Will Holiday Shoppers Revive The Economy?
Tuesday, December 1, 2009
As the official holiday shopping season gets underway, we'll look at how local retailers are doing and what's ahead for December.
MAUREEN CAVANAUGH (Host): I'm Maureen Cavanaugh. You're listening to These Days on KPBS. Cautiously optimistic, that might be a good way of describing the way many retailers are feeling about the holiday shopping season. Last Friday and yesterday—Black Friday and Cyber Monday, respectively—are typically used as a guide to gauging what consumers might be up to in December. For many retailers, holiday sales account for as much as 40% of their annual revenue and up to 80% of their profits. So this is not your typical crystal ball gazing, this is a question of survival for many businesses. Joining me to discuss the early indicators for consumer activity this holiday season is my guest, George Whalin. He’s a nationally known retail expert and founder of Retail Management Consultants, located in Carlsbad. George, welcome to These Days.
GEORGE WHALIN (Retail Management Consultants): Thanks, Maureen. Nice to be here.
CAVANAUGH: Now how were national retail sales over the Thanksgiving weekend? Do we have the early numbers?
WHALIN: We have pretty good numbers so far on both Black Friday, the Black Friday weekend, and Cyber Monday. Sales were – for the weekend were flat compared to last year, about the same as last year. Traffic was substantially up. It looked like retailers were able to draw a lot of customers into their doors with their special offers of products and so forth and they got a lot of traffic, they just didn’t – The price of those products were sold at so low a price that they didn’t really increase sales. And Cyber Monday looks like essentially the same situation. There were far more people online doing their shopping yesterday than last year. Unfortunately, the sales numbers were down fairly substantially from last year.
CAVANAUGH: That’s interesting. I want to go into that a little bit more carefully but I want to also take it back here to San Diego. Do we know what sales were like here? In other words, were the shopping malls – was parking – were there a lot of cars in the parking lot? Was there a lot of sales activity here in San Diego?
WHALIN: We don’t get numbers from any of the stores in San Diego, unfortunately. We’ve never been able to establish a good system for getting numbers here in San Diego. Traffic was heavy, there’s no question about that, in the malls. If you were around Fashion Valley at all this weekend, it was very busy both Saturday and – Friday, Saturday and Sunday. One of the things that happened this year is that we saw a fair number of retailers open earlier than, you know, four, five, six o’clock in the morning on Black Friday. There was – Walmart had their stores open at – at the morning of Thanksgiving, frankly, and…
CAVANAUGH: Yeah, and Kmart was open on Thanksgiving Day.
WHALIN: Yeah, Kmart has been open on Thanksgiving Day for a good number of years now. So there’ve been a fair – and that’s a growing number. There appears to be more retailers opening up on Thanksgiving Day to take advantage of consumers who have some time on their hands, I guess. But we, you know, traffic was out. There were a lot of people out, there was no question about that. But it’s hard to get any real hard numbers.
CAVANAUGH: So what you’re saying is what we’re seeing from the early numbers is that a lot of people actually went out on Black Friday and over the Thanksgiving weekend but the sales are so great, the discounts being offered by retailers are so great that the amount of money they’re making really hasn’t changed at all from last year.
WHALIN: Not at all, and last year was the worst year we’ve had in probably 20.
CAVANAUGH: Were there any segments of the retail industry that did better than others?
WHALIN: Well, obviously, the electronics business is the sort of the hot thing that draws people in and so the major retailers, both the big discount chains and the electronics retailers themselves all get very aggressive in bringing consumers in to buy computers and flat screen TVs and video games and GPS devices and digital cameras and all that sort of stuff. That’s probably the biggest draw these days. And probably second is toys. The toy business is actually pretty healthy right now considering where it’s been. And it’s doing better than we – most retailers expected.
CAVANAUGH: In recent years, I know that we’ve seen a disparity between the high end stores doing well, the low end stores doing well, and the stores in the middle not doing so well. How has the recession changed that dynamic?
