Pressure builds as retailers near holiday finish line
New York, December 21, 2013
By Phil Wahba, Dhanya S Kariachan and Lisa Baertle
After buying and remodeling a home, Karin Gilles and her husband, Dave Muilenburg, are not splurging on holiday gifts this year - no matter how drastically retailers slash prices to lift sales in a shopping season that peaks this weekend.
The couple, instead, is focusing on "a few, more-meaningful gifts," said Gilles, 41, who works in public relations for a technology company in California's Silicon Valley.
That approach is not unusual. Many Americans are either spending less or making more practical purchases - some because they haven't benefited from the economic recovery, and others because they have purchased new cars, homes or appliances, leaving less for discretionary items.
Holiday sales are expected to be the same or only slightly stronger than last year, according to the quarterly Global Retail Manufacturers and Importers Survey by Capital Business Credit, which provides funding to retailers' suppliers.
For the final weekend leading up to Christmas, retailers are planning for longer hours and even more aggressive advertising and discounts. Saturday is expected to be the second busiest shopping day of the holiday season, after Black Friday.
"You'll see heavier promotions than last year, pretty much across the board," said Charles O'Shea, senior analyst at Moody's Investors Service.
The biggest discounts, he said, would be at apparel stores - especially those competing for shoppers who are also interested in buying video game consoles.
"These next few days will determine quite a few things." said O'Shea. "Is 50 per cent off enough, or do you have to go 60 per cent off?"
A new Ipsos/Reuters poll released on Friday found that consumers plan to spend about a third less this year than last year on items such as jewellery, toys and electronics. Eight per cent said they would spend more on jewellery, 13 per cent more on toys and 17 per cent more on electronics.
Sales of major appliances, however, rose 18.1 per cent in the month ended November 23, according to the Association of Home Appliance Manufacturers,
"Santa is still going to come, but the goodies in his bag are going to be slightly different," said Patty Edwards, managing director of investments for the Private Client Reserve at US Bank. "There's more of a focus on necessities. We're seeing more need-driven shopping than want-driven shopping.'"
Thom Blischok, chief retail strategist and a senior executive adviser with Booz & Company's retail practice in San Francisco, said many US shoppers are holding back this season because they have fewer discretionary dollars.
"Sixty-five per cent of (Americans) are survivalists. They are living from paycheck to paycheck," he said. "Those folks simply don't have any money to celebrate Christmas."
People with annual income of $70,000 and up account for 33 per cent of US households, but 45 per cent of spending, according to US Census data crunched by AlixPartners. That group has seen the most benefit from the improving economy as rising home and stock prices bolster their net worth.
But even those with higher incomes are holding back.
"The era of 'living large' is now officially in the rear-view mirror," said Ryan McConnell, who heads the Futures Company's US Yankelovich Monitor survey of consumer attitudes and values.
Responses to the 2013 survey suggested that the "hangover effect" of the so-called Great Recession remained prevalent with 61 percent of respondents agreeing with the statement: "I'll never spend my money as freely as I did before the recession."
Albert Sandoval, who does budgeting at a university in Flagstaff, Arizona, agrees with that sentiment. He and his wife feel better about the economy and recently purchased a new car and a 55-inch flat-screen TV. But, both were value-priced model close-outs.
Sandoval, 47, said they changed their shopping habits after the economy tanked in 2008: "If we can't find a deal, we won't buy it."
Competing for shoppers led major retailers to significantly ramp up the frequency of their promotions in the first part of December, according to data prepared for Reuters by Market Track, a firm that provides market research for top retailers and manufacturers.
A group of eight major retail chains, including JC Penney Company, Wal-Mart Stores and Best Buy increased the number of circulars they published between December 3 and December 18 nearly 16 per cent over the comparable period a year earlier.
Those retailers, which also include Sears and Kmart, Macy's, Kohl's Corp and Target Corp ramped up the online deals even more, increasing the number of promotional emails by 54.5 per cent, according to the Market Track data.
The battle for shoppers has also led to the most discount-driven season since the recession, according to analysts and executives.
"There is a quicker turnover of promotions this year, and now several times, within a day," eBay Enterprise CEO Chris Saridakis said. "It's an all-out war."-Reuters