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Final verdict still pending on the holiday season

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With the conclusion of the best holiday selling season in several years, retailers are breathing a collective sigh of relief.

With the conclusion of the best holiday selling season in several years, retailers are breathing a collective sigh of relief.

Despite lingering concerns about an unemployment rate that remains near 10%, a weak housing market and slower than anticipated economic growth, many consumers were willing to spend more at Christmastime in 2010 than they did the previous three years.

MasterCard Advisors reports that activity in the MasterCard payments network shows that retail sales, which include services but not autos, increased 5.5% during the 50 days from November 5 through Christmas Eve over the same period a year earlier. That surprisingly strong showing exceeded the preholiday projections of most industry observers.

"If last year’s holiday story was about gaining some stability, this year’s is about getting back to growth," says Michael McNamara, vice president of research and analysis for MasterCard Advisors’ SpendingPulse. "The 2010 holiday period is characterized by strong year-over-year growth in apparel and continued strength in e-commerce. We also saw a noticeable return in spending in the larger ticket items, as exemplified by the solid growth in jewelry, luxury and even the furniture category."

If discount, drug and grocery stores fared less well than some other retailers in that environment, they still performed better than they did during recent holiday selling seasons. The gains generated by mass marketers offer some ground for hope that growth in consumer spending, the primary driver of the nation’s economy, will continue its long climb back to prerecession levels.

Despite all the positive indicators, the final verdict on retailers’ showing during the holidays will have to await the release of their quarterly financial results. Although most merchants did a better job managing inventory than in 2008 and 2009, they had to work hard for every sale. Promotional activity started early (Black Friday has lost much of its meaning, with many retailers now regarding the start of the Christmas selling season as the day after Halloween, not Thanksgiving) and discounting, while not as rampant as in recent years, played an important part in fueling the surge in demand.

Not until the costs of such efforts are weighed against sales gains will it be possible to make a final judgment about the retail industry’s success during the holidays.


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