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Shoppers may see big discounts soon

December 15, 2012
By ANNE D’NNOCENZIO , THE ASSOCIATED PRESS

NEW YORK - If shoppers don't show up in stores soon, more "70 percent off" sale signs will.

After a promising start to the holiday shopping season over the four-day Thanksgiving weekend, sales have slowed, according to an analysis of data done for The Associated Press by sales tracker ShopperTrak. Worries about weak U.S. job growth and other concerns are likely to blame for Americans spending less.

That puts pressure on J.C. Penney, Macy's and other stores, which had been offering fewer discounts this season than they did last year, to step up promotions to lure shoppers like Ron Antonette from Long Beach, Calif.

Antonette so far has spent about half of what he planned to spend during this holiday season on gifts such as Legos, a Wii U game console and Apple's iPad Mini tablet computer for his two young children. Antonette stopped shopping after spending $1,000 over fears that Congress and the White House won't reach a budget deal by January. A stalemate would trigger tax increases and spending cuts known as the "fiscal cliff."

"I basically stopped moving forward in buying," said Antonette, 44, who runs a small public relations business and worries that he might not be able to take mortgage deductions on his house next year. "I feel like we're in financial limbo."

Antonette isn't the only shopper who feels that way. Major stores don't discuss sales during the holiday shopping season, but Wal-Mart CEO Mike Duke said during a speech in New York City on Tuesday that a recent poll of shoppers of the world's largest retailer found that an overwhelming majority are aware of the threat of higher taxes. And some said it would lead them to cut back their holiday buying, he said.

Overall, holiday sales are up 2.2 percent to $659 billion from Nov. 1 through last Saturday, according ShopperTrak, a Chicago-based firm that tracks spending at 40,000 stores across the country. That's slightly below the 2.7 percent increase over the Thanksgiving weekend when shoppers spent $22 billion.

The modest increase means sales for rest of the season will be crucial for stores, which make as much as 40 percent of their annual revenue in November and December. With only about a week and a half left until Christmas, stores have a ways to go in order to reach ShopperTrak's forecast of a 3.3 percent rise in sales during the two-month stretch compared with the same period last year.

It's like the ghost of Christmas past has returned for stores. In order to salvage the season, they may be forced to offer the kind of heavy discounts that helped boost sales last year, but that also ate away at their profits. That's something stores have tried to resist all season: Promotions are down 5 percent so far this season compared with last year, according to BMO Capital, which tracks promotions at about two-thirds of mall stores.

To be sure, there still are plenty of 30, 40 and 50 percent off sale signs in store windows. But stores also have been doing more creative things with pricing to get shoppers to think they're getting a better deal than they really are. Think: Offering jeans for $9 instead of $9.99, hoping round numbers will appeal more to shoppers, or selling two shirts for $20 instead of giving shoppers 20 percent off.

"The retailing nation is trying to get off the discounting habit," said Paco Underhill, founder of Envirosell, which studies consumer behavior. "It's just like heroin - the more you do it the more you need to do it."

 
 

 

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