Christmas not so Merry for retailers this season

Holiday season is always the time for high sales and profits for the retailers but this time the business did not turn out to be that good for some stores.

Although the sales rose in the last few days but they were not enough to reach the levels as achieved in the past years. The reason for low holiday spending is thought to be higher gas prices and slow economy which did not give an open hand to the people to spend this year.

The worst hit segment was the Apparels, which saw the largest decline in sales this year. According to a report called SpendingPulse, by MasterCard Advisors, that tracked the national retail sales, the apparel category lagged overall spending, with a minute growth of 1.4%. Men's clothing climbed 2.3 percent, while sales of clothes for women fell 2.4 percent.

According to the estimates by National Retail Federation, the sales grew by 3.6% this season which is the slowest growth rate in the past 5 five years. Last year's holiday season sales grew by 6.6 percent over 2005's holidays. Two years ago, retail sales grew 8 percent from the previous year, MasterCard said.

The largest growth this year was seen in the e-commerce segment with more and more people preferring online shopping over the traditional one. It showed 22.4% growth rate which is the maximum this season.

Shoppers buying online led the growth in spending, with Internet sales gaining 22 percent from Nov. 23 though Dec. 24, said Michael McNamara, Vice president for Research and Analysis at MasterCard Advisors.

The sales really slowed down after the Thanksgiving and the early part of December turned out to be with very mild sales. Less than one-fifth of consumers finished their holiday shopping by Dec. 16, according to the International Council of Shopping Centers in New York. Analysts believe that people were waiting for better sale offers from the companies.

Electronic sector and luxury category were amongst the other fast growing sectors. Electronic sales increased by 2.7%, although it was lesser as compared to 15% growth on Black Friday, and the 5.8% gain seen at mid-season. Excluding jewelry, sales in luxury category rose 7.1%.

The sales in the holiday season are approximately 20% of the total year’s revenue for the retailers. With gasoline at $3 a gallon and food prices also rising fast, Americans were discouraged from spending during the last two months of the year, according to the National Retailer Federation.

The whole story can be summarized as- Although customer visits and spending increased for the month end, this was not sufficient to compensate for the unfavorable trends that carried over into December from the week following Thanksgiving, reducing the overall growth rate considerably.