November 1, 2007
Consumers Shop Later, Retailers Promote Earlier for Holidays
A survey by Consumer Reports shows that consumers plan to start shopping later for the holidays this year than in the past. At the same time, retailers including Wal-Mart, Toys ‘R’ Us and Circuit City have gone on the offensive announcing special deals well in advance of Black Friday.
According to the Consumer Reports survey, only 22 percent expect to get their holiday shopping done right after Thanksgiving this year compared to 30 percent in 2006. Another 45 percent said they expected to finish shopping for the holidays by the second week of December while 20 percent didn’t expect to complete their purchases until Christmas Eve. A full six percent don’t expect to finish their shopping until after the season is over.
The study also found that consumers intend to watch their holiday spending carefully so retailers will need to sharpen their pencils.
“Our findings suggest that consumers are tightening their wallets this year more so than last year,” said Tod Marks, senior editor, Consumer Reports, in a blog on the publication’s website. “The holiday shopping landscape is vast. Consumers need to make well informed decisions on their budget and on their purchases to alleviate the large bills and possibly disappointed gift recipients.”
Tops on the list of gifts that consumers want this holiday is clothing (71 percent) following by gift cards (62 percent) and electronics (53 percent).
Meanwhile, a number of retailers are going all out on the publicity and advertising fronts to let consumers know that there are great holiday deals to be had beginning this weekend.
The moves by merchants follows a pattern that has developed in recent years with stores looking to get a head start on the competition. The timing, much earlier than in the past, is the surprise element at play this year. The types of deals being promoted right after Halloween are not normally seen until the Black Friday weekend.
KB Toys is among those merchants looking to motivate consumers to shop earlier for the holidays.
Geoffrey Webb, director of advertising and sales promotion at KB, told The Associated Press, “This is definitely a preview of Thanksgiving. We heard this is going to be a competitive holiday so we are going to be right in the rings fighting it out.”
Ken Perkins, president of RetailMetrics LLC, told the news service, “This isn’t good news for stores’ profits…It’s just more evidence that this is going to be a highly competitive season. Why would you start to drive traffic this early unless the retailing environment is not expected to be particularly strong?”
Discussion Question: If consumers are inclined to shop later and spend more on gift cards, will early sales promotions have much of an effect on holiday shopping behavior? Will the early start by some give them an advantage when consumers finally do get serious about their Christmas season shopping even if it is a week or days before the holiday?
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Retailers have trained the consumer and don’t seem to understand what they have trained them to do? Doesn’t make sense does it? Comments by Mark Hunter and Camille Schuster are right on target.
What will happen this holiday season is the same that has been happening of recent. Retailers don’t yet understand the impact of gift cards, don’t know how to market to them, and don’t realize the changing trends–yet, they invented them.
What will happen is that the ‘crazies’ will be lured out by the ridiculi (that’s plural for ridiculous in ‘Scanner’ speak) on Black Friday. Then they’ll go home, sit and wait, and wait, and wait some more until retailers panic as usual and discount, discount, discount.
So what’s new? I’ll be watching carefully to see what happens to the new shopping season–January and February. Do they know its coming?
Dear Santa, please send gift cards….
First of all, I would like to know the historical accuracy of these surveys…do consumers actually do what they say they will?
If that indeed is true, then promoting early may lead to less effective promotions, but may help in preempting potentially weaker sales. Consumer confidence, announced earlier this week, was weaker than consensus expectations. If that is an indication of a weaker holiday season, then retailers may be justified in trying to build momentum in advance of the season.
Welcome to the fourth quarter panic-fest. It happens every year and this year isn’t any different.
Retailers have a self-perpetuating problem. Every year, buyers push more merchandise into the stores earlier. Retailers, without massive backrooms are forced to put them out on the sales floor. So, you have consumers looking at winter coats in September at full price. For the most part, they know the sales signs will be up in a month or two and they are going to wait until they perceive that prices are bottoming out. There are actually websites devoted to telling customers two or three months in advance what sales are coming up at major retailers.
