Every year, TV coverage of the holiday shopping kickoff takes on the sort of breathless urgency typically reserved for hurricanes or car chases. We’re told that fate of the republic hinges on the contents of our shopping bags. Historically, we’ve obliged by overstuffing them: Bankruptcy filings tend to surge early each year as consumers struggle to pay their post-Christmas credit card bills.
But if one of this season’s hottest gifts — an $8, battery-operated toy hamster — is any indication, we seem to be scaling back a bit this year. And that might be all right, since much of the conventional wisdom linking holiday spending and the health of our economy turns out to have been exaggerated.
Myth No. 1: Most retail spending occurs around the holidays.
With so much attention focused on shopping and sales during the holidays, people often assumethe vast majority of our spending takes place around this time of year. But over the past decade, only about 19 percent of each year’s retail sales were in November and December — just a bit higher than the 17 percent of total days in a year that fall in those two months. Of course, the holiday season’s importance varies by type of store, with those that sell nonessential goods more dependent on holiday cheer (and the spending it inspires).
Toy stores and jewelry shops rack up about a third of their sales in November and December, whereas supermarkets and hardware stores see a much smaller blip in demand.
The winter holidays do beat out other much-hyped shopping seasons.
For example, while sales at apparel and department stores tend to be stronger during the back-to-school season than they are early in the year, they’re a good deal more substantial in the weeks leading up to Christmas.
Myth No. 2: Sales on Black Friday make or break the holiday shopping season.
In shopping circles, the day after Thanksgiving has been dubbed Black Friday. Some attribute the nickname to the flood of traffic on the road and some to the burden the day imposes on store clerks, but most point to the association between black ink and profitability.
According to the International Council of Shopping Centers, Black Friday regularly sees more shoppers than other days in late November and early December. But it is just one of many busy shopping days. The consulting firm Accenture reports that 26 percent of consumers planned to do the bulk of their holiday shopping before Thanksgiving this year. And plenty of people leave things to the last moment: The Saturday before Christmas was, until recent years, the busiest shopping day annually, and it should remain one of the leading days this year.
Economic conditions this year will make that weekend this year especially hard to interpret.
Myth No. 3: This year’s holiday sales will tell us whether the economic recovery is real.
Retail sales during last year’s holiday season were pretty much abysmal, with what economists call the “core” category (which excludes spending on cars) falling 8 percent compared with the 2007 holidays. While most analysts don’t think we will see that kind of decline this year, they aren’t expecting a blockbuster season.
The consensus view is that consumer spending will rise only slowly in coming quarters, held back by weak labor markets, high consumer uncertainty and the big hit that households have taken to the value of their homes and to the value of their stocks and mutual funds, including those in their retirement portfolios.
Myth No. 4: Online shopping has come to dominate holiday sales.
The rise of electronic commerce has spawned talk of a counterpart to Black Friday: Cyber Monday. The idea is that when people return to their normal activities the Monday after Thanksgiving, they find time to surf the Web and order some presents. Anecdotal reports from online merchants confirm that such behavior has increased in recent years.
The hoopla over electronic shopping notwithstanding, online sales made up less than 4 percent of fourth-quarter retail sales last year. Although this represents a big increase since earlier this decade, online shopping remains a modest part of overall spending.
Myth No. 5: From an economist’s perspective, cash is the best gift.
Economists are known for arguing that giving your loved ones cold cash is better than giving them presents because people can spend the money on items of their own choosing.
There is an implication that the difference between the price of a gift and the value its recipient attaches to it — which can add up to tens of billions of dollars a year nationally — is essentially wasted money.
But this logic misses the point of exchanging presents. Gifts have more than monetary worth; the effort and care involved in their selection gives them sentimental meaning. If what mattered most were their cash value, we wouldn’t exchange presents at all — we’d simply let whoever was going to give the more expensive gift pay the net difference to the other person.
But even most economists will be found at the mall sometime in the coming weeks.
Karen Dynan is vice president and co-director for economic studies at the Brookings Institution.
