Bah Humbug! Slow Shopping Season Expected

Nov. 5, 2002 -- There may still be 51 shopping days left until Christmas, but many retailers are already bracing themselves for a chilly reaction from consumers this holiday season.

A lethal combination of mounting job losses, depressed consumer confidence and delayed or nonexistent deliveries due to the West Coast port slowdown are all conspiring to make the crucial holiday shopping period a potentially dismal one for retailers.

"I think people are cautious," says Harvard University economics professor Benjamin Friedman. "Some people are simply not able to spend and those that can are being careful."

Signs of decreased consumer spending have already shown up in recent economic reports, and many retailers have been reporting sales on the low end or below expectations.

October's jobless rate climbed to 5.7 percent in October, with the number of people looking for work but unable to find it rising by 100,000 to 8.2 million, according to the latest Labor Department figures.

And consumer spending, one of the pillars that have been holding up the U.S. economy, fell 0.4 percent in September, the largest drop in 10 months, according to the U.S. Commerce Department.

"There's going to be a lot of $200 or $300 purchases that may have been made two years ago that won't get made this year," predicts Ross DeVol, senior economist at the Milken Institute, a Southern California-based think tank.

Shoppers Retreating

Some retailers have already blamed declining mall traffic as one of the reasons for slumping sales. Recently, stores like jewelry retail chain Zales and youth-centered clothing retailers Charlotte Russe and Children's Place have all cited slow mall traffic for disappointing results in their latest earnings periods.

"Many of these malls, they are not very proactive and not very creative," says Arun Jain, professor of marketing at the University at Buffalo School of Management, part of the State University of New York system. "They need to do things that will drive people to the mall."

But mall owners say it isn't the shopping centers but the merchandise that hasn't been inspiring consumers to come out of their shells.

"Mall traffic has generally been flat, but it has not been decreasing," counters John Bucksbaum, chief executive of General Growth Properties, the nation's second-largest shopping mall developer, whose properties saw less than a 1 percent decline in traffic in the third quarter.

"We're trying to have the right merchants in our malls that are going to be appealing to the consumers," he adds.

Early Birds Get the Toys

One major preoccupation for many retailers is the potential impact of the recent 10-day port shutdown on the West Coast, which held up many imports from Asia, a major producer of many popular toys sold in the United States.

Though few retailers have reported problems so far, some retail analysts say the backlog of goods from the shutdown could cause many shoppers to find store shelves empty of popular toys this year.

"One of the big concerns for retailers right now is to make sure some of the merchandise is actually going to be there," says Daniel Butler, vice president of retail operations at the National Retail Federation, the Washington, D.C.-based retail trade group.

This is even prompting some shoppers to hit the stores earlier than usual this year.

"I do know friends that are shopping early," says San Francisco shopper Trina Pascal, who says some of her friends are already finished with their holiday shopping.

Free Stuff … But Not Forever

Despite many dismal forecasts, some experts can be found who predict the holiday shopping season, which accounted for some 23 percent of retailers' sales last year, will actually be better than expected.

The National Retail Federation is expecting holiday sales to rise 4 percent, with home- and leisure-related merchandise selling well. A recent report from Ernst & Young anticipates sales to rise an even more robust 4.8 percent this year compared to the 3.9 percent increase seen last year.

Both forecasts say the healthy housing market and a continued low interest rate environment will spur many buyers to come out of the woodwork ahead of the holidays. Further, an early Hanukkah, which begins at sundown the day after Thanksgiving this year, could give an early boost to sales.

"That's going to push a mini-shopping peak," says Jay McIntosh, director of retail and consumer products for Ernst & Young.

And another bright spot for consumers? Sales. Analysts expect deep discounts from department stores, especially in clothing, and say many retailers will offer "buy now, pay later" plans to help people afford gifts at a time of economic malaise.

"The prices continue to drop, and there's a lot of interest-free, buy-now-pay-in-a-year" offers, says McIntosh. "We tend to be a very optimistic country."

ABCNEWS Radio and ABCNEWS.com's Catherine Valenti contributed to this report