Come, all ye frugal

Stores combat downturn with earlier-than-ever holiday sales, deeper discounts

November 16, 2008|By Andrea K. Walker | Andrea K. Walker,

Nkeng Bailey is determined to give her son and daughter a nice Christmas, but she knows she'll have to make some sacrifices in these tough economic times, such as buying an acoustic guitar for her son instead of the more expensive electric one.

Last week, the 33-year-old geriatric nursing assistant loaded a cart at Kmart with board games, teddy bears, a football and dolls. Then she put all the gifts on layaway to help her better manage holiday spending and "make sure we can still eat and I can keep the heat on."

"Usually I go out and get everything," said Bailey, who lives in Baltimore. "But not this year. Everything is really tight. You have to budget and plan your finances, and you may have to sacrifice and not buy some things you want but don't really need."

Plenty of consumers feel the same anxiety, leaving the nation's retailers desperate to get them to spend. The federal government confirmed those worries Friday, reporting a record drop in retail sales for October.

Consumer confidence is at its lowest level in 40 years. Making matters worse for retailers, the traditional shopping season is five days shorter than last year because Thanksgiving occurs so late.

To lure shoppers, retailers are pushing holiday promotions earlier than ever; they're already offering extended store hours and steep cuts on items such as toys. In recent years, holiday advertisements began to appear before the Halloween candy is sold out, but the big shopping season has crept even earlier this year as retailers grapple with the economic downturn.

Wal-Mart led the way for holiday bargains by slashing the price on toys well before Halloween. The world's largest retailer also announced it will alert shoppers about holiday deals through text-messaging.

Other retailers have also launched sales and discounts traditionally pegged to the day after Thanksgiving, the typical start of the holiday season. Kmart began hosting "Black Friday Weekends" two weeks ago. Stores such as Kohl's and JCPenney have extended hours to midnight on some days, another shopping tradition once reserved for after Thanksgiving.

Retailers are also appealing to consumers with marketing campaigns and other programs that promote ways to stretch a budget or save a few dollars. "Gifts That Fit Your Budget Beautifully," reads one Kohl's tagline. Sears will begin offering layaway today after seeing how cash-strapped customers have responded to it at a sister company "Retailers need to do everything they can to get to the consumer early," said Margo Georgiadis, executive vice president and chief marketing officer for Discover Financial Services.

For some retailers, it's a fight for survival. Many stores will be forced out of business because of weak consumer spending, analysts predict. Circuit City and Boscov's department stores are among those that have been forced to declare bankruptcy. Liquidation sales at stores such as Tweeter and Linens 'n Things might put even more pressure on other retailers.

The National Retail Federation says the holiday season, when most retailers ring up the bulk of their sales for the year, will be the worst since 2002.

The trade group predicts that holiday sales will increase 2.2 percent to $470 billion, well below the 10-year average increase of 4.4 percent. That's the slowest growth since 2002, when sales rose 1.3 percent. The International Council of Shopping Centers predicts a 1.7 percent sales increase.

October sales figures show that consumers are holding on tightly to their cash - and the problem might be worse than retailers thought. Best Buy Co. cut its earnings forecast last week, saying changes in consumer behavior were "seismic" and created "the most difficult climate" the company had seen in its 42-year history. Macy's warned that the holiday season would be "a nail-biter."

Monica Stein, 38, is one of many shoppers planning to buy fewer gifts this year. Her family has decided to buy only for the children. The stay-at-home mother began shopping last month and will parcel her spending to avoid a huge credit card bill in January. She has taken advantage of the early sales, buying clothes at Old Navy and toys at Wal-Mart.

"We're definitely cutting back this year," said Stein as she shopped recently at Kohl's in Timonium with her 2-year-old son, Ryan. "It seems like all of our bills go up, but the paycheck remains the same."

Mamie Rader, a 57-year-old nurse who lives in Timonium, said the economy has made her nervous, even though it has had a minimal effect on her lifestyle. She took advantage of a rainy day recently to do what she called "Christmas browsing" at Kohl's. The knitter said she'll give away more handmade gifts this year and is looking for bargains. She also plans to cut out unneeded gifts to adults and instead will buy for a needy family.

"I'm thinking more about why I'm shopping and what I'm spending," Rader said as she looked at photo frames. "I'm being less frivolous."

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