Retailers’ summer optimism makes for better sales after consumer confidence plunged.
Quentin Fottrell / SmartMoney
Recent market volatility and an uncertain economic outlook may be enough to make shoppers renew recession-era vows of frugality. They may get some help from a surprising place — retailers once again struggling to drum up sales.
Most years, spending is hard to avoid from this point on. Even consumers worried about the economy are preparing for a new school year, holidays, and year-end expenses. Clothing, gadgets and supplies for back-to-school are expected to set the average consumer back more than $800 this year, according to the National Retail Federation. Halloween and Thanksgiving add another $110 to the ticket, and then there’s Christmas, which added almost $700 on average for gifts, decorations and other Yuletide cheer. Add in year-end tips for babysitters and supers, home heating oil bills and other fall expenses, and the additional cost of just making it to New Year’s Eve could easily top $1,600.
Or maybe not. Retailers started preparing for the fall spending onslaught months ago, when the stock market was thriving and there was general optimism about the economy, says Jeff Green, an independent retail analyst and placed orders accordingly. They may have overshot, leaving them with supply that exceeds demand. And it’s too late to do anything but cut prices. “Retailers can’t reduce their inventory now,” Green says. “It’s too late.” Consumers can expect bigger discounts and more early holiday sales to ease their budget crunch.
Although early sales are good, timing is still the tricky part. Offers are likely to follow the usual holiday pattern: as Christmas gets closer, the deals get better. However, stores place their holiday orders throughout the fall, so if shoppers pull back in September and October, stores may be more cautious — and sales less plentiful — come the holidays. If there’s a big-ticket item you’re planning for, sale-tracking sites like DealNews.com or TechBargains.com can show how a deal stacks up against other recent offers and trending prices.
Here’s how to take advantage in five key fall spending categories:
September and October are typically good months for buyers looking for last year’s models at a deep discount. This year, experts say the deals could be even better: shortages from the March earthquake in Japan forced a late start to lot-clearing sales, with many brands waiting until early August to beef up deals. BMW, for example, added $2,000 to $10,000 to its cash-back deals earlier this month. Analysts expect fierce competition in October on smaller, fuel-efficient cars as Japanese brands improve supply. (Already, those brands spent 24.5% more on incentives for buyers in July, $1,990 per vehicle on average, according to Edmunds.com. In comparison, U.S. automakers aren’t improving their offers as much: they upped incentives by 4.5% on average, though the deals were better to begin with, at $2,919 per vehicle.) If you’re at all picky about colors or options, don’t wait much past late September: selection dwindles fast.
Consumers are pulling back on new duds for back-to-school this year: 38.5% say they will make do with last year’s items, says the National Retail Federation. Last year, only 30.6% were going the hand-me-down route. That pullback has led to great sales, so it’s worth store-hopping for basics like jeans, sweaters and sneakers. Green says expensive teen apparel stores in particular have eye-popping discounts this year, in part to mollify parents reluctant to pay top-dollar for teen threads. American Eagle Outfitters has 60% off select jeans, while Abercrombie & Fitch offers 50% off. For university-bound shoppers, Gap has cut prices on most women’s and men’s clothing by 50% through the end of the month, and Ann Taylor Loft is offering an extra 25% off the total purchase.
It’s hard to top Black Friday, but early deals this year have been close, says Mark LoCastro, spokesman for DealNews.com. Supply from Japan has recovered and retailers are using sales to clear out older models. Amazon recently offered a 55-inch, internet-ready LG for a little more than $1,000 — a threshold not typically seen until after Thanksgiving. Shoppers should hold off on sets with 3D capability, which can add as much as 50% to prices, and will likely get cheaper as the season progresses. For gamers, Sony recently cut PlayStation 3 prices by about 17%, and makers of other video game systems could follow suit, experts say. HP also recently discontinued its TouchPad, allowing shoppers to snap up the $399-plus tablets for as little as $100.
It’s time to go house-hunting. Even in the current housing market slump, September and October are traditionally slower than the summer, prompting sellers whose homes have lingered on the market to drop prices. This year, there’s added incentive. In a third of markets, prices are already below fair-market value, reports Zillow. The Federal Reserve has also pledged to keep interest rates low for two years. In Reno, Nev., prices are nearly 60% off their 2006 peak of $365,000 on average, says real estate broker Guy Johnson. “You can’t build a house in Nevada for $150,000 for the kind of house you can buy for that price,” he says. A 30-year home loan is now 4.19%, according to Bankrate, which is near the 50-year low of 4.15% in mid-August. Rates are unlikely to get much better, says Shaun O’Conner, a vice-president at wealth management firm Firstrust Financial Resources in Philadelphia, Pa.
In previous years, some of the most-wanted holiday toys were already on shelves by this time. This year is unusual because there’s no early break-out favorite, so parents need to be vigilant. “We could see big shortages on those if retailers haven’t ordered enough,” says Jim Silver, editor-in-chief of TimeToPlayMag.com. (Two of his picks to watch: Leap Frog’s Leap Pad Explorer tablet and Redakai 3D trading cards from Spinmaster.) Sales usually pick up in late September. Wal-Mart, Amazon.com, Toys R Us and Target have used toys as loss leaders in the past, competing to have the lowest prices so parents will do more of their overall holiday shopping there.