Sunday :: Dec 18, 2005

Has Santa No Coal?

by pessimist

Despite all of the happy talk coming from the retail industry cheerleaders earlier this year, things didn't get going quite as well as they had hoped:

Disappointing debut for U.S. holiday season shopping
Nov 26, 2005

The official U.S. holiday shopping season appears to be off to a lukewarm start, results announced Saturday by a national research group that monitors retail sales indicated.

It hasn't gotten much better eighteen days later:

Holiday Shopping Shows Weakness
December 14, 2005

The fourth quarter is typically when many retailers turn the bulk of their profits. This year many retailers were so concerned that high fuel prices would hurt sales that they started discounting early.

On Tuesday the Commerce Department raised concern about the season when it announced that November retail sales grew 0.3%, just shy of estimates forecasting 0.4% growth.

* One good piece of news in that report: Auto sales increased 2.6% in November, rebounding from a 1.3% decline in October.

* The bad news: Without that auto sector, November retail sales actually dropped 0.3%, the biggest dip since April 2004.

Now - just WHY would this be?

Holiday Shopping Season Slow So Far
Dec 16, 2005

According to industry analysts, shoppers are a being a little cautious this season with how they spend their money. "Mall traffic is down 3.3% so far this shopping season," says economic analyst Matthew Will with the University of Indianapolis."And what's even worst is sales in the malls are down 9%."

Will says holiday shopping is down because shoppers are spending more time at stores buying for themselves and heading online to shop for others. "It's really just a very savvy consumer who says 'I'm going to go look at the product, then I'm going to buy it cheaper somewhere else,'" explains Will.

Industry analysts say malls will make up for the loss after Christmas when consumers make purchases using their gift cards.

They hope! My son, Bookseller, tells me that the bulk of their post-holiday gift card traffic is for cash refunds! There's no profit in that, now is there?

But I digress.

Online shopping - the basic premise behind the DotCom boom of the '90s - failed miserably for the very reasons this mall shopper gives:

Regardless where consumers decide to spend their money this season, one shopper says she'll spend the last shopping days knowing exactly what she's getting. "I like to go in the stores where I can see it, see what I am getting and know that it's going to be ok and not have to worry about sending it back if it's not," says Amy Whitis of Plainfield.

Some industry analysts see a connection between the cost of fuels and the slow sales:

Rising energy prices will alter holiday shopping

More than one out of every three online households said rising energy prices would alter their holiday shopping this season, according to the Consumer Internet Barometer produced by The Conference Board and TNS. More than half of all consumers will make fewer trips to the mall, while more than one out of every three plan to cut back their spending to combat costs. Some 30% will do more of their holiday shopping online instead of in stores.

Rising energy costs are changing the way 35% of all online consumers shop for the holidays. Consumers with modest earnings, under $35,000, and consumers aged 35 to 54 are the most affected. Even among more affluent households, with incomes over $75,000 annually, more than 60% plan to make fewer trips to traditional "bricks and mortar" stores than in the past.

This could prove to be a bad thing for the brick-and-mortar locations already under heavy assault from Walmart:

"Higher prices are driving more shoppers to the Internet instead of to the mall and changing the way consumers are doing their holiday shopping this year," said Lynn Franco, Director of The Conference Board Consumer Research Center. "But if energy prices recede, there is no guarantee these consumers will return to the malls. They may very well continue to point, click and ship instead."

The use by holiday shoppers of the low-energy Internet solution is confirmed by other market researchers:

Online Holiday Shopping Grows 33 Percent
December 12

"Online shopping has increased over last year because both new and experienced Internet buyers are not only researching products and comparing prices online before making a purchase, but they are also finding good holiday discounts online," said Heather Dougherty, senior retail analyst, Nielsen//NetRatings. Last year at this time, the Holiday eShopping Index showed shoppers visiting retail sites 348.3 million times during the week; this year, the number of shopping sessions grew to 462.5 million.

