MOST ANALYSTS EXPECT this holiday shopping season to be another dud. But retailers have one edge they didn’t have last year: they know it’s coming.
Few predicted last year’s market meltdown and shopper malaise would take as big a toll on retail sales as it did. (Holiday retail sales fell to $441.97 billion, a 3.4% drop below the prior year – and the first decline recorded by the National Retail Federation since data tracking began in 1992.)
Retailers often depend on robust holiday sales to propel them into the black for the year. When shoppers didn’t show, stores either shuttered or discounted deeply to rid their shelves of excess merchandise.
“Retailers were caught flat footed,” says Sapna A. Shah, a principal at Retail Eye Partners, a research and consulting firm in New York. “They weren’t expecting the financial markets to collapse and consumers to be scared of spending money,” she says. This year, the NRF is calling for holiday retail sales to decline another 1%. But most retailers will be better prepared, Shah says.
Here’s how they’re bracing themselves:
Start the season earlier
Andrew Jacobs, the owner of JAM Paper & Envelope, a Tenafly, N.J.-based chain of gift-wrap, stationery and packaging stores, predicts his stores’ holiday sales will fall 10% to 15% this year – not quite as steep as the roughly 20% drop last year. Knowing that shoppers are going to spend conservatively again this year has allowed him to plan better, Jacobs says. He is ordering less holiday merchandise; he’s also displaying sale items and decorating his store for the holidays earlier than usual.
“It’s almost Halloween, but if Christmas music was playing on the radio, we’d have it on,” says Jacobs, who hopes that his display of holiday wrapping, Christmas cards and red and green ribbons will promote early holiday buying. “We’ve held off making purchases. But the more people start buying, the more we start buying as well.”
Andrew Jacobs, the owner of JAM Paper & Envelope, is promoting the holidays early and offering less expensive choices.
For retailers, jumpstarting the holiday is a matter of righting their balance sheets, says Ronald Stampfl, a marketing professor at San Diego State University. “All retailers would like to reach their breakeven point in sales earlier rather than later,” he says. Once a company’s fixed costs have been met, they can start generating profits, Stampfl says. Reaching that milestone sooner also gives retailers more freedom to discount if they need to, he says.
Lower price points
To attract added customers this holiday season, JAM Paper & Envelope, like other retailers, is pinning down lower price points. For instance, rather than sell large spools of ribbon as he had in the past, Jacobs is making smaller quantities available for less. “Although the price per yard is more, we believe the customer will look at the total price they are paying and will be more inclined to spend less now,” he says.