December 12, 2013

U.S. shoppers tighten fists, sobering retailers

Consumers are used to bargains, have learned they can live with less, and are burned out on the frenzy of the season.

By Anne D’innocenzio And Candice Choi
The Associated Press

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

click image to enlarge

Shoppers rest on chairs in the Fashion Show mall in Las Vegas. Data so far this season suggests shifts in the attitudes of U.S. shoppers that could force stores to reshape their strategies.

The Associated Press

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 some of 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.

(Continued on page 2)

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