Retailers work to avoid a frosty holiday season
What retailers want most from Santa is a sleigh full of consumer confidence in time for the holiday season. They probably won’t get it.
While the forecast for retailers has improved from last holiday season, “consumers are still not 100 percent convinced that they should be shelling out a lot of money for gifts,” said Kathy Grannis, a spokeswoman for the National Retail Federation.
Their caution is largely due to the unemployment rate, she said, adding that consumers “are not feeling confident about their jobs and bank accounts and are choosing to scale back on discretionary spending.”
The federation is forecasting a 1 percent decline in U.S. holiday sales — not nearly as bad as last year’s 3.4 percent drop.
Many retailers will try a different strategy this year to try to discourage holiday shoppers from waiting until the last minute for the best deals, Grannis said.
“If they don’t get it now, they won’t have it” because many chains have reduced their inventories, she said.
Electronics may be one retail category where “we will see early-season discounts because stores are feeling pressure from online sites,” said Jeff Green, president of Jeff Green Partners, retail feasibility consultants in Mill Valley, Calif.
Holiday sales will be flat nationally but somewhat better in Houston, given the city’s relatively stronger economy, predicted Green, who has also done consulting in Houston.
Houstonian Rosalyn Cooper, general manager of a Texas State Optical, said she’ll spend a little more on Christmas gifts for her family this year compared to last.
“I can’t get them everything they want,” she said. “Everybody wants electronics,” which aren’t “like buying a carton of milk.”
Some aren’t optimistic that such spending increases will be widespread.
Ron Welch, an economist at the Institute for Regional Forecasting at the University of Houston, expects holiday spending to be down in the Houston area by about 2.5 percent compared with last year, because personal income here is down by about the same margin.
Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consulting and investment banking firm headquartered in New York City, also predicted a drop in spending.
Nationally last year, “we had the worst Christmas in 40 years, and this year we’ll be under last year,” he said.
Steps to avoid trouble
For this season, however, retailers have made a number of moves to improve their bottom lines, he said.
Along with reducing their inventory, which will mean fewer markdowns, they’ve focused on offering lower prices to draw consumers, he said.
Retail chains have also closed their worst-performing stores, Davidowitz said, “and they’ve also cut back on their expansion plans — even Wal-Mart has.”
In general, Davidowitz believes off-the-mall retailers, such as T.J. Maxx, Ross, Wal-Mart, Target and Costco will be the best-performers during the holiday season.
The International Council of Shopping Centers has a retail forecast that is more optimistic than the National Retail Federation’s: a 1 percent to 2 percent increase in sales over last year. An improving economy is among the reasons cited.
And on Thursday the group released more positive trending data. U.S. chain store sales for October were up 2.1 percent compared to the same time last year — the strongest monthly results since April 2008.
The improvement in the stock market has had a significant effect on the spending habits of affluent shoppers, according to the ICSC report.
A recent national Consumer Reports survey found that 65 percent of consumers plan to cut back on their holiday spending, compared with 76 percent last year.
“Customers are going to be shopping smart,” J.C. Penney spokesman Tim Lyons said, “and they’ll be looking for real value, style and quality and price.”
As in years past, J.C. Penney will offer a series of promotions, including door busters and extended hours, he said.
Macy’s, meanwhile, will provide “an arsenal of incentives: from gifts with purchases to special prices to exclusive offerings,” spokeswoman Milinda Martin said.
‘It’s really painstaking’
Many small businesses will also have promotions.
At Karen’s Kloset, a women’s clothing boutique at Woodway and Voss, owner Karen Darnell says she will host a Christmas party and a trunk show.
She’s optimistic about holiday sales because her business has been solid lately. It’s taken shifting her strategy to offering a “good look at a good price” to remain successful in these tight times, she said.
“It’s really painstaking,” Darnell said. “There’s less margin for error. Everything matters.”