Retailers are anticipating the worst holiday shopping season in years and are trying hard to attract cost-conscious customers early. Holiday sales will increase only 2.2 percent this year, considerably less than the 10-year average 4.4 percent, predicts the National Retail Federation (NRF). This Christmas season could be the worst since 2002, when sales increased just 1.3 percent.
NRF research shows consumers are cutting back everywhere they can, and retailers are aware of it.
“Retailers are at least heading into the season with their eyes wide open,” said Kathy Grannis, spokeswoman for the Washington-based trade group.
Wal-Mart is watching, but it’s not waiting. The nation’s largest retailer announced a “10 toys for $10” promotion last week and expects to have holiday decorations in most of its stores by this weekend, according to E.R. Anderson, Wal-Mart regional media director.
Wal-Mart research suggests that bargain-hunting shoppers will start early this year, and they buy presents for children first.
“The kids will be at the top of the list,” Ms. Anderson said. Wal-Mart expects to roll out other promotions in the coming weeks to keep people thinking ahead to the holidays, and other retailers are expected to do the same.
“Once a retailer as large as Wal-Mart rolls out something like this, others will follow,” said Ms. Grannis.
Indeed, the Christmas decorations were already out this past weekend inside the Macy’s store at the Fashion Centre at Pentagon City. The store’s entrance at the Northern Virginia mall was adorned with red garlands hanging from the ceiling, and the window display included children’s sweaters with silhouettes of reindeer.
Discount retailers such as Wal-Mart are expected to be the least affected by a slowdown in holiday spending, according to Ms. Grannis. But Christmas promotions during the first week of October are an indication that they are expecting to feel the effects of the economic downturn and want to get a piece of holiday sales as soon as possible.
Deloitte, the New York consulting group, expects holiday sales to increase between 2.5 percent and 3 percent this year • one of the smallest gains since 1991’s 2 percent uptick.
“Higher energy and food prices are making a dent in consumers’ wallets, and the dramatic drop in home-mortgage refinancings has dried up a substantial source of discretionary funds,” said Carl Steidtmann, chief economist with Deloitte Research, a subsidiary of Deloitte Services LP.
Mike Kraus, retail analyst for Allbusiness.com, said he doubted sales would even reach the NRF’s projected 2.2 percent gain in light of the current economic turmoil.
“People are not feeling very good about the holidays at all this year,” he said. “There’s just so much uncertainty out there, and zero consumer confidence.”
Though retailers will do their best to persuade customers to spend their money, Mr. Kraus said it may be a lost cause in some cases. “They’re in this ’stash the cash under the mattress mode,’” he said. “I don’t think consumer confidence is going to come back that quickly to impact holiday shopping.”
In light of this, Ms. Grannis said, “Retailers are going to have to work extra hard to get consumers’ attention.”
For many stores, that means discounts and promotions to get people in the door, including more personal and emotional connections through personalized mail and text-message offers, she said.
For now, Wal-Mart is ahead of the curve because many consumers traditionally don’t start Christmas shopping until late October or early November.
As for Black Friday • the day after Thanksgiving, when sated shoppers help put retailers’ ledgers in the black for the year • Ms. Grannis said she expects high traffic but perhaps not high revenues.
Black Friday is not necessarily the biggest shopping day of the season each year, but it kicks off the monthlong final stretch of Christmas shopping.
Blackfriday.info compiles information about Black Friday sales, and already has ads for stores including Kohl’s, Best Buy, Ace Hardware and Macy’s.
Each year, however, more people are browsing in stores but buying online, where retailers often offer the same prices without the hassle of crowds and traffic.
“It’s all in one place, and it’s just super-easy,” said Jennifer Kundrod, an Alexandria resident who runs a small business as a professional organizer. “The deals they have in stores that you wait in line for you can get online.”
In the past few years, retailers have recorded strong online sales on the Monday after Thanksgiving.
Shop.org, a division of NRF, dubbed the phenomenon Cyber Monday in 2005. Ms. Grannis attributed it partly to the incentives given to online shoppers, including free shipping.
Once Shop.org brought attention to Cyber Monday, the NRF launched cyber monday.com, an online resource for shoppers to see at a glance where the sales and promotions are.
Already cybermonday.com has offers from Target.com for free shipping on select toys, and Borders.com and CircuitCity.com for free shipping on minimum orders, all of which last until after Black Friday and some until late December.
With the downturn in the economy and forecasts of lower spending, however, analysts expect consumers will be cutting back on both online and in-store purchases.
“If people don’t have disposable income, they don’t have it wherever they buy, Mr. Kraus said.
• Joseph Weber contributed to this report.
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