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Holiday shoppers can expect discounts
Retailers’ frets begin early
Question of the Day
NEW YORK | The Christmas shopping season doesn’t kick off for another six weeks, but retailers already are signaling that they are prepared to discount aggressively to entice shoppers who are still skittish about spending.
Gift buyers are likely to scrutinize every purchase, from $20 toys to $1,000 designer jackets, do their homework before they buy and limit how many stores they visit.
That could put stores in a jam because deadlines for many holiday orders were in spring when the economic recovery looked more solid. Since then, several indicators and consumers’ collective mood have darkened.
Retailers aren’t expecting a flashback to 2008, when they were stung by shoppers who cut spending dramatically after the financial meltdown. Stores had to mark down items as much as 90 percent to clear them out. That left an imprint on 2009, when retailers managed to stay profitable amid sluggish sales by stocking fewer items, creating shortages in certain standbys such as strands of Christmas lights. This year, erratic spending has made it hard to strike the right balance of how much to stock as the recovery has lost steam.
Most forecasters don’t expect shoppers to spend much more this year than they did during last year’s tepid season. Sales rose only 0.4 percent over 2008, when they slumped 3.9 percent, according to the National Retail Federation’s calculations.
“The consumer is being very restrained. They’re closely planning their spending and continue to reduce their shopping trips,” said James Russo, vice president of global consumer insights at the Nielsen Co.
Many retailers say they’re ready to tweak orders where they still can or sharpen discounts to adjust to erratic spending. It’s tricky because many holiday orders usually are made six months to a year in advance.
A lot is riding on holiday sales because they account for up to 40 percent of annual revenue for many retailers. For toy merchants, it’s up to 50 percent.
J.C. Penney Co. Chairman and CEO Mike Ullman told investors last month that the department store chain was prepared to discount this holiday season to bring in shoppers, after holding back a little last year.
“I think this year we have chosen to take a bit more pricing liberty,” he said.
Bill Simon, CEO and president of Wal-Mart’s U.S. business, told investors at another conference a few weeks ago: “We expect a very, very competitive and aggressive Christmas and holiday selling season.”
Retailers on Thursday reported surprisingly strong September sales, fueled by a better back-to-school shopping season. That’s particularly encouraging because the gains are being compared with the return of positive revenue figures that started a year ago. That’s likely to boost stores’ holiday spirits. But those sales were spurred by aggressive discounting, so worries remain until Christmas shopping hits high gear.
The spending patterns for the back-to-school season underscore the purposeful buying that has defined shoppers since the Great Recession. They came out to buy back-to-school items for the first two weeks of September, resulting in strong sales, but pulled back the last two weeks of the month after they bought what they needed.
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