"I'm not expecting the average American to stop working and give up on shopping."
OPPS
Retailers brace for bleak sales season
Consumers cut back, even as prices slashed
By Jenn Abelson, Globe Staff | November 21, 2009
Shoppers facing rising unemployment and tight credit are expected to keep their wallets shut tight as merchants prepare for another bruising holiday season.
New Englanders are projected to spend on average about $445 on gifts this season, down 17 percent from last year. The national picture is only slightly better: Shoppers are expected to spend $452 on gifts, a 15 percent drop compared with last year, according to a Deloitte LLP survey of nearly 11,000 consumers across the country.
But if panic reigned last holiday season, resignation is this year’s king. Merchants are keeping expectations low and running leaner with aggressive, early promotions and scaled back inventory. Eager to grab consumers’ dollars before they spend them elsewhere, some retailers are offering preview sales to the doorbuster deals that will be available on Black Friday, the day after Thanksgiving and typically the busiest shopping day of the year.
Sears, for example, is giving select customers a chance to shop Black Friday sales on Wednesday and has offered “Black Friday’’ promotions on Saturdays for the entire month of November.
Looking for new ways to lure shoppers, such retailers as Toys “R’’ Us recently launched trade-in programs as a way to put cash - or gift cards - in consumers hands in exchange for old videogame hardware.
“We’re providing our customers a unique way to save, whether they want to upgrade their gaming system or use the gift card toward their holiday purchases,’’ said Jennifer Albano, a Toys “R’’ Us spokeswoman.
The threat of a dismal holiday season is a bad sign for merchants, who normally make between 25 and 40 percent of their annual sales during November and December. Last year’s holiday meltdown caught many retailers off guard, leaving them with piles of unwanted merchandise. That meant significant losses in profits for shop owners.
This year, retailers are trying to get ready by slashing inventory up to 20 percent, reducing hiring, and controlling other costs.
Jon Hurst, president of the Retailers Association of Massachusetts, said shoppers will see big discounts on some merchandise, but they will likely find fewer items on store shelves. “The lower inventories could mean certain sizes, items, and products won’t be there the final week for procrastinators,’’ he said.
But so far, trade-in programs and early deals aren’t enough to win over Bill Josephson of Andover. The self-employed executive recruiter says nothing will motivate him to spend other than his clients telling him they need to increase hiring. Feeling less optimistic than last year, Josephson said he will slash spending on holiday gifts for his family of four to $300 from $1,000.
“It pains me to say it,’’ Josephson said. “Extended family members know times are tough and not to expect anything, nor do we expect anything.’’
Though signs of a recovery have begun to emerge, like better-than-expected sales in August and upward momentum in the stock market, ongoing consumer uncertainty over job security and housing values will take a toll on spending this holiday season, according to Rosalind Wells, the National Retail Federation’s chief economist. The federation, a Washington, D.C., trade group, is projecting holiday retail sales to decline one percent this year to $437.6 billion, a dreary sequel to last year’s 3.4 percent drop.
IHS Global Insight in Lexington reported that consumer sentiment dropped sharply in early November as consumers’ attitudes about the short-term economic outlook collapsed to the lowest level since April 2009; consumer assessments of their own personal finances also deteriorated sharply. The national unemployment rate climbed to 10.2 percent in October from 9.8 percent in September, the highest rate since 1983.
“Americans have undergone a fundamental change in how they spend their money and uninhibited spending is no longer there,’’ said James Russo, vice president of global consumer insights at the Nielsen Co.. “Consumers are planning more before they spend and looking for savings.’’
Shop owners have taken note, lowering prices and adjusting their product mix to offer less expensive items. Merchants are expected to heavily promote popular categories, such as apparel and electronics, as they vie for consumers’ dollars. Wal-Mart has already fired away with steep promotions, including $10 toys.
Retailers are also expanding layaway programs to help shoppers spread out payments for gifts they want but cannot yet afford. Kmart recently launched an online layaway to make it more convenient for customers after the discount chain saw double-digit increases in layaway customers and sales in 2008.
One problem retailers face is shoppers who have adapted so well to the idea of spending less that they like it better that way. Millions of Americans have adopted simpler lifestyles, preferring vacations at home and cooking instead of eating out.
Valerie Barsom of Watertown is one of them.
“I will not be spending as much this year on holiday gifts and my family feels the same way and it does not bother us at all,’’ Barsom said. “I actually like living my life spending less. It somehow feels right, especially now.’’
Jenn Abelson can be reached at abelson@globe.com.
© Copyright 2009 The New York Times Company
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