RAPAPORT…
the outlines emerging of a difficult holiday shopping season. “I think it’s
going to be a very mixed season — in other words, for the vast majority of
retailers, it is going to be a very, very tough December,” remarked James Dion,
president of Dionco Inc., a Chicago-based retail consultancy firm. “There is
definitely a possibility that Scrooge is going to reign for many this Christmas
season.”
Many analysts are forecasting a less-than-average holiday
shopping season due to a sharp drop in consumer confidence over the past few
months. “When we asked consumers if they planned to spend more or less this
season than they did last year, around 20 percent said more, while 80 percent
said less,” observed Britt Beemer, chairman and chief executive officer (CEO)
of America’s Research Group, based in Charleston, South Carolina. “The consumer
is scared of what is going on,” agreed Dion. “And we are seeing that they have
already started to pull back on their spending.”
Retailers Optimistic
Not all, however, are feeling pessimistic about this
upcoming holiday season. “Throughout the retail community, I think the
retailers and retail associations are actually forecasting a good holiday
shopping season,” said Ray Florio, senior executive of Chicago-based global
management consultancy firm Accenture.
The reasoning behind retailers’ optimism, Florio added, was
that “In September, things have been pretty stable, as there was a good
performance in the back-to-school shopping sales.” He is personally skeptical,
however, that this will translate into a strong holiday season. “I am a bit
hesitant to buy into that because there is a large amount of uncertainty out
there right now.”
Discounting and Deals
Analysts predict retailers will most likely offer a large
number of discounts and deals on their merchandise to attract frugal consumers
hard-hit by the tepid economy. “Retailers should understand that the customer
is looking for deals, value and bargains. They are looking to stretch their
dollars,” advised Dion. How far retailers can stretch their deals, added
Beemer, will play a pivotal role in just how successful the holiday season will
be. “If they want a big Christmas, they can make one, and if they want a
smaller one, they can make that, too.”
One certainty this December is that brick-and-mortar
retailers will face pressure to discount from online vendors and educated
shoppers. “You can expect many more consumers to be walking through the aisles
with their smart phones, scanning barcodes and looking around for who has the
lowest price, or ordering online this season,” said Florio. “Things are not
going to be business as usual — the information age has really taken over, with
bad and good effects.”
Discounting to attract customers, however, may be a
double-edged sword. While low prices inevitably help merchandise sell, they
also cheapen its perceived value. “Retailers who give into discounting need to
have a more long-term focus. Because in the end, it may damage the brand —
especially in the high end, where you don’t want to be associated with other
value brands out there,” warned Florio.
Will Luxury Hold?
Though most analysts expect luxury retailers to be more
resilient in a difficult holiday season, many still are worried that current
economic conditions could prove too much of a burden for the luxury sector to
bear. “Luxury retail has been ‘okay’ so far, but if the stock market continues
to be bumpy, it will impact a lot of affluent consumer spending — affluent
consumers are very sensitive to the market,” noted Florio.
Erratic price increases for items like jewelry and diamonds
could further dampen luxury spending this season. “Two of the things that
affect jewelry and diamond demand are the volatility and the price. And we are
seeing that both these factors are high, so that is likely to hold back
consumers or reduce demand for jewelry, diamonds and other metals,” said Rohit
Savant, senior commodity analyst at New York–based research and consulting firm
CPM Group.
Caution Ahead
Analysts are warning retailers to tread lightly this
December and prepare for scenarios that will likely be worse than expected. “If
I were a retailer, I would really watch my purchases, watch what I bought and
try to not overbuy,” said Dion.
“Things are looking good right now,” added Florio. “It’s the
same way you advise anybody who is saving and budgeting — you hope for the
best, but prepare for the worst. And this is especially the case now, with all
the uncertainty that is out there.“
