A tight Christmas may bring joy to discounters

Discount Store News, Nov 15, 1993

Judging by reported consumer attitudes, Christmas '93 will be joyless event for retailers. However, for discounters and highly promotional full-price retailers, there could be a significant silver lining.

George Rosenbaum, president of Leo J. Shapiro & Associates, a Chicago market research firm, said the views expressed in his 12th annual survey of consumer attitudes toward holiday buying represent "the worst figures we've seen--ever. More than half of the shoppers we talked to said they plan to spend less this year than last." Babson College professor of retail marketing Doug Tigert, agreed: "Christmas '93 will be lousy."

Both noted that consumer confidence is plummeting. People are either afraid to losing their jobs or foresee someone else in the family losing income in the coming year. And fears of rising taxes are causing Americans to cut back on spending.

Rosenbaum also noted that two consecutive lean years may have conditoned consumers to expect less materially, from the holiday. Furthermore, 95% of consumers who said they spent less on holiday gifts in recent years told Shapiro that it had no impactg whatsoever on the joyfulness of the holiday. "Churches will love that, but retailers won't," Rosenbaum said.

However, not all is doom and gloom, particularly for discounters and aggressive promoters. While MasterCard survey indicated that spending will dip slightly (about 4% to $423), about 50% of consumers said they will spend the same as last year, and another 21% who plan to spend less (and might be tempted into spending at least as much as a year ago).

According to Shapiro's Rosenbaum, there is absolutely no embarrassment involved in buying presents from discounters, a major shift from just three years ago. The accent on value shopping favors off-pricers, as does a coincident movement toward, in retail consultant Carol Farmer's words, a strategy of "buying something a couple needs, and calling it a gift." Farmer sees a negative impact on apparel sales from that trend.

Rosenbaum also noted a movement toward downshifting a category or two, but staying at the top price point. "Instead of a beautiful cashmere sweater, someone might buy the nicest silk scarf in the store," he said.

Further, a clear strategy has emerged of buying a major home entertainment item for the whole family. Consumer electronics retailers can expect a strong year in categories like computers, large screen televisions, camcorders, and more esoteric products like Phillips' CD-1 player and Panasonic's REAL 3DO player. The latter is a extremely pricey family-oriented interactive CD player, with expensive software, and features game play and educational software attractive to all age levels. Both have cropped up in a variety of store fronts in recent months, even at prices reaching $800.

CD-ROM, both built-in and outboard, is already evaporating from retail shelves, and strong software sales in these categories should follow the holidays to feed the new purchases. Additionally, Fairfield Research president Ted Lannan projects extremely strong sales in music software, sell-through video (led by "Aladdin," which is still hot at retail), and video games, which are led by such hot titles as the controversial "Mortal Kombat."

But the strongest single Christmas product will be CD-ROM hardware, which has already outstripped rosy 1993 projections, and could sell as many as 1.5 million units in the fourth quarter. "The only thing that will slow CD-ROM down is empty shelves," said Lannan. Added chairman Gary Gabelhouse, "the sales of upgradJable-to-multimedia computers exploded last year; this year consumers are adding the upgrade kits, soundboards and speakers. Anything in home entertainment or education should be hot at holiday."

RCA's Joe Clayton reported that in September the company shipped more than one million video products, worth $400 million wholesale, an all-time record. "We are encouraged that this dramatic upswing in retailer buying will translate into an outstanding holiday sales year for CE products," he said.

Added Shapiro's Rosenbaum, "Investing in home entertainment makes sense (to a cash-strapped consumer), because you'll spend a lot less money at home than outside the home."

And most significantly, what consumers say they'll do and what they actually do don't always jibe. While consumer confidence has declined steadily since January, spending has been up, sometimes strongly, every month this year except March. Economists say the economy is rebounding softly from the recession, reflecting a permanent shift in the nation's downsized economy.

A price war is inevitable this year, starting earlier than ever. In Atlanta, sales started at department stores before Halloween, and Toys "R" Us just fired a salvo at Kmart, Wal-Mart and Target by distributing a book of coupons worth nearly $500 off on selected holiday toys (although analysts pointed out that the most desirable empted from the offer).

Similarly, consumer credit cards are tapped out, so chains with their own credit cards and tapped out, so chains with their own credit plans are offering 90-day, 6-month and even 12-month no-interest plans: Pay the balance by the end of the term, and no interest or finance charges will be applied; fail to pay, and accrued charges are added to the balance. Others offer lenient first payment terms of six months until the first payment is due.