This news is driving local retailers to take drastic measures - one which will drastically affect their annual profits:

Slow sales, big discounts
Shoppers go down to the wire in search for bargains, and retailers seem happy to accommodate them
December 18, 2005

And so it begins: the last stretch of holiday shopping, when shoppers are out nosing around for last-minute bargains, and retailers - anxious about the possibility of a lackluster season - are often willing to accommodate them. Markdown signs are abundant: At Kohl's, jewelry is up to 60 percent off, and at JC Penney, women's coats were marked down by 50 percent, even though cold temperatures just arrived.

That dynamic, while typical, has been evident throughout the season, with relatively slow sales, steep discounts and crowd-free stores for the last few weeks, according to retail analysts. The pace of holiday sales has been gradually slowing since Thanksgiving weekend, according to the International Council of Shopping Centers. "The consumer has been nonchalant this whole season," uninspired by the dearth of must-have merchandise on shelves and slowed down by early warm weather that stalled demand for traditional winter gifts, said Britt Beemer, chairman of America's Research Group, which analyzes the retail industry.

Still, the coming week will be a crucial one for retailers. According to Beemer, 14 percent of Americans had not yet begun their shopping as of last Sunday, up from 8 percent at the same time last year.

"A lot of consumers are waiting to see how low retailers will cut their prices," he said.
And the answer is, quite a lot.

Now, the pace is finally beginning to pick up, merchants and observers say. "The last few days have been very, very slow. It's shocking," said A.J. Joshi, the manager at the Circuit City store. "But today is better. I have a good feeling."

At the Broadway Mall nearby, volunteer gift wrapper Mimi Gallagher said, "Today is the first day I can honestly say it's been busy" since she started wrapping on Dec. 7.

Remember this: the annual profit-generating sales season began November 25 - 23 days prior to this article's publication date. Time is running out to ensure that black ink is used when entering the balances:

Retailers hope for big sales in last week of holiday shopping

With Christmas exactly seven days away, retailers and shoppers both know one thing - this week is it. One more week, retailers hopefully say, to see a profit.
"Shopping's about the same as last year," Hutchinson Wal-Mart co-manager Jeremiah Zweifel said. "People don't seem to be spending as much because of things like gas prices."
Some retailers, however, have seen a downturn this year. Employees of Radio Shack in the Hutchinson Mall said sales are down significantly, except for a few hot items like GPS receivers and Sirius satellite radio systems.

But with Christmas drawing ever nearer, retailers say impulse buying of last-minute gifts or shoppers hoping to make up for missing out on a big-ticket item lend to more sales. One of those consumers Friday was Janie Ediger of Inman, who said she was almost finished with her shopping except for a gift for her nephew and one more gift for her sons. "I do not like to do last-minute shopping," Ediger said. "I try to leave the week before Christmas for making cookies."

This shopper offers testimony that supports the observation of the Walmart manager, Zweifel:

Ediger said her family's spending less on presents this year to save money for a trip to Arizona during spring break.

But the retail news isn't glum everywhere! Holiday shopping at the halfway point show sales are up in Mexico - Mexico, Missouri, that is.

All stores surveyed said they expected sales to increase even more in the last two weeks before Christmas. Brian Fuller, manager at Pilcher’s Jewelry Company, certainly isn’t surprised. "It’s a local tradition to wait to the last minute," he said. Mexico’s home-grown grocery store, Hickman’s IGA, reported that its meat, produce, bakery and deli sales are all up this holiday season. As usual, their catering services are busy as well, and likely to get busier. Jim Hickman, owner of Hickman’s IGA said 70 percent of all catering business done all year happens between Thanksgiving and Christmas.
"The two days before Christmas are always extremely busy," said Hickman. "They’re probably the busiest days of the year."

Let's hope for your sakes, they will. Some of your fellow retailers are counting on that happening:

Stores that rely heavily on these belated shoppers, such as florists who sell most of their perishable goods in the immediate run-up to Christmas, reported sales are down this year compared to last year at the same time. Steve Lierheimer, owner of Garden Gate Florists, suspects high fuel prices are driving sales down, but he expects sales to improve. He anticipates the Friday before Christmas will be his busiest day of the holiday shopping season.

Again, let's hope. But your region is deep into winter already, and some of your regular customers may be asking themselves this next question:

Can You Afford Heat and Holiday Shopping?

With the cost of energy going up, News19 [WLTX] asked shoppers if they plan to cut back on spending this Christmas.

