BUSINESS

One-day sales aim to reignite retail

Two battle-tested retail behemoths are squaring off Wednesday with competing one-day sales online as they try to lure shoppers, who have been keeping a tight fist on their pocketbooks.

Months before the beginning of the crucial holiday season, Amazon.com Inc. and Wal-Mart Stores Inc. are girding for a sales event that they think could turn into one of the massive events of the year.

The event comes a day after the Commerce Department reported that retail sales dropped 0.3% in June from the previous month. The report also revised May retail sales increases downward to 1% from a previous estimate of 1.2%.

At the FIGat7th mall in downtown Los Angeles, many shoppers said they were checking their spending despite an overall lift in the economy.

“I just need less stuff and I don't need to buy as much as I used to,” said college student Lizbeth Beltran. “I'm saving that money.”

The Boyle Heights resident said she was shopping less and bulking up her bank account for a vacation. The 21-year-old said her entire family was feeling more optimistic about the economy but had been trained by years of recession to be more mindful about spending on frivolous items.

To combat shopping ennui, Amazon is celebrating its 20th anniversary by offering more discounts starting at midnight than it offers on Black Friday, the huge shopping day following Thanksgiving. The Wednesday sale, announced last week, will be available only to Prime members, who pay a $99 annual fee.

Not to be outdone, Wal-Mart on Monday announced its own rival one-day sale — also on Wednesday. It will include more than 2,000 online-only discounts. For at least 30 days, the retailer said, it also is slashing the minimum order to qualify for free shipping to $35 from $50.

Analysts said the heavy promotions reflect increasing competition for shoppers who are still reluctant to spend despite an economy on the upswing.

Many economists had expected that lower gasoline prices nationally would help kick-start spending, but so far, consumers aren't buying that idea. Hampered by slow wage growth and continued worries about the economy, many Americans have chosen to bank their gas savings instead, analysts said.

In June, hourly wages rose 2% from a year ago, according to the Labor Department. The unemployment rate last month dropped to 5.3%, the lowest in more than seven years. But that drop was largely the result of workers leaving the labor force.

The June retail sales report “shows that consumers are not eager to boost spending, despite a solid jobs market,” said Alan MacEachin, corporate economist at the Navy Federal Credit Union. “Consumers may need to see faster wage growth before they are comfortable enough to raise their spending.”

The reluctance to buy has ripple effects through the entire economy. Consumer spending accounts for more than two-thirds of economic activity, making retail sales a key gauge of the nation's economic health.

Many economists, though, remain optimistic that consumers will open their wallets as summer wanes and children head back to school.

“There's no reason to believe this is a continuing problem,” said Jack Kleinhenz, chief economist at the National Retail Federation. “Heading into the back-to-school season and through the remainder of the year, consumers should find the appetite to spend.”

Once shops start bringing in autumn merchandise, many Americans may be enticed to do a bit of spending, said Perc Pineda, senior economist at the Credit Union National Assn.

Retail sales should grow 2% to 3% in the latter half of this year, he predicted. Californians should be relatively unshackled and ready for shopping in the coming months, he said: The average delinquency rate on loans currently is only 0.5% statewide, compared with the national average of 1.6%.

“People have the disposable income, but they are cautious about where they spend their money,” Pineda said. “Businesses are not innovating and not offering something new. It's not surprising that on a monthly basis, you have actual negative sales growth.”

In June, eight out of 13 categories reported a sales drop.

Motor vehicle and parts dealers, which suffered a 1.1% decline, helped drag down sales. Excluding that volatile category, retail sales fell 0.1%.

Many households cut spending on goods such as furniture, which slipped 1.6%, and clothing and accessories, which fell 1.5%. Building and garden suppliers reported a 1.3% decline.

shan.li@latimes.com

 

Copyright © 2016, Los Angeles Times

UPDATE

7:29 p.m.: Updates with additional details and background

Originally posted at 6:24 a.m.

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