Bargain Christmas Gift-Buying Guide

Oct. 20, 2008— -- Americans struggling to pay their mortgages or put food on their tables are likely to cut back on their gift-buying this holiday season.

But the tight economy might actually work in some shoppers' favor as retailers slash prices -- offering bigger and earlier sales this year -- to lure customers away from their dollars.

Shoppers just need to look carefully for the best deals and play a game a chicken with retailers -- holding out for the best price, but not waiting too long for the risk of facing empty shelves.

Marshal Cohen, chief retail industry analyst for NPD Group, said that consumers feel obligated to buy gifts for some folks on their list, but he generally is calling this a "ho hum holiday."

The pain will be felt everywhere, from high-end stores to discounters.

"No level of retailer is insulated from this downturn," Cohen said.

"Consumers will be keeping careful watch on their credit card spending this season," Cohen added. "I think many will refrain from purchasing an indulgence or splurge gift, and for the first time in years, may actually cut people from their shopping lists."

Plenty of retailers will be offering sales well before Black Friday, the day after Thanksgiving when the Christmas shopping season traditionally starts.

"For consumers, it's good news. They can get anything, anywhere at any price," Cohen said. "Consumers can ask for additional discounts."

Lori Wachs, a retail analyst with Delaware Investments, said that she is already seeing some retailers, including big names like Sacks and Macy's, offer big sales.

"You just never see that kind of stuff in October. You really never see promotions, on a small scale, starting to happen until November," she said.

Wachs predicts there will be "deals to be had across the board."

"I don't think I'm unique is sensing that it's going to be a very difficult holiday season with promotional levels like we haven't seen in a long time," she said.

Even before the shopping season starts, there is new bad news for retailers.

Electronics retailer Circuit City is considering closing at least 150 stores and firing thousands of people to avoid bankruptcy, The Wall Street Journal reported Monday.

Shopping Sales

Most retailers thought they were being very conservative when they placed orders for the fall last spring, Wachs said, but they had no idea about how bad the economy would be.

"They all have been pretty upfront by saying: we thought we had our inventories lean enough, we did not," Wachs said.

One bright side, she said, is lower gas prices. Lower-income shoppers, for the most part, don't have money in the stock market and have been hurt more than others by this summer's high gas prices. Now that prices are abating, they and teenagers might be more likely to spend extra cash on gifts.

U.S. consumers plan to spend an average of $832.36 on holiday-related shopping this year, according to the National Retail Federation. That's up, in the trade group's words, "a paltry 1.9 percent over last year's" planned spending. That's the lowest increase since the survey started in 2002.

One area of cutbacks: gifts to family members. Expect either slightly cheaper gifts or no gifts for more distant relatives.

"People feel like family members will understand a little bit more that money is tight this year," said Kathy Grannis, a spokeswoman for the retail federation.

And yes, Grannis said, expect plenty of sales.

"Everything takes a backseat to price this year," she said. "Retailers months ago sat down and put a plan together to offer deep and hard-to-pass-up promotions for the holiday season."

Don't only expect sales, but also to see retailers trying to connect with shoppers on an "emotional level." Grannis said that customers should expect more e-mails and direct mailing to their most loyal customers, offering them special sales.

"It would be very wise to get out there, comparison shop online, sign up for email, keep eyes out for coupons," she recommends.

Some consumers might wait until the last minute, hoping for the best sales. That might work, Grannis said, as retailers lower prices, but she warns it is also very risky because there is a good chance that all the good products will be long gone.

"The tricky part is that consumers might be missing out on the best merchandise because retailers have been very conservative with their inventory," she said.

Traditional Toys and Home Safes

This year also has five fewer days between Thanksgiving and Christmas "which can certainly put a dent in retailers," Grannis said. But "they are heading into this holiday season with their eyes wide open."

Anita Frazier, a toy analyst with the NPD Group, said in an e-mail that this year "there doesn't seem to be one or two hot toys but rather a group of pretty desirable items."

"Toys are one of, if not the, most traditional gift items for kids. Girls may really want clothing items for gifts, but no boy would be happy with a sweater over an action figure," she said. "That said, apparel and toys are the two most widely purchased categories for gifts."

Some parents might opt away from the latest and greatest toy and go for something from their childhood.

"I think more traditional play patterns could benefit from the rocky economy as parents find the products they themselves enjoyed as kids," Frazier said. "The nostalgia factor comes into play as these types of toys can be very comforting."

But maybe the most comforting gift of all during this season of stock market turmoil is a personal safe. That's right, ABC News' Seattle affiliate KOMO reports that fear of bank failures or even a depression has caused a spike in sales of home safes.