Many economists are hoping for signs this Holiday season that Americans are ready to start spending again. But one local retail expert says it may be too soon to expect a big boost in spending, even though stores will be cutting prices drastically.
GUEST:
George Whalin, founder of Retail Management Consultants of San Marcos, which provides business-building services to retail companies and industry suppliers all across North America.
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MAUREEN CAVANAUGH: I'm Maureen Cavanaugh and You're listening to These Days on KPBS. Traterribly the holiday shopping season begins this Friday, the day after Thanksgiving known as black Friday, because businesses hope the volume of sales will begin to put their accounts in the black. But just like a lot of economic traditions lately, black Friday is not what it used to be. Many retailers are not waiting until Friday, and are open on Thanksgiving day. And Internet holiday sales have already begun. But the big question in the air this holiday season is not when it starts but where Americans are ready to start spending again, joining us to talk about the out look for retail sales during the 2010 holiday shopping season, is my guest, George Whalin, he's founder of retail management consultants of San Marcos, which provides business building services to retail companies and industry suppliers all across America. . And George, welcome back to These Days.
GEORGE WHALIN: Thanks Maureen.
MAUREEN CAVANAUGH: Now we invite our listeners to join the conversation. Are you planning on buying more this season, more gifts? Or are you still planning for a leaner holiday, something that's cut back and not quite so much under the tree. Call us with your questions and your comments, 1-888-895-5727. That's 1-888-895-5727. George, I just spoke with KPBS reporter Kyla Calvert about whether Americans will have a permanent change in spending habits because of the great recession. What do you think about that.
GEORGE WHALIN: Well, I think it's sort of semipermanent, I'm not convinced that Americans are gonna completely stop buying forever. One thing that happens is we have fairly short memories. I think when this recession's gone and people get back to work, and the housing situation settles do you happen, and people are more flush in having more cash, they'll go back to their olds spending ways. But I don't think that's gonna happen right away. We've got two and a half years of consumers being cautious in how they spend, and I think that's gonna be with us for a while longer.
MAUREEN CAVANAUGH: Now, I've heard some predictions that this year's holiday season will be bigger than last year. Do you agree with that?
GEORGE WHALIN: I think it's gonna be slightly bigger, but it depends on where you are. I don't see how it's gonna be bigger here in California when we still have 14 percent unemployment, and we still have such a terrible problem in our housing market. So I don't see it in California. There are some areas of the country with 7, 6, 7, 8 percent unemployment, and they'll have a better Christmas. But I don't think we will here in California.
MAUREEN CAVANAUGH: As I said, our listeners are invited to join the conversation. If you want to tell us what you're planning this christmas, buying more or still being very frugal, 1-888-895-5727. That 14 percent unemployment in California, I've heard 12. Have I been lagging somewhere, George?
GEORGE WHALIN: Well, I think the real number is 14, but the ones that would the government would have you believe is 12.
MAUREEN CAVANAUGH: Right. Now, is California kind of a special case in that we have that combination of high unemployment and this sort of really crazy real estate market that nobody seems to be able to figure out.
GEORGE WHALIN: Well, there are actually I few states. Us, and certainly Nevada. Nevada's still got big problems, Florida has big problems issue there are a few other states. But we're not in great shape, that's for sure.
MAUREEN CAVANAUGH: Now, considering this we may be kind of on the bottom, but everywhere across the country, it's pretty hard times, people are still feeling that almost everywhere in the United States. . What are retailers going to do to try to make us part with our cash this season.
GEORGE WHALIN: Oh, they're gonna get very aggressive in their pricing. We're already seeing it in the black Friday ads, and the prices are things are going to be very desirable for consumers to try to get occurs in the door. We know that one thing consumers respond to is rock bottom prices. And retailers have been doing that, and are doing that for the last few years, and will continue throughout Christmas.
MAUREEN CAVANAUGH: So where are these sales? Are they across the board or are they in some specialty areas of retail like clothing and toys and thing was that nature?
GEORGE WHALIN: Well, they tend to be targeted toward consumers [CHECK AUDIO] apparel has a difficult enough time getting their prices low enough right now. Check heck has had to increase their prices in the last few months because of the cost of raw materials, the cost of cotton has gone up to about 35 percent in the last 18 months. So the cost of raw materials is making apparel more expensive. But there are other categories that have had a very difficult time that are aggressive, particularly the jewelry industry. Jewelers had a very tough time, we see literally hundreds of jeweler cans across the country go out of business. So the jewelers are certainly going to be aggressive in their pricing and how they do things.
MAUREEN CAVANAUGH: Now, when you talk about aggressive in their pricing, what kind of cuts are we talking about.
GEORGE WHALIN: Well, last year, we saw a lot of this up to 70 percent off, we're gonna see a lot of this this year as well. Not necessarily on jewelry, but other categories of items will we'll see 30, 40, 50, 60 percent off very common this year.
MAUREEN CAVANAUGH: And how about high-tech items, how are they moving and what kind of sales should we see?
GEORGE WAHLIN: Well, they're good, but the thing that is really driving, for example, flat screen TVs is that the prices have come down. Like any piece of technology, the locker it's on the market, the more broad based it gets and the more consumer appeal. So we see dramatic increases in the cost of big screen and flat screen TVs.
