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Slower spending has pushed anxious retailers to offer early discounts.
By Mark Albright, Times Staff Writer
Published November 18, 2007
[Willie J. Allen Jr. | Times]
Gerri Coles will be out hunting for deals the morning after Thanksgiving and searching for stocking stuffers right up to Christmas Eve.
"The economy may be changing, but I don't see people cancelling their cell phones, their cable TV or their Christmas," said the 48-year-old St. Petersburg nurse. "Even if it means more debt."
Retailers hope there are a lot more like Gerri Coles out there. Unsteady consumer spending is slowing down, and some economists say that even the National Retail Federation was too optimistic forecasting a modest 4 percent sales gain for the holidays. That would be slightly below last year's ho-hum performance and almost a full-percentage point below the 10-year average of 4.8 percent.
It's one reason that stores have dialed up the promotional volume to get people spending early in a shopping season that will be defined by more discounting than usual.
The season lasts 32 days, a day longer than last year's. Add a Christmas that falls on a Tuesday, creating a long weekend that encourages procrastination, and it's clear retailers need to get shoppers out early to avoid even deeper price cuts to clear out unsold goods later.
In some ways, a weaker season is already in the cards. Once economic forecasts were revised downward in late August, big chains started canceling orders and trimming unsold fall inventory faster. Container traffic into the nine biggest U.S. ports from Asia is running behind 2006 levels for the past three months. Chains such as Bealls Outlets that trade in apparel makers' overproduction say their phone is ringing with suppliers dumping distressed merchandise. On Nov. 3, Wal-Mart dropped prices on 20,000 items, 5,000 more than it did to kick off the season last year.
Malls will open earlier than ever on Black Friday, the day after Thanksgiving, when they tout door-buster deals to jump-start the holiday. Many local malls will open at 5 a.m. JCPenney will try 4 a.m. Sam's Club starts serving free continental breakfasts at 5 a.m.
On the last Black Friday, Prime Outlets of Ellenton brought Interstate 75 traffic to a standstill 3 miles north and south of its exit by opening at midnight. This week, it will try it again,
"This time, we hired state troopers to handle traffic," said Sarah Ozgun, marketing director of the center that filled its 2,500-space parking lot twice between midnight and 6 a.m.
Alot is on the line. Up to a third of annual sales and half of the annual profit at many retail chains come in November and December. At $474-billion, the winter holidays bring in seven times the general merchandise sales as the second-biggest seasonal event of the year. Consumer spending is two-thirds of the gross domestic product, so shoppers' holiday spending mood is a harbinger of the economy.
This year, personal income gains are supposed to offset some of the spending that shifted to pay higher energy, gas and food prices. But shaky job security, fewer construction industry jobs and the ongoing subprime mortgage meltdown have been joined by deteriorating home prices and a weaker dollar to squeeze holiday budgets. In Florida, even a usually optimistic state retail trade group is forecasting a tepid 3 percent gain.
"That's a strong number when you consider the overall drop in consumer confidence and our first housing slump in a decade," said Rick McAllister, president of the Florida Retail Federation.
Nationally, the relentless weakening of the dollar and the unknown depth of the mortgage mess are spreading uncertainty to more affluent shoppers.
"Even higher-income households are becoming less sure about their wealth - whether it's the value of their houses or stock market assets," said Frank Badillo, senior economist for TNS Retail Forward.
Apparel sales had been stagnant in early fall. But many observers think that changed once an unusually warm fall ended in early November to perk up demand for winter clothing.
Polo Ralph Lauren Corp, has its finger on the pulse of several income groups, from its 145 outlet stores to Chaps brands sold at Kohl's and Bealls to pricey Purple Label at Neiman Marcus.
"The high-end customer is still spending, but if Wall Street headlines get worse, that might become a psychological depressant," said Roger Farah, president and chief operating officer. "What we're all worried about is the middle market. They are being squeezed by their inability to refinance mortgages and the decreasing value of their homes."
Says Lee Scott, CEO of Wal-Mart Stores Inc.:
"We're in a difficult time, but I feel good about our prospects for Christmas. We've got relevant merchandise, and people will love the prices. Being the low-price leader is an advantage if things get more difficult."
The growth of online shopping will continue, but at a slower pace than in years past.
"E-tailer" merchandise sales are forecast to rise 20 percent to $39-billion for the two-month season. That would be about 8 percent of general merchandise sales. But Web site traffic is expected to increase only 6 percent, according to Jupiter Research.
"After 13 years, online shopping has become mainstream," said Scott Silverman, executive vice president of Shop.org, the industry's biggest trade group.
Online shoppers demand free shipping. So 78 percent of retailers will offer it for the holidays, although most want a minimum order. Without a minimum purchase, 29 percent of sites will ship free, up from 22 percent a year ago.
Retailers are armed this time with soaring demand for many products to entice shoppers. High-definition TV prices are 30 percent lower than last year's, and Consumer Reports has predicted HD set prices dropping below $200.
Last year's sleeper game console debut, Nintendo's Wii, and many of its games remain in such short supply that few stores even take reservations. Guitar Hero III is a big seller.
Despite parental anxiety over waves of recalled toys made in China, toy departments boast big sellers. Anything Hannah Montana or High School Musical is big. So is old standby Barbie, plus Rubik's Cube, Pokemon, Power Rangers, Transformers and toys tied to new filmMr. Magorium'sWonder Emporium. Toys "R" Us thinkspink is a big enough color statement to sell special edition Monopoly, Jenga, Girl Talk and Twister games in shades of pink.
Women's fashion trends are propelling sales: sequined tops, slim leg denim, long cardigans in merino or cashmere and high-waisted, wide-leg trousers rather than those slung from the hip.
Regina Smith, a 23-year-old financial services manager from St. Petersburg, said the gloomy economic news won't stop her from shopping.
"I'll try to spend the same as I did last year, but if I see something I want, I will buy it," she said. "People expect presents. That has not changed."
Mark Albright can be reached at firstname.lastname@example.org or 727-893-8252.
Tips to get the best deals this season
Avoid the crowds: Shop after they leave. Even the busiest malls empty out around 3 p.m. Most department stores are open as late as 11 p.m. through the season. You haven't lived if you have not seen how many people shop at 2 a.m. Saturdays at Wal-Mart Supercenters.
Save every receipt: Put them in a shoebox. Stores are getting tighter on return policies to cut down on return fraud that this season will cost them $3.7-billion, up 6 percent. About 9 percent of returns are bogus. That's why a receipt is the coin of the realm for a cash refund.
A sale trick: After 6 p.m. the night before a big advertised sale, many clerks will give you the sale price if you ask because it has been programmed into the register.
Parking lot gridlock: Head directly for the remote corners. Know where the special shuttles work. Or give valet parking a shot.
Help Homeland Security: Most online retailers will send stuff to a different place than the billing address. Send gifts ahead if you're flying. Wrap them there, rather than watch airport inspectors unwrap them here.
Restocking fees: Ask about them before you buy. Many stores charge 15 percent to take something back and insist on the original packaging with the printed UPC code. Others won't accept returns after more than 14 days.By the numbers
4% The National Retail Federation's forecasted sales gain.
4.8% The holiday sales average of the past 10 years.
27% Shoppers who plan to spend substantially less than last year.
$474B General merchandise sales during the winter holidays.
[Last modified November 16, 2007, 22:03:49]