Holiday Sales Economic Data: Still Too Early
by Chris Paradysz | 
September 30, 2009 9:40 am
Job security and a disconnect between consumer confidence and consumer spending loom unpredictably over year-end holiday sales, but significant opportunities remain for marketers to optimize ROI and grow demand.
After months behind doors with our analysts and technology group building out potential new bid management algorithms and rules, this is the time of year when we start testing and tweaking our hypotheses for Holiday. This annual rite is both a quantitative and emotional climb to Black Friday where we can better forecast Holiday sales demand. August and September’s economic data is a head-spinner when comparatively evaluating it versus 2008. Historically, post-recession economic indicators are more predictable relative to buying behavior than times that are in rapid decline as were August and September 2008.
Gallup Consumer Confidence Index 2008 - Courtesy of Gallup
Although consumer confidence numbers were declining, it was the 2nd half of September that was ultimately predictive of the entire season. The Conference Board and Gallup data showed a radical shift, and we saw an immediate negative impact in October 2008. These early bellwethers, though, were critically important last year and they provided intelligence for search strategy adjustments in a deteriorating economic environment. It carried through the Holiday buying period into early December although, clearly, the retailer’s accelerated discounting captured some incremental sales that would have not occurred, otherwise. Following the election of Barack Obama, there was a short surge impact on performance, but we don’t anticipate that same trend this year.
Consumer confidence and leading economic indicator data for August and September this year is showing notable improvement with trends climbing modestly, yet consistently upward, since April 2009. Despite the downbeat consumer news this week from The Conference Board (with consumer confidence dropping to 53.1 in September from 54.5 in August), we anticipate the month-by-month trend to be positive through the balance of the year. The major challenge to spending, online or in stores, though, is job security and job availability, and there are still no significant signs of a turnaround in hiring. Through August, 14 states reported greater than 10% unemployment and 27 reported increases over July. From our perspective, this is THE showstopper for bringing consumers back into a buying mode, Cash-for-Clunkers, be damned.
As Gallup states, we, too, believe that there is a significant “decoupling of consumer spending from consumer confidence”. Retail sales figures are consistent with this as September is showing decreased spending (sans Wal-Mart). How long will this tension remain between economic data (and, a roaring bull on Wall Street) and the consumer’s desire and ability to spend? It is very unclear, but we do believe this decoupling to be the new Now.
The trends and the season are still too early to be predictive, but there are significant opportunities to optimize ROI and grow demand especially for those who have continued to test and experiment with their paid and natural search channels. Product, category and keyword bid management adjustments based on timing, geography, and budget allocation tactics, along with ad and email copy using audience-specific offers will drive sales for those retailers balancing 2008 Holiday data with this year’s most current performance data. Rapid adjustments to keyword buying based on short-cycle bursts of positive micro-trends in sales will be critical to overcome longer click-to-buy consumer anxiety.
What we need most, though, are declining unemployment rates, especially in large, populous states, to give the consumer some buyer mojo.
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