Pressure builds as retailers near holiday finish line

December 23, 2013 - 3:59:52 am
NEW YORK/ LOS ANGELES: 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 percent off enough, or do you have to go 60 percent off?”

A new Ipsos/Reuters poll found that consumers plan to spend about a third less this year than last year on items such as jewellery, toys and electronics. Eight percent said they would spend more on jewellery, 13 percent more on toys and 17 percent more on electronics.

Sales of major appliances, however, rose 18.1 percent 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 percent 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 percent of US households, but 45 percent 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.

Reuters
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