November 19, 1996 in Nation/World

Christmas Retail Disaster Predicted Group Sees Shoppers Spending Just 1.5 Percent More Than Last Year

Bloomberg Business News
 

Shoppers are expected to spend 1.5 percent more buying gifts this holiday than last year, which would result in the worst sales in two decades, according to a research group.

The report by America’s Research Group, which surveys about 8,000 consumers a week, runs contrary to many forecasts for sales increases of about 5 percent. The group, though, has a strong track record: It correctly called last year’s surprisingly slow sales and the sales results the two years before that.

Consumers probably won’t spend much this year because there are few new products that they find attractive, said America’s Research Group Chairman Britt Beemer. Also, consumers say that other merchandise seems to be lower quality.

“Nearly 70 percent of Americans think they are getting lower prices on lower quality and because of that, they say they are not finding the value that they once did,” said Beemer.

Sales could be even worse, he said. Many retailers will see no sales growth or declines of as much as 1 percent, compared with last year’s 2.5 percent increase.

One reason is that consumers are saving rather than spending because they’re worried about paying for their retirement or children’s education. Of those surveyed, 10 percent said they would spend less this Christmas in order to invest the difference, according to the survey.

“More consumers are coming to the realization that they can’t depend on the government to take care of them in retirement,” said Beemer. “Many don’t think there is going to be enough money to go around.”

Thirty-eight percent of those surveyed said if they were given a $1,000 gift they would invest it or pay bills, up from 16 percent five years ago and an average of 3 percent to 4 percent during Ronald Reagan’s presidency, said Beemer.

And when consumers do spend, they’ll be looking for the same deep discounts that crushed retailers’ profit margins last year.

Of the shoppers surveyed, 78 percent said they believe retailers will be forced to mark down prices by more than 50 percent just before Christmas.

“Consumers are going to be even more bargain hunter driven this year than last,” said Beemer, in part because they remember the discounting from last year and will be looking for more of the same.

If retailers are going to compete, those price cuts will need to start the day after Thanksgiving, which is traditionally the beginning of the holiday shopping, said Beemer.

“If they don’t, they will find a lot of merchandise on the shelves after Christmas,” he said.

Another sign that consumers won’t be spending freely: 58 percent said the plan to use cash, up from 47 percent last year. That indicates many will be on a budget, he said.

And when they do spend, 34 percent are less likely to go to department stores this year because they believe they offer less value. Their first choice will be discount stores.


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