Early data on holiday shopping are confusing and contradictory

By Daniel Gross
Sunday, December 6, 2009

Consumer spending is 70 percent of American economic activity, and the holiday shopping season always offers crucial information about the national mood. If we won't spend to buy plastic junk made in China this month, will we muster the courage to buy the stuff that matters in the coming months, such as cars, houses and stocks?

Numbers on the 2009 Christmas shopping season are coming fast and furious. But they're equally unsatisfying: instantaneous and relentless, but not comprehensive or insightful.

On the one hand, the International Council of Shopping Centers projected that holiday sales would rise 1 to 2 percent, and its survey suggested that consumers would boost spending on gifts this year but cut down on gift cards. On the other hand, early data are gloomy. ShopperTrak reported that Black Friday sales rose just 0.5 percent from last year. According to the National Retail Federation, more people are shopping -- 195 million shoppers hit stores or Web sites over the crucial Thanksgiving weekend, way up from 172 million last year. But they spent less. Average spending fell 7.9 percent, from $372.57 per household last year to $343.31 this year. For some sectors, though, the weekend was great. MasterCard SpendingPulse said that in November, which included the Thanksgiving weekend, spending on consumer electronics rose 6.6 percent.

Confused yet? If not, you will be. You can't throw a rock without hitting an online retailer prognosticating about Internet holiday shopping trends. HauteLook, an online retailer that does limited-time sale events, said that from Nov. 26 to Nov. 30, sales rose 500 percent compared with the same period last year. According to a Shop.org survey, 96.5 million Americans said they'd shop on Cyber Monday this year, up from 85 million in 2008. But according to ComScore, those estimates are wildly high. It says that only 8.7 million people made online purchases on Cyber Monday and that retail e-commerce spending rose just 5 percent, to $887 million. Coremetrics painted a rosier picture of Cyber Monday: Compared with 2008, it said, sales were up 13.7 percent and the average amount consumers spent on each order was up 38.2 percent.

Aside from being contradictory, these data are incomplete. As the chief executive of Equity Research at Fusion IQ, Barry Ritholtz, noted, many of the data are based on surveys rather than full measurement. And it's hard to make conclusions about a marathon based on how runners ran the first two miles. As the Wall Street Journal noted, Black Friday weekend sales in 2008 fell 1 percent as tracked by MasterCard SpendingPulse. But sales for the whole season fell 6.3 percent.

If people are front-loading their shopping, then a rise in Black Friday spending wouldn't necessarily indicate a improving retail situation. (Indeed, the ICSC's survey said that 16 percent of consumers would start shopping on Black Friday, compared with 10 percent last year.) And growth in e-commerce sales is almost certainly misleading. A mid-single-digit increase in e-commerce sales would sound impressive, especially at a time of slack economic growth. But one would expect sales to be up impressively because of the overall long-term growth of online retailing. Regardless of what's going on in the economy, each Cyber Monday should be stronger than the last simply because a larger chunk of retail sales are conducted online with each passing year. Or maybe not. Analysts believe that Cyber Monday activity is fueled by people shopping at work. Most offices have faster connections than home PCs, and it's more fun to shop on your company's time than on your own. But there are far fewer people with jobs this year than last.

Finally, what ultimately matters to retailers and investors are the profit margins that companies are able to maintain during the holiday shopping season. If sales and traffic are being driven largely by giveaways, door-busters, and low-margin sales, what would seem to be a healthy rise in total sales might still indicate underlying weakness.

We won't know if shoppers were naughty or nice until well after the holidays are over. For true insight, we'll have to wait for the major retailers' quarterly earnings results -- then we will see how much stuff they sold and how much green stuff they got to keep. But in this age of ceaseless aggregation and dissemination of information, the updates will probably continue unabated. My survey predicts that the volume of online holiday retail-sales discussions was up 6.2 percent on Black Friday, 17.4 percent on Cyber Monday and will finish up 4.9 percent for the season.

Daniel Gross is the Moneybox columnist for Slate and the business columnist for Newsweek. He is the author of "Dumb Money: How Our Greatest Financial Minds Bankrupted the Nation."

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