Monday, April 21, 2014
FAIRFIELD-SUISUN, CALIFORNIA
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Holiday shopping spree not for everyone

NEW YORK — Many Americans are watching the annual holiday spending ritual from the sidelines this year.

Money is still tight for some. Others are fed up with commercialism of the holidays. Still others are waiting for bigger bargains.

And people like Lark-Marie Anton Menchini are more thoughtful about their purchases. The New York public relations executive says in the past she’d buy her children up to eight Christmas gifts each, but this year they’re getting three apiece. The leftover money is going toward their college savings.

“We told them Santa is . . . being very conscious of how many gifts he puts on his sleigh,” Menchini, 36, says.

Despite an improving economy, most workers are not seeing meaningful wage increases. And those who can splurge say the brash commercialism around the holidays – many more stores are opening for business on Thanksgiving — is a turnoff.

But perhaps the biggest factor is that shoppers are less motivated than ever by holiday sales. Since the Great Recession, retailers have been dangling more discounts throughout the year, so Americans have learned to hold out for even deeper holiday savings on clothes, electronics and more. To stay competitive and boost sales, retailers are slashing prices further during their busiest season of the year, which is cutting into their own profit margins.

There aren’t reliable figures on how many people plan to shop during the holidays. But early data points to a shift in holiday spending.

The National Retail Federation estimates that sales during the start to the official start to season – the four-day weekend that began on Thanksgiving Day – dropped 2.9 percent from last year to $57.4 billion. That would mark the first decline in the seven years the trade group has tracked spending.

And during the week afterward – which ended on Sunday – sales fell another 2.9 percent compared with a year ago, according to data tracker ShopperTrak, which did not give dollar amounts. Meanwhile, the number of shoppers in stores plunged nearly 22 percent.

The numbers are sobering for retailers, which depend on making up to 40 percent of their revenue in the last two months of the year. They suggest shifts in the attitudes of U.S. shoppers that could force stores to reshape their strategies:

Shoppers want deals

Stores slashed prices during the recession to get financially-strapped shoppers in stores and to better compete with the cheaper prices of online retailers like Amazon. But shoppers got used to those deals and now won’t buy without them. The constant discounting has blunted the “wow” factor of sales during the holidays.

For instance, some retailers were offering discounts of 40 percent or more on the day after Thanksgiving known as Black Friday. But Jennifer Ambrosh, 40 was unimpressed with the “deals” she saw on that day. “There’s a lot of hype, but … the deals aren’t that good,” Ambrosh, an accountant, says.

Overall, the retail federation expects spending in November and December to rise 3.9 percent to $602.1 billion. But to get that growth, analysts say retailers will need to discount heavily, which eats away profits.

There are signs that profits for the quarter that includes the holiday season are being hurt by the discounting. Wal-Mart and American Eagle Outfitters are among 47 retailers that have slashed their outlooks for either the quarter or the year.

Overall, retailers’ earnings growth is expected to be up 2.1 percent, according to research firm Retail Metrics. That would be the worst performance since profit fell 6.7 percent in the second quarter of 2009 when the country was in a recession.

Scrutinizing purchases

The recession not only taught Americans to expect bargains. It also showed them that they could make do with less. And in the economic recovery, many have maintained that frugality.

So whereas in a better economy, Americans would make both big and small purchases, in this economy they’re being more thoughtful and making choices about what to buy.

That hasn’t boded well for retailers that sell clothing, shoes and holiday items. That’s because Americans are buying more big-ticket items over the holidays.

Government figures show that retail sales were up 0.7 percent in November, the biggest gain in five months. But the increase was led by autos, appliances and electronics.

Auto sales jumped 1.8 percent, furniture purchases rose 1.2 percent and sales at electronics and appliances stores rose 1.1 percent. Meanwhile, sales at department stores and clothing chains were weak.

Americans are leaning toward big purchases for two reasons. They want to take advantage of low interest rates. And since many paid down debt since the recession, they feel more comfortable using credit cards again for such purchases.

But they won’t do that and buy smaller items. “This is still a weak, fragile shopper,” says Craig Johnson, president of Customer Growth Partners, a retail consultancy.

Retailers including Macy’s and Target in recent months have said that shoppers’ focus on big-ticket items has put a damper on sales of discretionary items, and the retail federation says it has hurt holiday sales in particular.

Holiday consumerism

Black Friday used to be the official kickoff to the buying season, but more than a dozen chains opened on Thanksgiving this year.

That didn’t sit well with some shoppers who viewed it as an encroachment on family time. Some threatened to boycott stores that opened on the holiday, while others decided to forgo shopping altogether.

In a poll of 6,200 shoppers conducted for the retail federation prior to the start of the season, 38 percent didn’t plan to shop during the Thanksgiving weekend, up from 34.8 percent the year before.

Ruth Kleinman, 30, isn’t planning to shop the entire season in part because she’s disheartened by the holiday openings. The New Yorker says the holiday season “has really disintegrated.”

While some shoppers didn’t approve, analysts say stores will need to open on the holiday to appeal to the masses. Overall sales declined over the holiday weekend, but several retailers said there were big crowds on Thanksgiving. “Customers clearly showed that they wanted to be out shopping,” says Amy von Walter, a Best Buy spokeswoman.

Analysts say stores will need to redefine Thanksgiving as a family tradition beyond sitting at the table eating turkey to make more shoppers comfortable.

“They have to show that they’re maintaining a family tradition in new ways,” says Marshal Cohen, chief retail analyst at market research firm NPD Group.

The Associated Press

The Associated Press

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