Post-Christmas Sales in San Diego Try To Lure In Bargain-Loving Shoppers
December 26, 2013 1:21 p.m.
Miro Copic, professor of marketing, SDSU College of Business Administration
MAUREEN CAVANAUGH: This is KPBS Midday Edition, I am Maureen Cavanaugh. Our top story today, department stores and retailers of all kinds are hoping the Christmas season isn't over yet. After Christmas sales been begin today and stores are cutting prices and offering deals on clothes, toys, appliances and electronics. The post-Christmas push is an effort to bring sales from consumers who were not eager to part with cash during the pre-Christmas season. Joining me to talk about this is my guest Miro Copic. Welcome to the show. What do we know so far about the sales volume this holiday season?
MIRO COPIC: We know that it has been a bad holiday season for retailers. Initially we were looking at a 4% increase, but if we hit 2% this season retailers will be pleased.
MAUREEN CAVANAUGH: What are the explanations for these missed targets?
MIRO COPIC: It's really consumer expectations and consumer confidence. At the beginning of the year going into 2013, and consumers buying cars and appliances and as the year went on, expectations around to increases in taxes, the budget deal was not really being done in one of the concerns is, what would happen to healthcare? What would happen to unemployment benefits? Consumer retail rages had not gone up, there's a little bit of a red flag in back-to-school and August back-to-school sales were very weak. Retailers realized that the fourth quarter would not be as rosy as they thought, it's the expectation that consumers have with and the degree as uncertainty they have with heading into 2014.
MAUREEN CAVANAUGH: What about the shorter shopping season? It was six days shorter than it should have been.
MIRO COPIC: It was six days shorter and weather issues and a lot of things this holiday we know was a concern. We talk more about the circumstances, Target with the security breach. Retailers really took out all the stops and they were aggressive and opening up on Thanksgiving. First and foremost Black Friday sales started the beginning of November which created confusion around Black Friday but beginning sales were very positive. There was a degree of hope. They were open way longer hours and they were open until midnight and open longer consecutive hours. Toys "R" Us leading up to Christmas day was opened late to compete against Amazon, more discounts than ever before. Higher discounts earlier, 70% discounts and consumers were not biting. They did not bite from Black Friday all the way to Christmas Eve.
MAUREEN CAVANAUGH: What impetus could there be had there been one great selling item where everybody wanted that one thing, whether it is a new iPhone or some other gadget that has come about, did not seem to be that one thing this season.
MIRO COPIC: There were a few things, tablets were a big item for the most part that transcended all ages from kids to adults. Tablets were a big item overall and that helped especially especially for Black Friday and Cyber Monday, the game consoles, the Xbox 360 the new PlayStation4, those were big. Retailers did well this season. Apparel retailers are the ones that really struggled from back-to-school all the way through Christmas Eve.
MAUREEN CAVANAUGH: Just remind us how important the holiday season is to retailers.
MIRO COPIC: 30% to 40% of retail sale volume is in the last couple months of the season of holiday shopping. It's really critical to retailers.
MAUREEN CAVANAUGH: Does that extend to January 1, can they hope to make up something by the end of the year?
MIRO COPIC: This becomes the catch-up week, retailers are pulling up all the stops, it's interesting because Christmas holiday shopping really stops on January 5. Retailers have from now January 5 to really push through to consumers and the problem is for most companies, the quarter ends on December 31. They will count those first five days of shopping in there. Those numbers will go into their 2014 sales.
MAUREEN CAVANAUGH: Let's talk about some of the big retailers the season. Target security breach affecting 40 million customers, what has been the fallout on that?
MIRO COPIC: Target has been hit drastically with a 5% decrease in sales traffic this last weekend. They have had fallout talking to Attorney General with lawsuits already filed against them. They have tried offering consumers 10% off which wasn't really enough. The offered to pay for credit protection for customers as well. This wasn't enough to assuage concerns.
MAUREEN CAVANAUGH: There was news today that pin numbers may also be affected. Does it appear that they delayed letting customers know the breach?
MIRO COPIC: Apparently they did know early on. With internal investigations and contacting the Attorney General and looking at what they could find in terms of criminal act heavy, they have a responsibility not only to shareholders but to let customers know about the extent of the breach. They have done a good job of having information available and giving information to prevent scams.
MAUREEN CAVANAUGH: You are an expert in how companies can recover after dramatics mistakes, are they doing the right thing?
