A full 76 percent of Americans surveyed recently by Consumer Reports' National Research Center said they will buy fewer gifts this holiday season than in past years, which may cause anxiety for those retailers who depend on holiday shopping for the majority of their yearly profits. Consumer spending shrank in the July-September quarter at a 3.1 percent rate -- the steepest fall since 1980. However, retailers that anticipated an economic slowdown generally have lean inventories that support the companies' adjusted sales forecasts. Retailers with creative sales promotions and careful attention to expenses are the most likely to be profitable, according to Dee Knight, University of North Texas associate professor of merchandising. "It has been some time since I have seen so much heavy promotion before Thanksgiving," says Knight, adding that she has received numerous e-mail sales pitches from retailers and is receiving more catalogs than usual. The discounts, she says, have been advertised days and even weeks ahead of "Black Friday" -- the day after Thanksgiving, which this year falls on Nov. 28. Traditionally the start of the holiday shopping season, the day is known as "Black Friday" because it is the date when retailers begin to operate from a profitable, or "in the black" position, rather than an unprofitable, or "in the red" position. "Typically, the holiday season represents the lion's share of sales. It's a make-or-break season for most retailers," Knight says. "I expect this holiday season to be very challenging for retailers, but people who can afford it will still buy gifts, though the gifts they will be giving may be different this year." She points out that even luxury retailers are experiencing diminished profits because of the economy. The Neiman Marcus Group recently reported that same-store sales fell nearly 27 percent, while Saks Fifth Avenue and Nordstrom reported decreases of at least 10 percent. "During lean economic times, the sale of accessories typically goes up, meaning that shoppers are spending less at a store," Knight says. "They may not buy a whole outfit or even a cashmere sweater -- they'll buy cashmere scarves or gloves to have the luxury at a lower price. Or, instead of buying a complete new set of golf clubs, they'll buy one special driver or putter." The tactics that retailers have been using to encourage spending include promoting their nationally known brands, such as Martha Stewart bedding and kitchenware at Macy's, over their private label merchandise. Knight notes that national brands "can help retailers bear the burden of inventory that's not selling." "Their partners can give them a markdown allowance or incentives on future purchases. With private label merchandise, retailers don't have a partner, so it takes creativity to maintain margins," Knight says. "Retailers must also provide something other than discounts. Many retailers are lowering prices, so that in itself may not be enough incentive to go to a particular store." Special promotions such as a free gift with the purchase of a particular item -- a regular tactic of cosmetics companies, Knight says -- may result in shoppers patronizing one retailer over another, and may ultimately be more cost effective for the retailers. "For example, free gift wrap may be an attractive incentive for consumers to patronize a particular retailer, and it may be less costly than 10 percent off most items," she says. "Retailers must also make shopping an enjoyable experience." And although Black Friday may not be the start of deep discounts for holiday shopping this year, retailers will still consider it an important day and plan accordingly to entice shoppers, she says. "There will always be consumers who make going shopping the day after Thanksgiving part of their holiday celebration. They may have out-of-town visitors, and so decide to go to the mall," she says. "And many of the stores will continue to have early morning openings and special promotions for certain items." Knight may be reached in her office at 940-565-2433, at home at 940-591-0999 or by cell phone at 940-391-6408. |