Retailers Prepare for Holiday Rush

Nov. 14, 2006— -- The weather outside is colder, the days are growing shorter, and for the nation's retailers that means only one thing: It's the "most wonderful time of year."

The holidays are upon us, and retail merchants are prepping for the yearly onrush of shoppers.

And they need shoppers to come out in force. The holiday buying season typically accounts for one-third of retailers' annual profits and more than a quarter of annual sales, according to the International Council of Shopping Centers.

So as T.M.X. Elmos fly off the shelves and video gamers eagerly await new game consoles from Nintendo and Sony, retailers hope gas prices and recent wage increases, along with early sales promotions, will put shoppers in a spending mood.

Early forecasts suggest stores will ring up solid sales growth this year, but maybe not as strong as previous holidays.

The National Retail Federation expects holiday spending this year to top $457 billion, a 5 percent increase over 2005 but lower than last year's 6.1 percent increase. Industry analysts concur, predicting that holiday retail sales will increase 3 percent to 7 percent.

If the forecasts hold up, the average shopper will spend $800 this holiday season -- up more than $50 from last year, according to the National Retail Federation.

Ready, Set, Shop!

Retailers and analysts optimistically believe that a combination of factors will come into play: Lower gasoline prices, expectations for a mild winter, and less expensive heating bills could leave many consumers feeling flush with cash.

And during the holidays, many consumers are willing to overlook tight budgets and buy things on credit.

Marshal Cohen, chief industry analyst with the research group NPD, said consumers had shown they would spend during the holidays regardless of economic conditions.

"You have to cut up their credit cards, take away their wallets, basically lock them in [a] room to get them to stop spending and buying things," he said.

Electronics and Elmo Lead the Way

Bear Stearns analyst Christine Augustine said this year would be a "digital Christmas" similar to last year.

Hot items include flat-screen televisions, iPods, digital cameras, and new video game consoles from Sony and Nintendo.

Electronics are also behind the toy story of the year, T.M.X. Elmo, or Extreme Tickle Me Elmo.

Ten years after the first Tickle Me Elmo became the must-have toy for that holiday, Mattel has done it again with a new Elmo that falls to the ground kicking his feet and pounding the floor with his fists in fits of laughter.

Jim Silver, editor in chief of Toy Wishes, said that 250,000 toys had sold in the first 24 hours.

It's not just hot, "it's blazing," Silver said.

In the clothing aisles, analysts continue to see a return of fashions last seen in the 1980s: skinny pants, leggings, oversized sweaters and tunics.

Christmas in July a Reality?

Because the holidays are so important for the bottom line of the nation's retailers, many got a jump on the season and put up Christmas decorations even before Halloween.

Wal-Mart kicked off the holiday season in October by lowering prices on 100 toys and games. Several weeks later, it "rolled back" prices on nearly 100 electronic items like high-definition televisions and digital cameras.

After disappointing sales in September and October, the nation's largest retailer is aggressively marketing lower prices this holiday season even earlier than last year in order to bring in shoppers.

Surveys show nearly half of consumers buy some holiday items before November, but putting up the mistletoe in September may not lead shoppers to embrace the trend.

Research from the NPD Group found that most shoppers had no plans to change when they would buy holiday gifts compared to a year ago.

With Wal-Mart already slashing prices, many are expected to follow the lead of the nation's largest retailer.

"This holiday season is expected to be more promotional than last year," Deborah Weinswig, retail analyst at Citigroup, wrote in her annual holiday outlook report.

Already there is buzz about what deals stores will offer on Black Friday -- the shopping day after Thanksgiving -- and Web sites such as Gottadeal.com and bfad.net have already started to post leaked fliers listing reduced prices for laptops and DVDs.

To get a deal though, shoppers will have to be at the stores only hours after cleaning the dishes from Thanksgiving dinner.

Increasingly, outlet shopping centers are kicking off Black Friday at midnight to offer all-night shopping.

Chelsea Property Group, the world's largest owner-operator of outlet centers, is launching "Midnight Madness" at 25 of its 36 locations throughout the United States.

Last year, the group tested the concept at seven centers.

"It was all the things we had hoped for and more," said Michele Rothstein, senior vice president of marketing at Chelsea Property Group.

Competitor Tanger Outlet Centers will also open at midnight with "Midnight Madness" sales at eight of its 35 centers.

Last year at its outlet in San Marcos, Texas, near San Antonio, more than 6,000 people shopped between midnight and 6 a.m. on Black Friday.

The 31 Days of Christmas

This year's calendar will actually lend shoppers -- and retailers -- a helping hand in herding people through the doors in December.

Between Thanksgiving and Christmas, there are 31 shopping days, a day more than last year and three more than the median number of shopping days.

Even better for stores is the fact that Christmas falls on a Monday, giving last-minute shoppers one final weekend to shop.

The International Council of Shopping Centers estimates this additional shopping day could bring in an additional $700 million in sales.

Attention Department-Store Shoppers

One surprising fact is that many shoppers will spend their money at department stores this year.

Research conducted for the National Retail Federation indicates that nearly 62 percent of shoppers will visit department stores, up from just 53 percent three years ago.

After years of losing market share to just about everyone -- from mass merchandisers like Target and Wal-Mart to specialty stores such as American Eagle Outfitters and the Limited -- department stores have recently rung up surprisingly strong sales results.

In fact, September represented the strongest increase in monthly sales since January 1997.

Recent consolidation within the industry bolstered the resurgence of department stores. The stores have improved their technology to better manage inventory and pricing, and, perhaps most importantly, better fashion and improved merchandise have drawn in more shoppers.

"Department stores are where the action is this year," said Michael Niemira, chief economist at the International Council of Shopping Centers.

Online Shopping Continues to Grow

Thanks to the Internet, shopping is no longer defined by trips to the mall.

Jupiter Research estimates that $32 billion will be spent in online sales this year, an increase of 18 percent from last year.

With 114 million users browsing online -- 6 percent more than last year -- the National Retail Federation estimates that 52 million people will shop online while at work, perhaps even in a cubicle near you.

The week after Thanksgiving is particularly big for cybershopping, as millions of shoppers return to the office from the long holiday weekend and browse the virtual aisles online.

In fact, the Monday after Black Friday is now described as "Cyber Monday."

And a last-minute flurry of online purchases usually comes around Dec. 17, one of the latest deadlines for ensuring shipped gifts arrive by Dec. 25.

Christmas in January … for Retailers

But the holidays don't end for retailers just because the gifts under the tree have been unwrapped.

Thanks largely to gift cards, the shopping season now lasts into January.

Nearly 40 percent of the $30 billion to $40 billion in holiday gift cards is redeemed the week after Christmas.

And an additional 38 percent is used in January. Knowing that shoppers will be back, more retailers prepare for postholiday shopping, not by discounting leftover items, but by offering brand new goods at full prices.

Robert Drbul, retail analyst at Lehman Bros., said Dec. 26 to New Year's Eve now represented 10 percent of holiday sales while January equaled 20 percent of holiday sales for the season.