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A New Normal for Retailers: Caution And Growth

This week Customer Growth Partners issued its annual retail sales forecast and they are expecting retail sales this year to outpace historical averages.

Woman shopping for a dress
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Woman shopping for a dress

The notable thing about this forecast is that the firm thinks this target can be achieved without consumers really changing course from their current behavior.

To put this in perspective, the forecast calls for retail sales to rise 5.1 percent in 2011, that's the strongest growth in four years. This growth would bring retail sales to $2.87 trillion, topping the total sales record of $2.73 trillion set last year.

Still, the pace of growth would not be a record, especially when compared with other years that follow a deep recession, said Craig Johnson, president of Customer Growth. Typically those periods are followed by growth of more than 6 percent. However, if retailers hit this mark, the growth would be above the retail industry's long-term growth rate.

"Despite stubborn near-double-digit unemployment, the very strong holiday growth—surprising most of the experts—demonstrated that the 90 percent of people with jobs, who account for over 96 percent of retail sales, are clearly spending again," Johnson said. "But unlike the 'bubble years' they are spending smartly and strategically—and out of current income rather than with 'plastic'—across virtually all categories."

What this basically means is the bar has been reset. Consumers have adjusted to this new normal and are feeling a bit more comfortable with their spending. But the belt-tightening of the past is likely to impact how their money is spent.

During the past holiday season, it was Johnson's forecast that was the closest to the actual results, and he's offered up several other predictions for this year.

Among them, he expects the strongest retail sector growth to be home-related. This is an area that has suffered over the past four years. Johnson expects shoppers will begin to release some of this pent-up demand. This sector includes retailers such as Bed Bath Beyond

and Williams-Sonoma as well as home improvement giants Home Depot and Lowe's .

Johnson also expects to see the same strong growth of e-commerce that we saw last year, as well as continued growth among luxury retailers, especially jewelers such as Tiffany and Signet .

Perhaps a bit more surprising, Johnson expects mall-based retailers to have their best year since before the recession.

And remember the part about consumers sticking to their thrifty ways? Johnson expects deep-recession retailers such as dollar stores and Aldi to continue to see strong growth as they expand to new areas, particularly urban markets and expand their product offerings to include food.

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

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