Struggling companies likely to cut back on holiday giving
Fewer workers also means drop in number of gifts
NEW YORK – Workers shouldn’t count on lavish gift baskets or monogrammed cuff links from their employers this holiday season. As companies face tighter budgets and layoffs in a tough U.S. economy, analysts and industry data suggest a slowdown in employee gift-giving. While financial worries have many consumers curtailing their spending, companies are scaling back their budgets as well.
Sherry-Lehmann, a 74-year-old wine and spirits shop in Manhattan, has seen some corporate customers – mostly law firms, real estate companies, and Wall Street firms – trade down to cheaper items.
“We’re seeing more interest in less expensive items as the economy struggles,” said Chris Adams, Sherry-Lehmann’s executive vice president.
Adams expects this to continue as the holiday season approaches and more companies start ordering gifts for their employees. He says sales of pricey champagne have declined, while sales of sparkling wine and wines priced between $15 and $30 are rising.
David A. Schick, managing director of equity research for Stifel Nicolaus, says he expects many companies will cut back on ordering gifts for their employees “based on where budgets are right now.”
A survey by the American Express OPEN Small Business Monitor, which asked 768 businesses nationwide about spending habits, found that the intensifying financial meltdown was leading companies to rethink gifts for their employees. About 29 percent of businesses surveyed in October said they planned to give gifts to their employees, down from 46 percent in August.
“Business owners are feeling pinched and have held off as long as they could, but they have no choice this year,” said Alice Bredin, small-business adviser to American Express OPEN.
For the companies that provide corporate gifts, rising unemployment is also having an impact, Schick said – since layoffs mean fewer employees for companies to give gifts to.
Upscale luggage company Tumi, which has a large corporate gift business, says corporate customers appear to be ordering more-expensive items, albeit fewer pieces.
“We’re seeing a flight to quality, but the numbers cut,” said Mike Landry, the company’s director of special markets. “There are fewer people getting gifts. If there were 150 people before, now it’s more like 60 or 70.”
The nation’s unemployment rate soared to a 14-year high of 6.5 percent in October, the government said, as another 240,000 jobs were cut.
Given the thousands of layoffs on Wall Street this year, many businesses will likely see orders soften this holiday season, as bankers have typically been well-rewarded by employers.
Some companies have insulated themselves from swings in demand.
Schick said Tiffany & Co., for example, does not depend greatly on orders from corporations after scaling back its corporate business several years ago.
“It’s far less important to them, but that’s not to say it’s not important at all,” Schick said.
Tiffany spokesman Mark Aaron said the company’s corporate-gift segment is not a large portion of its overall business, but said the unit posted a double-digit gain in sales from January through July.
Others are trying to spur demand by advertising more and holding special events for corporate clients.
Adams said Sherry-Lehmann ramped up marketing efforts by advertising in the New York Times.
Vineyard Vines, a Stamford, Conn.-based apparel company that makes neckties and other merchandise popular among Wall Street bankers, hosted preview events this year in New York City and Boston for its corporate customers. Spokeswoman Lindsey Worster called the event “a great success.”
“Last year our custom business doubled. This year, we’re up about 20 percent,” Worster said.
Some businesses also still see the value in maintaining their corporate image, especially among clients, and keep this in mind when rewarding employees.
One of Tumi’s most popular items, Landry said, is a business case – a functional item that an employee can use in their day-to-day activity, and especially important in sales.
“Companies want their salespeople to walk in with a nice business tool,” Landry says.
“Budgets are getting cut and expenses are being slashed, but companies still get the fact that they have to reward employees.”