"Yes, I'm going to cut back this year," said Dena Finch of Gilbert. "I'm going to make some gifts."

"No, I'm not and I don't think the rest of the community is either," said Tom Gallo of Chapin.

"With the gas prices what they are, and the fact that I drive an SUV, it has definitely made an impact on my budget," said Heather Felthaus of Columbia. Felthaus spent her lunch hour searching for presents at a Harbison strip mall. While the high gas prices were not keeping her from venturing inside stores, Felthaus says she will not be coming out with quite as many bags this year. "I already said I'm going to make a drastic cut. I went crazy last year. So, this year, I'm trying to keep a tight budget."

"We kind of budgeted ahead for the holidays and Christmas shopping," explained Cara Nicklin of Columbia. She admits her family is feeling the burn of higher energy costs, but says changing her holiday spending habits is not an option. "You can't cut back on Christmas!"

In fact, eight of the 11 shoppers we spoke to say this just is not 'the most wonderful time of the year' to pinch pennies.

"It's Christmas time and I like to overdo it a bit," Cheri Beesburg of Chapin. "I like to spoil my family. That's what Christmas is all about. So, I'll worry about it a little after Christmas."

This may be how many shoppers are creating after-Chri$tma$ worries for themselves:

The plastic in holiday shopping
Many consumers say they'll be charging gifts this year
December 7, 2005

A new study of consumers says many Americans are planning to increase their spending by a little more than 4 percent this hoiliday season to about $747 per person. Many of those shoppers said they didn't necessarily have more money this year so they would make up the difference with credit cards.

Pat Frank from Consumer Credit Counseling in Savannah says store credit cards may provide easy credit and discounts on merchandise but they carry a big price tag in interest, often over 20 percent. "They're out there trying to get your business," says Frank. "That's basically what they're doing." [P]robably only half of customers pay off their balance in full each month. The other half carries it over.

As far as discounts, Frank says "it's probably going to save them some money at the moment. But if they don't pay that balance off at the end of the month when that bill comes, it's not going to save them anything. Any savings is going to get eaten up with interest that's charged to it."

Frank says a lot of people also shop "after" Christmas sales so they may not only get a larger bill in January, but also in February.

Meisha Manuel agrees. "I'm paying cash for everything, I don't want to be in debt," she says. "I just want to have everything paid off so I won't have that 'after' Christmas struggle."

However, shoppers like Ebony Young say they don't want the Grinch to steal their Christmas. "Do you plan on using charge cards to buy some things?" I ask. "Yes of course," she laughs.

Be afraid! Be VERY afraid!

[I]f you're planning on using your Visa or Mastercard for holiday shopping, remember that minimum payments on some cards are increasing on January 1.

The credit sharks are very hungry - and are definitely ready to devour the unwary:

Credit card shoppers could be in for a shock after this holiday season
Dec 18

Shoppers who rely on credit cards to make this Christmas a merry one could be in for a shock when the first bills of the new year arrive.

At the urging of the federal government [still glad you voted for Bu$hCo? - ed.], credit card issuers across the country have begun raising the minimum payment required each month in a move that experts say ultimately will help those in debt crawl out from under a mountain of bills. The changes vary by credit card company, but the basic premise is the same – cardholders who make only the minimum payment every month will see their required payments jump, in some cases by as much as 100 percent.

Until now, Bank of America, the nation’s largest credit card issuer, required customers to pay only $10 a month plus all finance charges and fees. Starting with December bills, the company will require cardholders to pay at least 1 percent of the total balance plus all finance charges and fees. "The idea is to help customers pay down their debt faster," said Betty Reis, a spokeswoman for the bank.

Just paying 1 percent of the total due still will leave cardholders paying down their debts for years.
A family that owed $5,000 on a credit card with a 15 percent interest rate would take more than 80 years to pay off the debt and in the process would pay more than $25,000 in interest and finance charges, according to a calculator at If that same family paid 3 percent each month, on the other hand, it would take just 16 years to pay the debt off and the family would incur just $3,400 in interest and finance charges.