MAUREEN CAVANAUGH: And this is really important for people who have young children, what about the price of toys? Should we expect any real sales there?
GEORGE WHALIN: Well, I think we'll see a lot of it, because first of all, we have so many people in the toy business today in a big way. Wal-Mart always had toys, [CHECK AUDIO] so you've got Wal-Mart selling toys, you've got Costco selling toys, you've got Target selling toys, you've got toys are us selling toys, and a lot of other people selling toys it. So the toy business is -- is they see it as a valuable seasonal kind of business that they can get a lot of volume out. So we'll see very low prices on toys, and if a parentary looking for a specific toy for their child, they ought to shop around in as many places as possible, and on line as well, because they'll get a price that meets their needs.
MAUREEN CAVANAUGH: I'm speaking with George Whalin, he's retail analyst [CHECK AUDIO] this holiday shopping season. Than you have, perhaps last year or the last couple of years. 1-888-895-5727 is the number to call. Let's take a call right now, norvalis calling from Lemon Grove, and good morning, welcome to These Days.
NEW SPEAKER: Taking my call.
MAUREEN CAVANAUGH: Yes, hi.
NEW SPEAKER: I think that spending money is not necessarily patriotic. And it doesn't make our country a better place in which to live. Patriotism grows with the love of family, community, and country. And love grows by the time with family. Things are not a measure of love. Children learn value by not being given a whole Christmas tree full of clothes. And that's all I have to say.
MAUREEN CAVANAUGH: Well, Norval, thank you very much. And that, I think a lot of people share that. In fact, I think more people share that, that mindset, than perhaps used to. But George, on the other side of the coin, give us an idea of how much our economy is actually driven by consumer spending?
GEORGE WHALIN: Well, see, I think consumer spending is an extraordinarily important part of our economy, and our patriotism. Because it is about keeping people working. The retail industry is the second largest employer in the United States. And it's an important part. Consumer spending is more than 70 percent of our GNP. So it's, you -- we will not turn this economy around until the consumer goes back to buying the things they need. I'm in the suggesting and I don't think anybody in retail suggests that anybody should over spend. What we in the realist industry want though is we want consumers, if they legitimately have money to spend for the things they need,ing that they go out and spend it. . And they buy the things they need. Frugality is all well and good, but if you don't have the things you need for your family, then I don't know that that makes a whole lot of sense.
MAUREEN CAVANAUGH: You were telling me about sales of we were just talking about sales, lots of sales on toys. We're gonna see sales Reach across the board, although clothing may not fit in there because of a price jump just recently, but if you do see big sales though, if you see something advertised at a really reduced rate, you should expect that, the price to come down even more later in the season, or should you wait to buy or should you jump right on it?
GEORGE WHALIN: Oh, I think if you see something that's a very good buy, and something you want, you should buy it right now. There's a real good reason for that this year. The primary reason is that retailers after the 2008 Christmas season learn aid valuable lesson. In the early months of 28, retailers thought we were gonna have a normal, good, 5 or 6 percent increase in holiday sales and they bought accordingly. And they ended up owning a lot of that merchandise well after that Christmas. So they started slashing the prices. They got absolutely hammered when it came to profitability for their stores. If you start selling merchandise for 70 percent off, you're not gonna make any money off it. That's just plain and simple. [CHECK AUDIO] and they can afford to give away 70 percent and still remain profitable. That's just not the case. They ended up -- months after the holiday accept, finally getting rid of that merchandise. And they've learned that they cannot have too much merchandise. If they over order, they're gonna own some of that merchandise into February and March, [CHECK AUDIO]. And they continuing the demand is gonna be up a little bit to flat this year, they're gonna order accordingly.
MAUREEN CAVANAUGH: Now, what sectors of the retail market do you see doing well this season? Even if you're not predicting anything gang busting in California when it comes to holiday sales?
GEORGE WHALIN: Well, I guess the most surprising one we're seeing is the luxury markets. The up scale retailed like Nieman Marcus and Saks Fifth Avenue, and those kinds of stores have had several good months now for the first time in two years, and we suspect that's gonna continue thought the holiday season. And the reason for it appears to be, and it's pretty obvious that this is it, is the stock market has done very very well for the last several months, for actually most of the year, and a good number of affluent people rely on the stock market as an indicator [CHECK AUDIO] and that's gonna be good for the holiday season for luxury retailers. The other category of retail is gonna do well, but not spectacular, will of course be the guys in the electronics business. We think best buy will have a good holiday season, and other guys like them, Radio Shack will have a good season. And the reason is because all the new technologies that are out there, certainly Ibooks, and those kinds of things, are gang busters right now, and will continue to be throughout the holiday season.
MAUREEN CAVANAUGH: Let's take a couple of calls. We're taking your calls at 1-888-895-5727. Or you can join us on line at KPBS.org/These Days. Pat is calling -- Aspen, that is, is calling from San Diego, George, Aspen and welcome to These Days.
NEW SPEAKER: Good morning thanks for having me on.
MAUREEN CAVANAUGH: Yes, you're welcome.
