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Can Retailers Get Consumers into the Christmas Spirit?
Saturday, Nov. 01, 2008
Can Retailers Get Consumers into the Christmas Spirit?
By Kristina Dell
The jack-o-lanterns are still on the stoop, but already we're seeing prices for holiday ornaments slashed in half at J.C. Penney and pricey toys at Wal-Mart marked down to $10 a pop. Home Depot skipped Halloween altogether, piling up Christmas trees by early October.
Retailers always engage in some Christmas calculus to get you to loosen your wallet during the holiday season, but this year it feels a little more desperate. Stores are starting their promotions earlier in the hopes of luring in customers quickly to spend money — before they're tapped out or the markdowns get any steeper. Black Friday, the Friday after Thanksgiving, is the traditional kick-off of the holiday shopping frenzy, and it will still be the biggest sales generator of the season. But don't sweat it if you can't shop that day. "We will start to get Black Friday level deals every week," says Brad Olson, owner of GottaDeal.com, an online bargain site.
One reason for the earlier discounts: a shorter window to shop. Black Friday falls on November 28th this year, the latest date possible. That means five fewer shopping days (and one less weekend) between Thanksgiving and Christmas than last year. "Stores are trying to grab their share of consumers earlier because they don't think there will be that much to go around," says Stacy Janiak, vice chairman and U.S. retail leader at Deloitte LLP. "If they can get people to shop now it will be better than waiting."
For many retailers, holiday sales account for as much as 40% of their annual revenue and up to 80% of their profits — hence the name Black Friday or the day when stores traditionally go from being "in the red" to "in the black." That's an overstatement, but with holiday forecasts predicting flat to 1% sales growth — according to Bain & Co and Archstone Consulting respectively — retailers are anticipating one of the toughest holiday shopping periods in decades. Consumers cut back spending in the July to September quarter by the largest amount in 28 years as they grappled with a tanking economy, tightening credit and looming lay-offs. "It's going to take excruciating deals to get people into the stores this year," says Olson. "Stores need to walk the line between big deals and still making money."
The key for retailers will be managing inventory smartly. The economy has been braking for months, so many stores have already adjusted inventories accordingly. "Don't forget, this slowdown started hitting a lot of retailers back in December of last year," says Darrell Rigby, head of Bain & Company's global retail sales practice. "It might be challenging, but it's not completely surprising." Still, no one predicted a Wall Street implosion right before Santa Claus' arrival.
So far, Sears, which has been struggling, is leading the promotional pack, announcing 450 door busters, or specially priced items, from 5 a.m . to 11 a.m. on Black Friday. Shoppers will find deep discounts in electronics, like a Sony Blu-ray Disc player for $179.99, down from $300, and a 46-in. Sharp LCD HDTV for $899.99, reduced from $1,400. Although Wal-Mart already marked down 10 toys to $10, from butterfly-winged Barbie Mariposa to Fur Real Newborn Animals, its full Black Friday prices won't be announced until November 24.
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