MIRO COPIC: For the most part. Will be a concern, their customer bases lower to middle income consumers using debit cards and this is their safety line, and all of these banks have to replace his cards. Credit card companies have some insurance. They have less to worry about. This forces many customers to use cash. This is the same kind of consumer and this will be a concern. People will have to rely more on cash and there will not be much there for the next few days.
MAUREEN CAVANAUGH: Moving onto the next story, there are so many online orders that UPS cannot deliver them all? What happened that caused the delay?
MIRO COPIC: Its recently reasonably printable in the holiday season that consumers will procrastinate. This year 15%, more consumers procrastinating and wait for better deals. Physical traffic to the balls had declined every week after Black Friday weekend with this weekend being all traffic down 20% since last year. Retailers are not getting more people in the stores, more people are looking online in terms of last-minute shopping resources purchases. People who wanted orders delivered by the twenty-fourth were making orders on the twenty-second, that overburdened the system and they did not have the capacity to deliver all of them.
MAUREEN CAVANAUGH: Retailers did not graduate them beforehand for the offered to have packages delivered by the twenty-fourth and there is a huge amount of volume that they did not expect because they did not have these relationships with an extended time period.
MIRO COPIC: Retailers like ProFlowers plan a lot with FedEx who delivers their products, in terms of demand planning and they know what they are going to get those last-minute calls to drive volume. FedEx can plan for that, the big retailers like Macy's or sports authority throw last-minute promotions and do not think through to contact UPS. It is unplanned. They need to plan for the unexpected capacity. There are a lot more on expect the choppers this year before.
MAUREEN CAVANAUGH: Some people with nothing under the Christmas tree. Online sales for the store sales, you just told us that the volume at malls is way down. Aren't they incorporating their advertising pitches now? To the store and get special savings if you go online?
MIRO COPIC: They call it in on the channel retailing strategy where they want you to buy for that particular recent retailer if you buy it online or in store. If you buy from them online generally waive shipping services. Retailers expect on my business to carry the day, but that is not the case. Online sales have grown dramatically, the issue is they are at a slower pace than last year terms of growth. Even though there has been a strong growth in online sales of as much as last year.
MAUREEN CAVANAUGH: What can people expect to see in terms of post-Christmas sales this year?
MIRO COPIC: You will see discounts as high as 70 to 80%. Once retailers are north of 40% at discounts they are cutting into the margin. Especially you will see retailers looking to move inventory to make room for spring lines and offering discounts somewhere between sixty and 80%. You'll see 75 to 80% off a clothing outlets. One of the big challenges is, once the inventory is gone it's got. If you have a gift card and you want to receive it today or tomorrow, but even before the inventory is gone.
MAUREEN CAVANAUGH: That is what the sales are geared toward, people have received gift cards or other form of money or cash for Christmas is that right?
MIRO COPIC: It will be a record sales for gift cards this year. It is important because it retailers bank on people spending between it 20 to 50% more on average than the value of the gift card. It is a hope that that will drive incremental sales and once those are redeemed, or partially redeemed, a lot of gift cards have a remainder balance that is thrown away and ends up in the pocket of the retailer.
MAUREEN CAVANAUGH: Since Christmas sales so far have not been good for retailers, should we expect to see these stores opened for greater hours now?
MIRO COPIC: I think they will. They already are opening earlier than normal operating hours. You'll see them all staying open beyond their traditional hours.
MAUREEN CAVANAUGH: It didn't work during the holiday season, why are they doing it again?
MIRO COPIC: I think they are out of ideas. This holiday season 85% of apparel retailers discounted merchandise. This is huge. Deeper and more discounts and open more hours, and still shoppers are a little reticent, and I will break with the budget deal.
MAUREEN CAVANAUGH: So you see this this with people holding back for back-to-school as something as an aberration? If you talk to a economist they say the economy is improving and jobs are looking better, they do not see this is as a trend?
MIRO COPIC: People are looking for more discounts and there's not as much impulse buying. A lot of people like themselves in the holiday season. This year that did not really happen. Last year it seems the holiday for shopping season. This year it was less. If you look at the economy, even though the economy is doing well, and consumer expectations are down. They are taking this information and looking at what the upcoming year will be like and it is uncertain. Changing consumer behavior and seeing what is valuable to them. They're not the shocks to the system that 2013 had.
MAUREEN CAVANAUGH: It was a wide range of information, thank you so much.