Harvard Business profs weigh in on holiday sales

The best retailers will be doing more than trying to maximize sales this holiday season; they'll also be looking for clues about whether the recession has drastically shifted consumer shopping habits, two Harvard Business School professors said.

"After the shock and awe of last year's financial crisis," there is evidence that consumers are retrenching and rethinking values, and one result could be a "new normal," said Nancy F. Koehn, the James E. Robison Professor of Business Administration, in a statement included in a Harvard Business School press release.

The release also included insights from Rajiv Lal, the school's Stanley Roth Sr. Professor of Retailing.

And while newly chastened big spenders could head to Target this holiday season to buy sensible gifts such as pants and coats, retailers should fare better this year than last, thanks in part to a rising stock market and a perception that the worst is behind us, the professors said.

"If we start with the big picture, holiday retail spending in 2009 is likely to be flat or marginally better than last year," Koehn said in her statement. "In 2008, holiday retail sales were $442 billion or about one tenth of total retail sales for the year. While this year is likely to see little or no increase on 2008 holiday sales, the difference, year-over-year, is expected to be much smaller than the 3.4 percent drop in holiday spending last year-relative to 2007 - when consumers pulled back dramatically on all manner of buying in the midst of the financial crisis."

Lal's statement said in part: "I am still betting on the power of Santa Claus. While consumer spending may never reach pre-recession levels, I think it will be much better than expected for a number of reasons. First and foremost is the difference in the psychology of the American consumer. At this time last year, the economy was in a free fall. The stock market was tanking, major Wall Street firms were facing extinction, 401ks were evaporating, and the nation's confidence in our economic system was badly shaken. A 6 percent contraction in the GDP was hardly surprising. Consequently, most consumers spent their money only on essentials. Sales in categories where purchase could be delayed suffered the most - automobiles in particular and apparel to a lesser extent. Thankfully, things have changed for the better." (Globe Staff)