NEW SPEAKER: My comment was, the gentleman said that -- how important retail is for our economy, and you know, certainly the numbers don't disprove that. But my comment is about how, when you look at the amount of consumer debt that people are accruing, that it's not necessarily an honest perspective as to what Americans, you know, can afford. And you know, people living without -- not within their means got us into a lot of the problems that we're in in the first place.
MAUREEN CAVANAUGH: I understand your comment, Aspen. And what about that, George? Our economy was fuelled for years by people spending more than they could afford on things.
GEORGE WHALIN: Well, yeah, I don't disagree with that premise that people shouldn't buy what they can't afford and living beyond their means. [CHECK AUDIO] by playing funny games with money and with debts, and household finances and things like that. So I think -- I think the primary force that drove our problems in the last two and a half years was wall street, frankly, and not American consumers.
MAUREEN CAVANAUGH: Jocelyn's calling from San Marcos. Good morning Jocelyn, and welcome to These Days.
NEW SPEAKER: Good morning. Thank you for taking my call. I just had eye quick comment, instead of purchasing individual gift it is this year, as our family is growing and getting larger, we have shifted to drawing names for family gifts. I.e., on one family purchases a gift for another family. Everyone still gets to participate and get a gift, I suppose.
MAUREEN CAVANAUGH: And when kid you start doing that?
NEW SPEAKER: We just decided this year. We have had a lot of members of the family get married, and [CHECK AUDIO] and to shift those gifts is just getting so enormous and expensive that we decided it would be more fun for each family to draw another family's name, and pick a whole family instead.
MAUREEN CAVANAUGH: And that's a good idea, so basically though that's gonna reduce your costs, right, down the line, even if you get a big family gift?
NEW SPEAKER: Absolutely. And we put a budget on it, because there are some of those in the family who are newly starting out, I have a younger sister and a younger brother who is just 20. So he doesn't have the income that say, my husband and I do. So the guitars are set at a $40 limit for the family, and it's an excellent way for every family to participate. But yes, in the end, the cost will go down.
MAUREEN CAVANAUGH: Jocelyn, thank you so much for the call.
GEORGE WHALIN: That's a great idea.
MAUREEN CAVANAUGH: I know. I was gonna ask you, George, we still talk about black Friday as if it was the black Friday that it used to be, and as I said, considering the Internet, and early starts from retailers getting on the season, how important is Black Friday?
GEORGE WHALIN: Well, it's I very important day for retailers, because it gives us some indication of what things are gonna be like. But it's kind of a phenomenon too. It's as much of a social event as it is a shopping event. People go out and hunt for bargains of what it's not, it's not the busiest shopping day of the year anymore. The busiest shopping day of the year now is the Saturday before Christmas -- are huge days, people are keeping their money longer, have less to spend, so they're getting -- the closer they are to Christmas, the more important. And, you know, we're a nation of procrastinators as well.
MAUREEN CAVANAUGH: Now, that is true. Now, how about Internet sales though? I've heard some early indications that are the numbers are up from last year.
GEORGE WHALIN: Yeah, they'll be up. One of the things I think has happened though, is the internet's importance to overall sales is blown way out of proportion as to what it actually is. It's only about eight percent over all of all retail sales. It's an important thing. It's very important. And all the big traditional brick and mortar retails also have websites. Wal-Mart's is a huge website, target's is a huge website. Seers does big business on the internet JC penny's does over a billion dollars a year on the internet. So it's a very important part of the consumer marketplace these days, but it isn't the end all and be all.
MAUREEN CAVANAUGH: And also, you were talking about how luxury items are going to be doing -- you know, relatively well this year. Are there also sort of niche retailers that are bucking the trend in California, and I'm thinking of places sort of like trader Joe's, that sort of market to a specific kind of a customer.
GEORGE WHALIN: Well, that's always been the case, no matter whether good times or bad. You get narrowly defined retailers, check check they're just a wonderful retailer, they do everything right, their consumers love them. Everybody I know that regularly shops there just thinks it's the best store since sliced bread. They just love that store.
MAUREEN CAVANAUGH: So people are willing to spend money but they're just really picky about where they do it.
GEORGE WHALIN: No doubt about that. If you go to Costco on Saturday, you can't find a place to park. If you go to one of the outlet centers around here you won't have -- there won't be any parking place on the weekends. It just depends on where you are and what you're doing.
MAUREEN CAVANAUGH: We only have juat about thirty seconds left, George, but what will it be to be a good Christmas this year? I mean what -- I know that you're not expecting much f a change, but how much of a boost would you say, okay, well, that wasn't too bad.
GEORGE WHALIN: Well, forget anything over a 3, 3 and a half percent growth. I think most retailers and those of us who observe the industry are gonna be thrilled.
MAUREEN CAVANAUGH: Okay. All right then. George, thank you so much.
GEORGE WHALIN: My pleasure.
MAUREEN CAVANAUGH: I've been speaking with George Whalin, he's founder of retail management consultants of san marcos. If you would like to comment, please go online at KPBS.org/These Days. Coming up, how to take part in the national day of listening. That's as These Days continues here on KPBS.