The longer they wait, the lower the profit margins. Like I said, it happens every year because there is absolutely no incentive for buying early–except every two years when the electronic gaming industry puts out their “hot” new system and there’s a rush to get it before the artificial pre-Christmas shortage appears.
Other than that, people are simply going to wait longer before they make their purchases. I’m reminded of the old Woody Allen line: “In my family, the greatest sin was to buy retail.”
This only proves how much the retail industry is out of sync with consumers. The end result of all of this is retailer’s will get the expectations of investors up to a point where they can’t deliver, which will result in some amazing discounting late in the holiday season. The end result will be that the consumer will win at the expense of the investor. In the end, the credibility of the retail community will be tarnished, resulting in P/E ratios being pushed lower.
Gift cards have changed the holiday economy in a very positive way. Consumers come back to the stores in January to “buy.” Gift cards have created a retail environment where there are less returns, better management of retail dollars, and more consumers shopping in the black in months that used to be red. Retailers and suppliers can fully take advantage by winning over new customers that will come back throughout the year. We discussed these ideas at a recent consulting session I held with branded companies. One of my clients will be using January this year for a major new product launch to fully take advantage of the type of traffic that the gift card and post holiday traffic.
Good comment by Mark Hunter. If the retailers knew their consumers well they would know when consumers shop for Christmas and whether they appreciate Christmas shopping this early. That they don’t know says volumes about their lack of consumer orientation.
While a lot of consumers object to seeing Christmas decorations before Halloween, that hasn’t stopped a good number of retailers. If consumers are going to do any Christmas shopping this early the prices are going to have to be a really good deal–cutting into the retailer’s profit. With a long shopping season ahead of them and lots more sales to come, consumers are likely to cherry pick the good deals and not buy any other presents because they will be waiting for other sales.
I order all of my gift fruitcakes one year in advance.
Every year, retailers get scared about Christmas volume. Every year, retailers start promoting Christmas earlier. Every year, retailers are tempted to destroy their Christmas profits by giving away loss leaders. Every year, more and more shoppers learn to be cherry pickers, only buying the loss leaders, waiting to buy the rest until the last minute or even after Christmas, since prices drop as time goes on. Every dollar spent on a gift card today is worth more than a dollar after Christmas because of the huge markdowns. The only reason to shop early is to get something for nothing, because retailers won’t run out of stock, except for a predictable handful of items.
Hello sales, goodbye profits….
I can only echo what been said already. Corporate retail stepped out onto this slippery slope of relying on price to drive traffic decades ago, and advances in technology only steepened that slope. Every year, it’s become a race to capture early sales, capture tenths of a percentage point in market share, drive comp store sales, and hope nobody notices the impact on profitability.
And all the while, consumers get smarter and smarter, wait longer and longer, knowing they can out-wait the retailers, further destroying any retail price integrity and any consumer sense of urgency.
In the end, the rush of price promotions isn’t as likely to drive sales volume as much as it is to destroy profitability. After offering 25% to 40% discounts to drive volume now, how deep will retailers have to go to drive volume in December?
The challenge for corporate retailer as an industry and as individual companies is to begin to develop strategies for stabilizing pricing, and margins, and begin to back off this slippery slope.
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Retailers have trained the consumer and don’t seem to understand what they have trained them to do? Doesn’t make sense does it? Comments by Mark Hunter and Camille Schuster are right on target.
What will happen this holiday season is the same that has been happening of recent. Retailers don’t yet understand the impact of gift cards, don’t know how to market to them, and don’t realize the changing trends–yet, they invented them.
What will happen is that the ‘crazies’ will be lured out by the ridiculi (that’s plural for ridiculous in ‘Scanner’ speak) on Black Friday. Then they’ll go home, sit and wait, and wait, and wait some more until retailers panic as usual and discount, discount, discount.
So what’s new? I’ll be watching carefully to see what happens to the new shopping season–January and February. Do they know its coming?
Dear Santa, please send gift cards….
First of all, I would like to know the historical accuracy of these surveys…do consumers actually do what they say they will?