In the short term, however, the changes could come as a shock. "It’s going to be very difficult for those families that are already struggling, where there’s been a significant healthcare expense or a job layoff recently," said Jeanette Tucker, a family economics professor at Louisiana State University who studies credit card debt.

Such as in all of the homes of former Delphi and Ford autoworkers, for example?

Still, the increasing minimum payments that cardholders will face in the new year are a step in the right direction, according to Paul Richard, executive director of the Institute for Consumer Financial Education. "But it’s really not enough at this point," he said. "They never should have let it slide as far as it has.
"[T]he whole point of minimum payments is to keep people in debt longer and make them pay more in fees.
"Just paying the minimum payment is like taking a pencil and trying to scrape away a concrete sidewalk," Richard said.

Those who assist people with repaying their debts can see what's coming:

"It will be interesting to see what happens as these changes take effect," said Nick Jacobs, a spokesman for the National Foundation for Credit Counseling. "One potential difficulty we’ve foreseen is with people who have fallen into significant debt over time. They may have figured out a way to at least pay the minimum each month, and now if that minimum doubles, they’re going to have to refigure everything."

Including gift shopping!

Such lessons can be especially important around the holidays, when credit card use tends to peak. According to a survey conducted for the National Retail Federation, more than one in four Americans intends to rely on credit cards for all their holiday shopping this year.

Another survey conducted by Deloitte and Touche, a consumer research provider, revealed that the average shopper intends to spend $604 this year on holiday gift-giving.

Tucker, the family economics professor, said research she’s seen shows that those who go into debt to pay for the holidays tend to need about nine months to completely pay that debt off.

"At Christmastime, people tend to overuse their cards and overspend just because it’s available to them," she said. "Then, just as soon as you’re done paying it off, you start shopping again."
Richard, the Institute for Consumer Financial Education official, had some stark advice for shoppers tempted to spend more than they can afford. "Take that credit card, put it in a glass of water and then put the glass in the freezer," he said. "Then see if that urge to shop is still there while you wait for it to melt."

If a credit card is the only way a shopper can afford Christmas this year, then the truth is that Christmas may just be out of the question, Richard said. "If you haven’t started your Christmas shopping yet, then for heaven’s sake call your family members together and tell them you are simply not in a position to give gifts on credit cards again this year," he said. "Believe me, they will understand."

Some have already learned that lesson, and are willing to share their advice to others:

Kelly Powers works at a bank and has seen the pitfalls of overspending at the holidays. She decided this year to use only her debit card, which draws directly from her bank account and keeps her from spending more than she has. "If I don’t have the money for it, then I’m not going to buy it," she said as she finished up her shopping at the Bristol Mall last week. "I’m very tight with my money because I don’t want to be paying that high interest rate on a credit card."

Dot Christian said she’d managed to buy for 12 people this year without resorting to the plastic she carries in her purse. "I’m retired, so you don’t want to put things on your card that you can’t pay off right away," she said. "When you get to my age, you learn that it’s not the money you spend that matters all that much."

And maybe this is why the Chri$tma$ holiday $eason is so lackluster - fewer people have cash to spend, either to pay purchases directly or to pay off holiday credit charges. But never fear! Credit help is here:

For those who don’t follow Christian’s advice, however, hope exists. Credit card companies would rather get some sort of payment than see their customers go into default, said Jim Donahue, a spokesman for finance company MBNA. Therefore, companies work with cardholders who run into trouble. "If a customer thinks he or she is going to be up against a difficult situation, then the best thing to do is to call us before that difficulty becomes apparent to us in the form of late or missing payments," he said. "We will work with a customer to find an alternative to constant fees and ever-increasing rates."

Such as a stint in the poorhouse - er, company warehouse?

It may prove to be a good thing this year that the 14th Amendment doesn't allow indentured servitude! It would, however, be better to be forewarned and prepared to alter your habits, according to this expert:

With careful planning and strict budgeting, though, consumers can avoid finding themselves in that position, said Jacobs, of the National Foundation for Credit Counseling.
"Use cash," he said. "Leave the credit card and the checkbook in the drawer at home because it’s awfully easy to get in a little over your head otherwise."

Oh, and have a Merry Happy Kwaanz-onukkah-mas! That you can have while you shop at no extra charge!

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