HAPPY HOLIDAY FOR RETAILERS? : NEWS ANALYSIS
Tradition usually dies slowly. However, responding to a lackluster economy the last two years, retailers have been hastening the demise of the commercial custom known as The Friday After Thanksgiving--the annual cue for holiday shopping for decades--by launching their seasonal sales promotions earlier.
The outlook for the holiday season is brighter this year--but still unclear. Although retail sales in California are still weak, merchants nationwide reported that sales in October climbed from the disappointing levels of the previous two months. The Commerce Department reported Friday that retail sales increased 0.9% in October, raising hopes for a more robust holiday shopping season. On the other hand, strong October sales may only be a sign that consumers are indeed shopping earlier this year.
In the wake of an election that will bring a change in presidents, retailers are hoping that consumers will be more optimistic about the economy and more willing to change their stingy habits.
This holiday shopping season is important to retailers and the Clinton Administration because consumers can help spur a quicker economic rebound by spending more freely.
The view of the Christmas shopping future is uncertain because retailers are haunted by the Scrooge-like attitudes reflected in the most recent consumer confidence index findings of the Conference Board, a New York-based research group. Consumer confidence, declining since June, was actually lower in September than a year ago, according to the Conference Board.
However, other polls indicate that consumers may be more upbeat. The mixed results show that while some consumers--for example, many of the unemployed--are more pessimistic, some are actually planning to spend more this year.
A number of polls have already made it clear that consumers this year are more bargain-oriented.
Discount stores such as Wal-Mart and Kmart are expected to see a sizable increase in sales. However, many department store chains are vying for price-conscious shoppers by cutting prices and launching sales promotions early, industry observers say.
“Because the economy has been weak, it’s now fashionable to shop for bargains at discount stores,” said Larry Gresham, a marketing professor at the Center for Retailing Studies at Texas A&M; University. “Retailers hear that consumers will be looking to discounters. The pie is not going to grow significantly, and department stores are trying to get a bigger share by holding more sales promotions early. It will be a very competitive season.”
Sellers of consumer electronics and other retailers have been touting their bargains at events with names such as “Pre-Christmas Sale.” Other examples of early bird campaigns include:
* Los Angeles-based Carter Hawley Hale Stores opened Christmas Outlet sections at its Broadway stores Nov. 1. Shoppers can buy Carter Hawley’s popular Jingle Bears stuffed toys and ceramic miniatures at the outlets. They also offer information to shoppers who want to purchase gifts for needy children.
* J. C. Penney tried to generate early holiday sales for its catalogue business by offering a $10 coupon to those who made a purchase of $50 or more before Nov. 9.
* Marshall Field’s tried to prompt buyers to act even sooner with ads for its late October “Field Days” sale. “Today’s your last chance to save on everything for you, your family and the holidays ahead,” the ad said.
* Sav-On stores in California are promoting an “early bird” sale, offering discounts on a wide range of goods for a limited time.
* Sears earlier this month issued its 1992 Wish Book catalogue, 800 pages of toys, electronics, appliances and fashion. “Twas two months before Christmas and Santas around the country are busy filling their sacks for the holidays,” said a promotional release about the Wish Book.
Many retailers are angling for shoppers early to try to avoid a repeat of last year, when they were stuck with a lot of inventory late in the shopping season. Some retailers last year took losses when they had to offer big discounts to sell off that bloated stock in late December, said David Stewart, a USC marketing professor who studies consumer behavior.
“By starting their sales campaigns early, retailers can better anticipate their sales and get better control on the flow of merchandise,” Stewart said. “They can eliminate the need for last-minute sales by convincing consumers that they will not necessarily get better deals by waiting.”
However, Stewart does not expect a major increase in holiday season sales because there is no evidence that early-bird shoppers spend more overall.
To be sure, retailers traditionally realize 40% of their holiday sales in the last two weeks before Christmas. However, some studies show that more consumers are planning to get an early start on the shopping season.
Cilex Mosco, 18, of Los Angeles is among those shopping early this year. Mosco recently browsed stores at the Beverly Center in search of trendy baggy clothing known as “old school” fashion.
