A blue Christmas for U.S. retailers could save shoppers some green this year as stores compete for traffic amid a looming recession that has clamped down spending. U. of I. marketing expert Cele Otnes, a professor of business administration, discusses potential bargains and when to look for them in an interview with News Bureau Business & Law Editor Jan Dennis.
Analysts predict that retail sales this holiday season will fall for the first time in more than two decades. What do you foresee, and will sales in Illinois mirror the nation?
It will definitely not be a merry Christmas for retailers in the U.S. – or around the globe, for that matter. The latest predictions are growth rates from 0 to 2 percent for retailers, although when “e-tail” sales are factored in, the picture is a little brighter for those firms who rely heavily on these sales. To put this in perspective, retailers don’t really get that excited about their holiday sales figures unless they reflect a 4-6 percent increase. So, it’s going to be “ho, ho, woe” for most of the retailers this year. As far as retailers in Illinois, the latest figures show that the state’s projected sales are following a similar pattern to that of the nation (and not any better, unfortunately). David Vite, the president of the Illinois Retail Merchants Association, recently noted that the revised projections for Illinois retailers are predicting zero – and in some cases, negative – growth for December.
Might retailers offer better bargains than usual as they try to lure shoppers who plan to spend less as a result of an economy that many believe is already in a recession?
The fact that we saw discounts of up to 30 percent storewide, rather than on selected items, at lots of popular niche retailers like Express two weeks before Thanksgiving suggests that the more broad-based retailers will probably follow with deep discounts. Of course, many will wait to see what happens on Black Friday – the Friday after Thanksgiving, typically the busiest shopping day of the year. Retailers are also trying to get shoppers in the store prior to Thanksgiving, since the lateness of that holiday means there are only 27 shopping days between Thanksgiving and Christmas. Many people still regard the day after Thanksgiving as the start of the shopping season, but the Christmas trees we’ve seen cropping up in stores since September are indications that retailers have been working very hard to change that mindset in the past few years. And with the economy in its current state, prodding consumers is even more important this year.
What kinds of merchandise are most likely to see discounts, and which ones are more apt to hold the line on prices?
It’s usually the case that the “cool” products – the ones high in demand, like Wii systems, iPods, iPhones, and other hot electronic items – will not see a reduction in prices. These “badge” products are too valuable to consumers’ self-image, and companies don’t have to discount them because consumers will make other sacrifices to get them. But products where there is a lot of competition and many parity choices – such as clothes, jewelry, home accessories – will probably see some deep discounts. In addition, there are a few retailers such as Linens-N-Things that are going out of business, and the discounts at these stores are likely to be significant.
Will it matter when you shop in terms of finding bargains? Should shoppers rush out the day after Thanksgiving, or wait until closer to Christmas?
Many articles that are counseling consumers on how to get the most for their money this holiday season suggest shopping online as much as possible, because some sites will compare prices for you. In addition, incentives such as free shipping and rebates are pretty common right now. If a consumer doesn’t have to pay sales tax on these items, that’s another chunk of savings. I think that if shoppers want an item that they know is a badge product, and that will make a person on their gift list feel truly valued and happy, they should buy these products when they see them after they shop around a bit. But if they wait until closer to Christmas, they may be disappointed with respect to those particular items. For other items, where the recipient wants more choice, shoppers can always give gift cards that can be used after Christmas. Interestingly, though, people aren’t perceiving gift cards as good values because they can’t get discounts on them, and sales of cards is projected to drop by as much as 33 percent. So, they are good values for the recipient (especially if used during January and February, which are likely to be ghastly for retailers), but not for givers.
