This holiday season should prove especially interesting for
vendors and suppliers.
I wonder if we will see some companies close and mergers occur next
year after the holiday numbers are tallied?
How are you planning on spending your holiday HSM money?
Desperate retailers seek holiday season rescue
by Rob Lever Rob Lever
Sat Nov 21, 11:32 pm ET
WASHINGTON (AFP) – US retailers are taking desperate measures to spark
holiday sales in the face of what promises to be another troubled year-
end shopping season.
Merchants are furiously working to ramp up consumer interest ahead of
"Black Friday," on November 27, the day after the Thanksgiving Day
holiday that marks the traditional kickoff of the holiday gift season.
Some are promising price cuts of 50 percent or more on some hot
electronics, and planning for big events to bring out shoppers for big
Analysts say retailers are struggling to find the right balance of
inventories and discounts while cautious consumers are hesitating
about how much and when to buy.
Clothing retailer Gap has started early with 25 percent discounts,
while Wal-Mart and Target are offering online shoppers free or
discounted shipping on many items. JC Penney is boosting Black Friday
promotions and will open its doors at 4 am for the best deals.
Steven Dennis, executive-in-residence at Southern Methodist
University's JC Penney Center for Retail Excellence, said price cuts
may be deep but are not as broad as some might expect.
"I think most retailers are desperate for market share," he said.
"Everyone seems to have the view that business is gong to be flat and
it is a battle for market share."
But Dennis said retailers are not in the dire position of last year,
when they had large amounts of inventory. So price cuts will mainly be
on a few high-profile items to get consumers into the store "and hope
they get a disproportionate share of their spending."
"I don't think deals will be so widespread."
Dennis said that with retailers focused on lean inventories, most will
be able to post profits even if sales are lower than in 2008.
Diane Swonk, chief economist at Mesirow Financial, said she sees
overall holiday retail sales growing 1.6 percent from last year, but
that this will essentially be flat when adjusted for inflation.
"The quality of spending this holiday season will still be dismal,
however, when compared to Christmases past," she said.
Swonk said retailers who don't join the heavy discounting "might be
disappointed with the results."
"Consumers were already playing chicken with retailers to get better
discounting ahead of the recession and there is no reason to believe
they won't be even more cautious about paying full price now, given
the sorry state of their balance sheets."
Scott Hoyt at Moody's Economy.com agrees the outlook is grim, with
unemployment running above 10 percent.
Retail spending "will look good compared with last year, but poor by
any other standard," Hoyt said.
"Though it will be the first nonrecession holiday shopping season in
three years, 2009 will again be trying for retailers," he added.
"In an effort to reduce discounting, retailers have cut inventories to
well below year-ago levels and are expected to keep them low through
the holiday season. If merchants have underestimated demand, they
could end up with bare shelves, losing sales."
Jon Ogg at 24/7 Wall Street said retailers are anxious ahead of Black
Friday -- which by tradition is the day in which merchants swing from
the red into profit for the first time in the year.
"This is the day that retailers look forward to all year and
critically depend upon as an anchor to how each retailer's full year
earnings results turn out," he said.
"What is amazing is just how much of the deal-making is already out
before the holiday season starts as retailers key off of each other.
It is almost impossible to avoid thinking how such a promotional
Christmas and holiday season in 2009 is going to add pressure to
margins at almost all of the first-line retailers."
A survey by Visa USA found consumers plan on spending 161 dollars less
on holiday shopping than last year and 368 dollars less than they
planned two years ago.
In one sign of the times, several retailers have brought back the
layaway plan, which enables customers to put down a deposit to hold
merchandise until the full amount can be paid. Sears, Kmart and Toys R
US are among those offering the plan, and a new online version of the
program is offered through eLayaway.com.
One reason for this is that consumers are stretched and may have less
acess to credit.
A survey for the National Retail Federation found 24.9 percent of
holiday shoppers will pay for gifts this year with cash, up from last
year?s 22.8 percent. Also, 42.5 percent of shoppers plan to pay
primarily with debit or check cards and those using credit cards is
expected to fall 10.1 percent.
"With many holiday shoppers focused on spending within their limits,
it's no surprise that fewer people will be relying on credit cards
this year," said Tracy Mullin, the NRF's president and chief