WHALIN: It’s changed it pretty dramatically actually. The middle still have struggles, the department stores still have struggles and they’ve had down numbers all throughout this year. But the high end stores have had the biggest struggles of all. If there’s any segment of retailing that’s suffered more through this recession, it’s certainly the Neiman Marcuses and the Saks Fifth Avenues of the world. Neiman Marcus has had double digit declines in their sales every month this year and we’re not expecting anything great out of them for the holidays. And Saks Fifth Avenue has not been quite that bad but they’ve had – they’ve really struggled. High end luxury goods retailers have struggled dramatically throughout this recession.
CAVANAUGH: I’m speaking with George Whalin. He is a retail expert, founder of Retail Management Consultants, located in Carlsbad. We’re talking about how the Christmas shopping, the very early Christmas shopping season is going. Black Friday and Cyber Monday are behind us and we have a few numbers to deal with and try to read the crystal ball and tell us whether or not this holiday season is going to be better than last year. George, let’s talk a little bit more about Cyber Monday, which was yesterday. Did – You did say that, indeed, it almost mirrored the actual brick and mortar traffic over the weekend. A lot of people online but sales flat?
WHALIN: Sales actually were down…
WHALIN: …from last year. What we think that the online retailing will have, will show an increase for the year over last year. One of the things about Cyber Monday is it’s kind of a made-up marketing scheme. It is typically not the busiest day of the shopping year online. Typically, that’s closest to the middle of the month before the last day of shipping.
WHALIN: We’re – We, as consumers, are pretty good procrastinators. And as the next week or ten days, maybe fifteen days, goes along, we’ll see the business online continue to increase until we get to that last day, probably around the 15th, 16th, 17th. That’ll be the end of the shipping days for the online retailers.
CAVANAUGH: Speaking of shipping, lots of online stores are offering bargains like – incredible bargains on shipping, things that I’ve never seen before. Some catalogs, some online places, are offering free shipping on anything so, you know, conceivably you could buy a $10.00 item and get it shipped to you for free. Is that a good strategy, to basically knock off those shipping prices for people?
WHALIN: Well, it’s the way they compete with trick – the traditional brick and mortar retailers. You know, they have the – generally have the advantage of not having to charge sales tax and if they can take care of the shipping then they can compete very favorably price wise with brick and mortar retailers so, yeah, it’s a viable strategy. It is one that we are not going to see go away anytime soon.
CAVANAUGH: Is it something that eats into their profits though?
WHALIN: Oh, yeah, no question about that. But, you know, you look at an online retailer, their cost of doing business is substantially less than that of a brick and mortar retailer that has a store and have to pay taxes on their profits and they have all of the things that go to operating the store whereas most of the online retailers have one or more warehouses around the country but they, none of them, have more than a half a dozen or so. So it’s a very different business model.
CAVANAUGH: Now let’s look at it, if we can, I know that you’re very retail centric because that’s what you do. Look at it from the consumer’s point of view for this holiday shopping season. What kinds of bargains should people look for? And should they buy now or should they wait until closer to Christmas? What is – what kind of strategy should a consumer sort of develop this holiday season?
WHALIN: Well, the one strategy they should have is that if they see something they absolutely want, to go buy it and not procrastinate because one of the things that happened, last Christmas season retailers got absolutely killed by having too much inventory in their stores. They – we didn’t know that last Christmas season was going to be bad and when retailers started buying months before for the Christmas season, they expected it was going to be pretty good, much like had been in 2007, and that turned out to be not the case. We had – we saw dramatic decreases in sales and dramatic decreases in consumer spending and retailers got left with a lot of inventory so they were discounting it 40, 50, 60, 70%. That is not going to be the case this year. They’re going to be some discounts, there’s no question about that. That’s just the nature of the business. But if you see something that you want and it’s something you desire to have, you better go buy it because it may not be there two weeks from now.
CAVANAUGH: You talked about big discounts on electronic items being offered now, are there any other big bargains that shoppers should look for?
