Stores Are Hoping for Fireworks in November
As the holiday shopping season gets underway today, retailers are dangling discounts, contests and giveaways to tempt legions of window shoppers to spend rather than just look.
Thanks to a strong economy, retailers are optimistic that the end of the millennium will be marked by strong sales. So their efforts are focused on retraining consumers to buy early, rather than persist with a bad habit taught by retailers themselves during leaner years: waiting for last-minute markdowns.
Ideally, retailers are hoping they can take a long weekend more notable for traffic than actual sales, and transform it into a three-day selling event. In reality, they might find themselves heavy on promotions and still relatively light at the cash register.
Discounters, who practically invented promotions, and that modern phenomenon, the online retailers, are promising to wage a street fight over prices. And that is forcing retailers up the chain to enter the low-cost fray, whether they can afford to or not.
“The weekend will look strong,” said Michael Niemira, a senior economist with Bank of Tokyo-Mitsubishi in New York. “It’s become a big discount day, or promotions day, which gets people out looking, but not necessarily buying.”
Stores began weeks ago to try to claim a fair share of this year’s large Christmas shopping pie. American Express predicts the average family’s 1999 holiday budget will rise 16%, to $1,558, including gifts, entertaining, travel and decorations.
Bed Bath & Beyond stuck with its own promotional basics, sending out a gift idea flier containing a $5-off coupon. E-tailers began a television advertising blitz and Bloomingdale’s mailed vouchers for an additional 15% off this weekend on any three regular or sale items. Other retailers boosted their newspaper spreads and bombarded favorite customers with direct-mail appeals.
Macy’s got rolling well ahead of its famous Thanksgiving Day parade with early newspaper ads and mass mailings.
“The holiday season has become more promotional,” said Michael Steinberg, chairman and chief executive of Macy’s West. “There are promotional events virtually every week.”
In November, Target began a $2,000 daily national giveaway for its credit card users, with a matching $2,000 for the winner’s favorite school.
“We’re building up to the day after Thanksgiving,” Target spokeswoman Patty Morris said. “We’re hoping that this momentum will carry enough excitement to lure people into our stores after Thanksgiving.”
Niemira of Bank of Tokyo-Mitsubishi said that while earnings and job growth numbers are strong, the pace has slowed, leading him to estimate just a 4.5% sales gain for this Christmas season. Average monthly sales so far this year have been up about 6% in stores open at least a year.
Others are more optimistic. Diane Swonk, chief economist for Bank One in Chicago, forecasts the strongest November and December since 1994, with sales rising 7.7% over last year. Deloitte & Touche, along with the National Retail Federation, is predicting a 6% to 6.5% sales increase this season.
At accounting firm Ernst & Young, Stephanie Shern, global vice chairwoman of the retail and consumer products group, said she expects holiday spending to hover near $185 billion for 1999, up from $175 billion last year.
Analysts also are expecting as much as a tenfold increase in online sales this Christmas season from last year’s roughly $3 billion--which is still, in spite of the hype, only a fraction of the holiday total.
This year’s strong economy is also likely to lessen the pain of the “middles,” the retailers who fall between the new consumer favorites, the specialty stores on one end of the spectrum and the discounters on the other. In general, even the once-moribund department store industry has enjoyed the kind of incremental sales gains enjoyed by their smaller, more nimble competitors--a trend the big stores hope will continue through the end of the year.
Mervyn’s California is planning a variety of shopping incentives this year to increase its holiday stake, including its traditional surprise door prizes for the first 800 shoppers today, a special Saturday contest and additional discount certificates. The department store, which has been overshadowed by parent company Dayton Hudson’s powerful Target stores, will tout the “best prices of the year,” to jump-start holiday sales, said Frank Castiglione, Mervyn’s vice president of marketing.
“We’re trying to create some two-day excitement out of what traditionally has been a one-day holiday,” Castiglione said. “We’re bullish about the holidays. We think the retail season is going to be a good one and we’re excited about the assortment we have.”
Although the Christmas shopping season is very important to nearly all retailers, it represents almost everything in some sectors.
Toys R Us tried to reach holiday customers the first weekend in November with special online shopping deals, hoping to reclaim toy sales lost to such upstarts as EToys and powerhouses such as Wal-Mart.
That gambit was a bit too successful for Toys R Us. Facing a tenfold traffic increase, the Web site caved in, refusing new visitors entry to the site. Still, analysts are projecting between $50 million and $100 million in online sales during the company’s fourth quarter.
Among the toy seller’s other plans to secure holiday sales are extended hours and a free exclusive Pokemon play mat for each store’s first few hundred customers. More important is a better stock of basic toys, such as Mr. Potato Head and Magna Doodle, said Michael Goldstein, Toys R Us chairman and, as of October, acting chief executive.
“Every Christmas is a very important Christmas,” Goldstein said. “Although we had a management change at the top, the other members of the senior management team are seasoned veterans of retailing--even though some are new to Toys R Us--and we’re ready. Our commercials have been very well received, our inserts are well done and much better than they were a year ago.”
Wal-Mart signaled its aggressive holiday pricing plans at the end of October, issuing a 32-page circular filled with a more-than-usual number of reduced-price items, including compact disc players, Barbie dolls and linens. Analysts said they expect even more rollbacks by the No. 1 retailer later in the holiday season.
