Full Shelves, Emptier Wallets Worry Retailers

This holiday season, the nation's retailers face some formidable obstacles to getting Americans in the mood to shop.

A slump in the housing market, tighter lending standards, higher energy and food costs all combined to form the proverbial perfect storm in consumers' pocketbooks, putting them in a tight-fisted frame of mind just as the holiday shopping season starts.

Added to that, unseasonably warm temperatures this fall kept shoppers away from the mall where retailers were selling gloves, scarves and sweaters.

And if all that wasn't enough, analysts say that for this season there are no must-have items, especially when it comes to apparel.

"In 10 years of doing this, I've never seen anything like it," said Deb Weinswig, retail analyst with Citigroup Investment Research.

Will you be out shopping this weekend? Tell ABC Your Story.

With the lack of a TMX Elmo-style toy, experts predict this holiday, like last year, will be another "digital Christmas" as people clamor for even lower-priced flat-screen televisions and iPods.

The most wonderful time of the year could turn into the most worrisome.

"I think it is going to be a tough year," said Bear Stearns' retail analyst Christine Augustine

It could get worse. The ABC News/Washington Post weekly Consumer Comfort Index found Tuesday that 68 percent of Americans believe the national economy is getting worse. This represents the highest level of pessimism about the U.S. economy since 1990, right before the economy fell into a recession.

Good, But Not Great Sales

For the holiday season, the National Retail Federation forecasts that shoppers will spend $474.5 billion. This includes spending on everything from sweaters to electronics to gasoline to food during the months of November and December.

While this amount represents an increase of 4 percent from last year, it's a slower rate of growth compared with previous years.

"Shoppers will be a little more conservative with their spending as they become aware of the softness in the economy," said Tracy Mullin, CEO of the retail trade association.

On average, the NRF predicts shoppers will spend $923 during the holiday season. The International Council of Shopping Centers estimates the amount will come in a bit more, at $1,116 this season.

But the dour economic mood this season could lead shoppers to "trade down" and shop at a lower priced retailer. For example, a Nordstrom's regular might do more shopping at Macy's. A Macy's shopper could look for gifts at J.C. Penney.

"Our findings suggest that consumers are tightening their wallets this year more so than last year," said Tod Marks, senior editor with Consumer Reports. 

Discount retailers like Wal-Mart and Target could benefit from these tougher economic times. The NRF said its surveys show 68 percent of shoppers plan to shop at lower-priced merchandisers.

"The consumer will be looking for value, and lower-income households will be very cautious in their spending," Michael Niemira, chief economist with the ICSC, said in a press release.

Tired of Jingle Bells Already?

Worried, many retailers kicked off Christmas even earlier. Leading the pack was Wal-Mart.

  • 1
  • |
  • 2
Join the Discussion
blog comments powered by Disqus
You Might Also Like...