Holiday shoppers spending carefully

Deep discounts lure, but analysts wary

November 26, 2007|By Hanah Cho | Hanah Cho,Sun reporter

Discounted sweaters, laptops and personal GPS navigation systems drew large crowds during the Thanksgiving shopping weekend, according to several early surveys, but customers also appeared to temper their spending amid concerns over the economy.

Despite positive signs over the weekend, analysts cautioned yesterday that retailers must keep enticing customers with bargains to sustain momentum through the end of the year. Several retailers and economists say this holiday shopping season could be the worst in five years, in part because of the slumping housing market and higher energy costs.

A report released yesterday by the National Retail Federation said discounts on digital photo frames, cashmere sweaters and small electronics helped push traffic up during the weekend, which is considered the ceremonial beginning of the holiday shopping season. More than 147 million shoppers hit stores this weekend, about 7 million more than last year, the trade group said.

But the retail association also found that the average consumer spent $347.44 this weekend - down 3.5 percent from a year ago. The group attributed the decline to retailers offering deep discounts.

Many retailers expect consumers to spend less this year. But merchants hope the discounts will draw in larger crowds and push up overall sales.

ShopperTrak RCT Corp., which monitors more than 45,000 retail outlets and malls, said sales Friday and Saturday rose 7.2 percent, to $16.4 billion, over the corresponding period last year. Sales on the day after Thanksgiving rose 8.3 percent, to $10.3 billion, compared with a year ago, according to ShopperTrak.

Various retail reports over the weekend indicated robust sales in toys and electronics. Early-bird specials drew die-hard shoppers to stores such as Best Buy and Circuit City. Discount and department stores also seem to be attracting crowds. J.C. Penney said it saw "strong performance across all merchandise categories," on Friday, including fine jewelry, outerwear and young men's and children's assortments.

"I've talked to couple of dozen merchants, and most have been able to beat last year in terms of sales volume," said Karen M. Geary, senior general manager at The Mall in Columbia.

The Thanksgiving weekend is no longer the bellwether for the season that it once was. In the past, retailers have been fooled by positive sales at the start of the season only to be disappointed when sales in December did not meet expectations.

"Black Friday is a great kickoff, but it's definitely not the tone we see the rest of the holiday season," said Kathy Grannis, a spokeswoman for the National Retail Federation. "Retailers are well aware of the restrained spending they have been seeing from consumers. ... The promotions and the planned markdowns will continue through the season in hopes of getting the consumers into the stores through December."

The trade group said yesterday that it is maintaining its projection of a 4 percent increase in sales this month and next, to $474.5 billion, the smallest growth since 2002. That forecast, coupled with weak sales in October, prompted retailers to approach this holiday season with a different strategy.

Retailers such as Wal-Mart, Toys "R" Us and Kohl's offered deep discounts in the weeks before Black Friday, so called because it often was when retailers posted their first profit of the year. And J.C. Penney and Kohl's opened at 4 a.m. Friday, an hour earlier than a year ago.

Nikki Martin, 31, of Severn said she looked for deals when shopping this weekend. Payments on a new car and rising gas prices are forcing her to think hard about what she buys.

Martin went to The Mall in Columbia yesterday to cap off a weekend of shopping. She has completed about 50 percent of her holiday gift buying.

"I could have gotten more done, but I have bills to pay, so I had to stop there," she said. "That was all my budget would allow at this point."

Dianne Kvech, 41, of Woodbine and her 11-year-old daughter Sarah ventured out yesterday to The Mall in Columbia to get ideas for gifts and a feel for bargains.

"I thought the parking lots would be packed, but they weren't," Kvech said.

Britt Beemer of America's Research Group, who interviewed more than 900 shoppers over the weekend, said earlier openings and more specials brought crowds of shoppers Friday. But his research showed that 67.2 percent of Friday shoppers were done by noon.

"The crowds on Saturday and Sunday were disappointing," Beemer said. "I think Friday, if you shopped after 4 p.m., then you had no trouble getting around."

Retail analyst Jay McIntosh, director of consumer products at Ernst & Young, said he saw similar traffic this weekend.

Black Friday is an "exciting time to be shopping, the big kickoff to the holiday season," he said. "The challenge is to do something between now and Christmas to create that excitement so we feel pressure to shop."

Many retailers will do that today with their online sites, hoping that workers returning to office cubicles will shop some more.

Though growth in holiday online sales is expected to slow slightly this year, about 72 million consumers plan to shop online from home or work today, up from 60.7 million last year, according to a survey by Shop.org, the online arm of the National Retail Federation. The survey also found that more retailers are expected to offer promotions today compared with a year ago.

hanah.cho@baltsun.com

The Associated Press contributed to this article.

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