WHALIN: Well, the bargains are going to be certainly there and the other bargains are going to be in some kinds of apparel, not all kinds of apparel but in some kinds of apparel. And, you know, the department stores have had a very difficult year and so they’re going to be very aggressive in their pricing on apparel and things like that, and those are the kinds of things you have to look at.
CAVANAUGH: You know, I – in just watching TV, I’ve noticed actually some TV ads that seem to be pushing people to spend a lot for the holidays even if they don’t think they can afford it. I remember one Target commercial, for example, basically saying, you know, we’ll find some way to – that Santa’s elves will help us and so forth. I may be misconstruing and exaggerating this ad a little bit but that seems to be the tone of some of the ads. Do you, George, think that that’s a good strategy for retailers?
WHALIN: I think retailers have to do whatever it takes to get business in this time of the year. One of the things with Target, Target’s kind of interesting to look at right now because Target for a long time had positioned themselves as not really a discounter and had been very successful about doing that. Well, they have changed their way of doing business. Since Walmart has gotten so aggressive, Target has also gotten very aggressive at pricing and discounts and things like that. But retailers, this is the time of year, retailers need this time of year to generate the kind of revenues that they need for – to make their year. So it’s very important that they do that. I don’t advocate telling people to spend money that they don’t have, but it’s a very aggressive time of year for retailers.
CAVANAUGH: Tell us a little bit more about that. What stores are literally banking on this holiday shopping season for their survival?
WHALIN: Oh, there are two kinds of stores specifically that without a good holiday season they generally either don’t go – they don’t – they go out of business or they don’t have a very good year, and they are toy stores and jewelry stores. Those two kinds of stores very specifically have to make their numbers in November and December and January or they have a disaster on their hands.
CAVANAUGH: Wow. So what do you think will work for retailers this holiday season besides a lot of advertising? I guess that, if they can afford it, that’ll do it. What are the kinds of offers that are going to get people into stores buying things this holiday season?
WHALIN: Well, if you look at the entire year, the entire year of 2009 has been a very, very bad year for retailers. We have not had a month where retail sales are actually positive from the year before. We’ve been down every single month so retailers are very aggressive in their pricing and in their marketing. I don’t know that I’ve ever seen a year when Walmart has spent more money and more effort on advertising than they’re doing right now. And we will continue to see that throughout the season. One of the things that happened, oh, probably the last five or six years is we, as consumers, have become more procrastinators than we probably ever have before and that last weekend before Christmas and the last week before Christmas have become crucially important and we’ll see more and more advertising and more and more aggressive pricing and more and more things to try to get customers through the front door.
CAVANAUGH: So, in other words, we won’t really know what kind of a holiday shopping season this has been until basically the last minute, is that what you’re saying?
WHALIN: Actually, we won’t know it until probably the middle part of January.
WHALIN: And the reason, there are two reasons for that. One is that, obviously, the procrastinators, but gift cards have become a very important part of the holiday season and gift cards typically don’t get redeemed…
WHALIN: …very much until after Christmas and the first week or two of January.
CAVANAUGH: That’s exactly right. So that’s considered part of the…
CAVANAUGH: …holiday shopping season.
CAVANAUGH: It’s very interesting. You know, last year I remember going to malls and being really surprised around Christmastime that the parking lots were so empty but what you’re saying this year is we might see a lot of crowds at the malls but that doesn’t necessarily mean that sales will be up for retailers.
WHALIN: Absolutely. Absolutely. Consumers are very cautious these days. I mean, you have to look at the overall picture. We still have a housing crisis in this country and we have 10.2% unemployment. Those two factors make a huge percentage of our population very cautious in how they spend money. And Christmas or no Christmas, rather than spending five hundred or six or eight hundred or $1000 on Christmas, they may spend two or three or four hundred this year.
CAVANAUGH: I want to thank you so much for talking with us.
WHALIN: My pleasure.
CAVANAUGH: You’ve given us a good overview on this holiday season. Thank you so much, George Whalin. And I want to let everyone know that they can post their comments on this or anything you’ve heard on These Days online at KPBS.org/TheseDays. Thank you for listening. You’ve been listening to These Days on KPBS.
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