Christmas Sales Predicted to Decline Another 1% This Year

October 13th, 2009 • Related • Filed Under • by Debbie Dragon

A report based upon a projection released on Kudlow & Co. (CNBC), during the week of October 5^th. “Retailers are expecting a 1% decline during this Christmas selling season following the 3.5% decline they experienced last year.

Last year’s sales were $442 billion with an expectancy of $438 billion this year. The report further emphasized that high end specialty retailers would be hardest hit again this year.

With such a gloomy projection as has been reported due to the economic slowdown, other factors could play into the expected results. Beyond the fact that many consumers don’t have the discretionary dollars available is the “hunker down and wait” psychology that typically occurs in stressed economic periods.

The very tangible reward for that psychology was demonstrated earlier this year in the “Cash for Clunkers” Government Program.

Retailing industry comments and assumptions have included the reality that less store staff will be available to serve customers with the sacrifice coming through less part time associates. Since there are only so many dollars of profit to be allocated for employment and with a poorer projection the assumption is that corners must be cut.

With less staff and less service, an alternative motivation must be emphasized in order for stores to capture as many dollars as possible. That means for the consumer an opportunity exists. Stores only have a limited number of options. The retailer only has unique offerings, outstanding service or price. Advertising budgets must follow the same trend as the expectancy.

All that being said, from the time the retailer makes acquisition and presentation, they only have 90 – 120 days to successfully sell through and attain back the cost dollars needed to meet their bills for the expanded inventory.

A logical assumption can be justified, in that due to hesitation and even though the consumers will wait by virtue of psychology or simple need, that the only real option for the retailer is price. A price war could break out beyond the pre-planned and set psychological advertising campaign that always accompanies the competition.

We could be looking at and enjoying a retail downward spiral ultimately causing many businesses to earnestly liquidate and go out of business. Admittedly the overall effect is negative for the country with a small positive of the potential of temporary relief for the consumer.

What happens if a significant number of brick and mortar retailers find themselves in the quandary of fighting to win back the cost dollars they need? Their prices could go below where even the “Internet Giants” can go.

We could find ourselves returning to a style of Christmas that has been declining for several years – in the stores, elbow to elbow with throngs of customers attempting to capitalize upon price offerings.

One aspect that always surprises, is the creativity that retailers possess in making their best efforts to capture sales. Plus and value added offerings beyond “two for one” could be in our immediate future. Free additional goods or services will be the most likely next motivation offered. Legitimate – real, “free” offerings done out of the motivation of simple survival on the part of store owners.