"The credit crunch will lead to a consumer crunch by the holidays," said Frank Badillo, senior economist at TNS Retail Forward, in a statement. "This will extend the weakness in retail sales beyond home improvement stores to other retail channels."
"This top-line forecast may still underestimate the extent of the weakness," Mr. Badillo said. "Our forecast numbers are even weaker when home improvement and catalog retailer sales and online sales are excluded. And the risks are biased in favor of still weaker growth, particularly if the housing market deteriorates further."
In a positive sign for Internet retailers, four-fifths of US consumers said they expect to research gifts online, according to BurstMedia. The company also found that more than one-half of adult Internet users expected to make a holiday gift purchase online, up from 37.6% who did so in 2006.
One-quarter of respondents said they would spend less on gifts and entertaining this holiday season compared to 2006.
Respondents who expected to purchase gifts online this holiday season estimated they would spend 42.5% of their holiday budget on the Internet.
eMarketer senior analyst Jeffrey Grau said that targeting specific consumers could help online retailers during the holidays.
"Affluent consumers, less vulnerable to economic downturns than the average consumer, are increasingly turning to the Internet to do their holiday gift buying," he said.
