest for electronics gifts such as electronic readers, iPhones and other smartphones and other gadgets.

One unknown will be how much the online channel steals from electronics retailers. Kantar is forecasting the non-store channel, which is mostly made up of online sales, to rise 5% during the fourth quarter.

One factor is that consumers will still being doing a lot of research before making their purchases.

About one-third of all shoppers say they will comparison shop online before making a trip to the story, said Mandy Putnam, vice president of Kantar and director of its ShopperScape survey.

One in every twenty consumers plans to bypass stores all together as they do their holiday shopping, Putnam said.

Questions? Comments? Email us at consumernation@cnbc.com

Retail