Online Sales to Increase as Consumers Battle Gas Prices

A national survey by The Ernst & Young Consumer Trends Center predicts that online sales this holiday shopping season will increase, as consumers seek to combat high gas prices by eschewing trips to the traditional shopping mall.

A copy of the survey provided to the E-Commerce Times indicated that, overall, the 2005 retail holiday sales increase for November and December will be 6 percent — compared with an 8.3 percent increase for the same period last year.

“Higher home heating costs and interest rates likely will dampen spending, but there are several factors that could stimulate sales,” Jay McIntosh, Americas Director of Retail and Consumer Products for Ernst & Young LLP said.

Good Values

Consumers should find good values, as most retailers will begin online promotions early and discount heavily this holiday season, the survey said. What’s more, consumer electronics should see sales gains as popular items become more affordable, and online sales increase. Apparel remains deflationary, however, due to weak demand and a lack of new compelling fashion trends.

The Ernst & Young Holiday Forecast is based on 14 years of data, including stock market performance, consumer confidence, unemployment rates and historical relationships between retailers and their customers.

Affluent Driving Sales

There are a number of other, significant retailing trends this holiday season, including sales of private label and luxury items, and the growth of online gift cards, the survey said.

“Affluent consumers likely will drive retail sales again this season,” said McIntosh. “The building supply segment should continue its solid performance and likely will see holiday sales gains from the post-hurricane rebuilding in the Gulf Coast and the popularity of the home improvement and renovation trend.”

The mood of American consumers was brighter — even more than expected — as gasoline prices receded from record highs and the impact of late-summer hurricanes faded, another report showed.

However, though gas prices are retreating to their August levels, consumers have not yet recalibrated their expectations, and are still cautious about spending on fuel.

Consumer Sentiment

The University of Michigan’s index of consumer sentiment increased to 79.9 in November from 74.2 in October.

The survey’s index of current conditions increased to 100.3 from 91.2 in October, while the expectations section of the report advanced to 66.8 from 63.2 last month.

These indices retraced part of the declines seen in the aftermath of the destruction Hurricanes Katrina and Rita inflicted on U.S. oil and gas industries.