If that indeed is true, then promoting early may lead to less effective promotions, but may help in preempting potentially weaker sales. Consumer confidence, announced earlier this week, was weaker than consensus expectations. If that is an indication of a weaker holiday season, then retailers may be justified in trying to build momentum in advance of the season.
Welcome to the fourth quarter panic-fest. It happens every year and this year isn’t any different.
Retailers have a self-perpetuating problem. Every year, buyers push more merchandise into the stores earlier. Retailers, without massive backrooms are forced to put them out on the sales floor. So, you have consumers looking at winter coats in September at full price. For the most part, they know the sales signs will be up in a month or two and they are going to wait until they perceive that prices are bottoming out. There are actually websites devoted to telling customers two or three months in advance what sales are coming up at major retailers.
The longer they wait, the lower the profit margins. Like I said, it happens every year because there is absolutely no incentive for buying early–except every two years when the electronic gaming industry puts out their “hot” new system and there’s a rush to get it before the artificial pre-Christmas shortage appears.
Other than that, people are simply going to wait longer before they make their purchases. I’m reminded of the old Woody Allen line: “In my family, the greatest sin was to buy retail.”
This only proves how much the retail industry is out of sync with consumers. The end result of all of this is retailer’s will get the expectations of investors up to a point where they can’t deliver, which will result in some amazing discounting late in the holiday season. The end result will be that the consumer will win at the expense of the investor. In the end, the credibility of the retail community will be tarnished, resulting in P/E ratios being pushed lower.
Gift cards have changed the holiday economy in a very positive way. Consumers come back to the stores in January to “buy.” Gift cards have created a retail environment where there are less returns, better management of retail dollars, and more consumers shopping in the black in months that used to be red. Retailers and suppliers can fully take advantage by winning over new customers that will come back throughout the year. We discussed these ideas at a recent consulting session I held with branded companies. One of my clients will be using January this year for a major new product launch to fully take advantage of the type of traffic that the gift card and post holiday traffic.
Good comment by Mark Hunter. If the retailers knew their consumers well they would know when consumers shop for Christmas and whether they appreciate Christmas shopping this early. That they don’t know says volumes about their lack of consumer orientation.
While a lot of consumers object to seeing Christmas decorations before Halloween, that hasn’t stopped a good number of retailers. If consumers are going to do any Christmas shopping this early the prices are going to have to be a really good deal–cutting into the retailer’s profit. With a long shopping season ahead of them and lots more sales to come, consumers are likely to cherry pick the good deals and not buy any other presents because they will be waiting for other sales.
I order all of my gift fruitcakes one year in advance.
Every year, retailers get scared about Christmas volume. Every year, retailers start promoting Christmas earlier. Every year, retailers are tempted to destroy their Christmas profits by giving away loss leaders. Every year, more and more shoppers learn to be cherry pickers, only buying the loss leaders, waiting to buy the rest until the last minute or even after Christmas, since prices drop as time goes on. Every dollar spent on a gift card today is worth more than a dollar after Christmas because of the huge markdowns. The only reason to shop early is to get something for nothing, because retailers won’t run out of stock, except for a predictable handful of items.
Hello sales, goodbye profits….
I can only echo what been said already. Corporate retail stepped out onto this slippery slope of relying on price to drive traffic decades ago, and advances in technology only steepened that slope. Every year, it’s become a race to capture early sales, capture tenths of a percentage point in market share, drive comp store sales, and hope nobody notices the impact on profitability.
And all the while, consumers get smarter and smarter, wait longer and longer, knowing they can out-wait the retailers, further destroying any retail price integrity and any consumer sense of urgency.
In the end, the rush of price promotions isn’t as likely to drive sales volume as much as it is to destroy profitability. After offering 25% to 40% discounts to drive volume now, how deep will retailers have to go to drive volume in December?
The challenge for corporate retailer as an industry and as individual companies is to begin to develop strategies for stabilizing pricing, and margins, and begin to back off this slippery slope.