Retailers and consumers concerned about holiday shopping season

November 26, 2008

University Park, Pa. -- Nationwide, retailers face a bleak forecast heading into the holidays.

Since October was a disappointing month this year for most stores, according to Fred Hurvitz, instructor of marketing at Penn State University Park, the holiday shopping season is crucial for profit margins.  Many businesses, in particular department stores, ordinarily count on this time of year for 30 percent of the year's earnings. But stores like Macy's, Kohl's, JCPenney and specialty boutiques, might not see reach their goals this season, he said.

"I think discretionary purchases will have more problems than necessities," Hurvitz said. "People have to buy food, so grocers are not as affected by the economy. And I've seen some consumer reports saying electronics are doing OK, but traditional department stores are suffering."

Discount stores such as Wal-Mart, Target and Dollar General are actually up in sales volume -- Wal-Mart was up 2.5 percent in October, he said. Stores like Kmart, which is advertising its layaway option, are finding new ways to draw in customers without taking risks. And layaway isn't a bad idea for consumers to take advantage of, instead of using credit. Another good idea, Hurvitz said, is to wait until closer to Christmas to run across greater bargains.

"I think the sales will come closer to Christmas," he said. "Right now retailers hope to do as much business as possible without hurting margins, but closer to Christmas there will be more markdowns."

Hurvitz cautions that shoppers waiting for good deals, however, might not have the same selection to choose from by late December.

Cathy Faulcon Bowen, a consumer issues specialist and associate professor,  said that above all else, people should develop a budget -- see what money they have to spend, see where they can cut corners -- before shopping. She is scheduled to appear on CNN Saturday (Nov. 29) and Sunday (Nov. 30) to discuss strategies for coping with a financial downturn.

"Most shoppers give to the same people year after year, though they may add on a few folks, but if they have a written list, they can use it next year," she said. "If you plan your budget with paper and pencil beforehand, you'll have a handle on your spending. Some people tend to get carried away at this time of year. Hopefully with the media warning us we're in dire straights, people will be more cautious."

Bowen said different strategies for holiday shopping work for different consumers. She knows of people who watch for sales throughout the year, purchasing gifts well in advance so they don't have to fight the holiday crowds. On the contrary, many people still wait for Black Friday bargains -- strategizing over the store fliers and getting up early for the rush. A man Bowen knows gives his teenagers cash for Christmas, encouraging them to buy after the holidays when there are significant sales.

When it comes to giving gift cards, Bowen urged people to use their own judgment. Instead of buying cards for specific stores  -- in case they might be in danger of closing, or the recipient isn't interested in its inventory -- she recommends buying generic gift cards, such as those that credit card companies offer, or one to a mall with several stores to choose from.

"Gift cards really allow you to control your spending because you know in advance exactly how much you'll spend," she said -- as long as you plan to keep your purchase total under the card's full amount.

She also encouraged gift-givers to be practical -- gifts that don't need to be cleaned or put in long-term storage are best. Gift cards for gas or to grocery stores for parents, music gift cards or movie passes for teens, piggy banks for children to learn how to save and educational books for everyone are more practical for the recipient. Bowen added that it's OK to re-gift if the original recipient knows of someone else who might get more use out of a gift that would otherwise sit in the closet.

For the elderly, time is a valuable gift, she said. Take them shopping, help them with chores or just give them company.

"Just think outside the box when giving of your time," Bowen said. "It is very much appreciated and can make a difference. You don't always have to look in a store."   

  • Retailers are facing the likelihood of fewer shoppers this holiday season.

    IMAGE: Penn State
Last Updated November 18, 2010