Discount stores pitch sales early for Christmas
Posted on Sunday, November 2, 2008
Halloween was only two days ago, but Wal-Mart Stores Inc. has been promoting popular toys for Christmas, priced at $ 10, for more than a month, a move that prompted other retailers to offer similar deals.
Most Christmas shopping forecasters expect sales gains to be more sluggish than they have been in years, a result of shrinking consumer credit and fears that the economy will only get worse.
Amid the bleak forecasts, however, gasoline prices have plummeted 40 percent in a month and a half, easing the economic pain at the pump. And with anticipated heavy retail promotions aimed at diverting people’s minds from the sporadic stock market seesaw, focused shoppers could find some of the best Christmas deals in years.
And shoppers are ready, according to Information Resources Inc., a Chicago-based market research and consulting firm.
“There’s a moderate backlash. They’ve had all the economic bad news they can take,” said Thom Blischok, the company’s president for innovation and consulting.
“Most people are talking about doom and gloom. We’re not,” he said.
He doesn’t envision shoppers bingeing on big-ticket items this Christmas season. Rather, he said, shoppers surveyed by the company indicate they plan to shop early and expect good deals, and will keep shopping until they find them.
Three out of four shoppers the firm surveyed said they intend to give the same number or more gifts than last year, and nearly two-thirds said they intend to buy as many or more expensive gifts as they have in the past.
The survey results and Blischok’s optimism are not universally shared in the retail business.
Don Delzell, co-chief executive officer of consulting firm Future Merchants in Sherman Oaks, Calif., said the credit squeeze that is hitting many consumers will dampen sales.
“In tough economic times, people tend to use credit for Christmas. They don’t do what the reasonable, logical thing is to do,” he said.
But increasingly, Delzell said, card holders have seen lower limits imposed on their credit cards, along with higher interest rates that can boost a $ 150-a-month minimum payment to $ 225.
“Where is that going to come from ? You didn’t get anything extra for that,” he said.
Delzell said that, despite some good economic news such as the drop in gasoline prices, he expects to see changes in shoppers’ spending patterns this year as credit dries up for some. An older child who may have gotten the Guitar Hero game last year is more likely to get necessities such as jeans.
“Right now, the sad truth is the banks don’t want to lend money. They’re happy if you want to cancel your credit card,” he said.
CAUTIOUS SHOPPERS Credit is critical to retailers’ results at Christmas. Last year, 32. 3 percent of shoppers surveyed by the National Retail Federation said they would do most of their Christmas shopping with credit cards, up from 30. 5 percent the previous year. The group has yet to do this year’s survey on credit usage. But Ellen Davis, the federation’s vice president for consumer research and trends, said retailers should expect that shoppers will charge less. “People are just being very conscious right now about debt,” she said. “They’re just very, very focused on price and sales, and that’s certainly going to affect the credit-card industry and how much consumers are going to use credit.”
Eduardo Castro-Wright, president and chief executive officer of Wal-Mart’s U. S. stores division, told analysts at a meeting in Rogers last week that credit-card use at the company’s stores was down 7. 4 percent so far this year. “Customers have maxed out on their credit limits,” he said.
Consumer groups are pushing for tighter rules governing changes in interest rates and credit limits.
Travis Plunkett, legislative director of the Washington-based Consumer Federation of America, a consumer advocacy group with about 300 nonprofit organizations as members, said the recent trend of tighter credit limits appears to be widespread.
“From what we can tell, they are reducing credit lines significantly,” Plunkett said. “It’s hard to say who’s been touched and who hasn’t,” he said. “We’re talking about approximately 50 million households.”
EARLY PROMOTIONS Wal-Mart’s $ 10 toy promotion was the first major shot fired in what is expected to be a highly promotional Christmas season. It included well-established brands such as Barbie, Hot Wheels, Play-Doh and Tonka products. No-frills retailer Aldi, which sells mostly groceries, countered last week with its own toy promotion in its one-time purchase program — when they’re sold, they’re gone. The list includes 22 items under $ 10, among them Barbie, Bratz and Hannah Montana dolls, Fisher Price Sweet as Me dolls and Star Wars Transformer figures at $ 9. 99.
Spokesman Martha Swaney said the company has seen an increase in customer traffic as the economic news worsened this fall.
“More people are finding out about us,” she said.
Credit problems are not an issue at Aldi; the company doesn’t take credit-card payments, only cash, debit cards and electronic payment cards issued by foodassistance programs.
Swaney said avoiding creditcard processing fees is one way the company keeps its prices low. Aldi has stores in Rogers, Springdale, Fayetteville and Fort Smith.
Discounter Kmart, a part of Sears Holding Co., recently began promoting layaway — a program Wal-Mart and many other retailers have abandoned — as an alternate form of credit. An item bought on layaway requires a down payment and a fee, and customers have eight interestfree weeks to pay it off.
Officials with Wal-Mart rival Target Corp., hosting retail analysts last month, said the company is tightening terms for its store credit card. The Minneapolis-based company also plans to emphasize its low-price message in its Christmas advertising.
Blischok, with Information Resources Inc., said value is likely the only message that will work well this year.
“We’re pretty clear that the value-based retailers will do pretty well this holiday season,” he said. To contact this reporter, e-mail: spainter@arkansasonline. com
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