“I’ll be buying more (Christmas) gifts this year because I have more friends,” Mosco said. “I’m buying more clothing because there are more interesting styles this year.”
Jose Torres, 17, of Los Angeles, another Beverly Center shopper, said he felt more confident about the economy.
“I think it’s safe to spend more this year,” he said.
In contrast, Carolyn Clines of West Hollywood said she will be spending less on holiday gifts unless she finds a job. Clines, at the Beverly Center on a job interview, is part of the growing ranks of Southland’s unemployed.
“If I don’t find at least two jobs by Christmas, I’ll close my doors, close my drapes and hide,” she joked.
Across town at the Sherman Oaks Galleria, Mary Knox of Van Nuys was keeping track of her spending with a hand-sized computer.
“I’ll be spending the same amount as last year,” she said. “I’m keeping track of my spending because I don’t want to purchase too much.”
More retailers are studying consumer attitude surveys to determine the best methods for luring early buyers. Accounting and business services giant Arthur Andersen & Co. is among those polling to find out how much consumers will spend and which kinds of stores they will patronize.
“Industrywide, sales will be a little better than last year--but that isn’t saying that much,” said John Golisch, Los Angeles-based retail services director at Arthur Andersen.
Golisch predicted that nationwide holiday season sales will rise 5% from last year’s levels. He said discount chains will have the most profitable Christmas.
The International Mass Retail Assn., a Washington-based trade group representing 130 discount store and catalogue operators, also expects discounters to fare better than department stores catering to mid- and upscale shoppers, said Bob Verdisco, the group’s president.
One encouraging sign for retailers is a nationwide Los Angeles Times Poll conducted late last month that showed a greater percentage of consumers plan to spend at least as much as last year, compared to the number responding to the same question in 1991. Fewer respondents said they would spend less.
Another Los Angeles Times Poll question measured how much consumers plan to spend this holiday season. The median spending figure this year was higher than the median from last year’s survey.
Some studies show a mix of consumer sentiment. For example, an annual Mastercard holiday survey conducted in mid-October found that more consumers would spend the same as last year; but there was also an increase in the number planning to spend less.
Retailers’ expectations are also mixed.
“We’re cautiously optimistic,” said Jim Abrams, spokesman for St. Louis-based May Department Stores. “We worked hard to bring in exceptional merchandise at good prices.”
Others are less upbeat about the industry and uncertain about their own prospects in this promotions-heavy season.
“It’s going to be a tough season because the recession is still in place and there’s no sign that it’s lifting,” said William Dombrowski, a spokesman for Los Angeles-based Carter Hawley Hale Stores, owner of the Broadway chain.
The Season for Profit Consumers are sending mixed messages to retailers as the important holiday season approaches. Retail sales are improving and polls indicate that consumers are likely to spend more on gifts than last year. Still consumer confidence remains very low, a fact that could depress spending and result in another disappointing selling season. Retail sales have improved slowly . . . Department store operators are cautiously optimistic approaching this holiday season in part because of the steady improvement in retail sales over the past 12 months. Many retailers are hoping Bill Clinton’s election will loosen consumers’ pursestrings further. Date Sales (in billions of dollars) Sept. 1992: 161.1 Source: U.S. Commerce Department
Even as consumer confidence lags . . . Consumer confidence--a major determinent in consumer spending--has been declining since June and was lower in October than it was a year ago, according to an index compiled by the Conference Board. An index of 90 or more is considered healthy; 80 or less is considered to be poor. Date Index (base is 100) Oct. 1992: 53.0 Source: The Conference Board
But hopes still emerge of greater holiday spending. When asked how much they will spend on gifts this holiday season, a majority of consumers plan to spend the same or more. In 1991, a majority planned to spend less. When asked how much they would spend this holiday season, consumers in all geographic areas said they would spend about the same--except for the West, where a greater increase in spending is expected. Overall in the country, spending is expected to be slightly more. Source: Los Angeles Times Polls of Oct. 24-26 based on 1,829 respondents, and Nov. 21-24, 1991. Margin of error is plus or minus 3 points.
