Summary
Retailers are cutting prices as much as 60% and keeping longer hours in an attempt to increase sales, as result of decreasing sales over the holiday week. Internet sales, costs of fuel and foods, consumer debt, and the present economic downturn are the main reasons.
Analysis
Retailers are decreasing prices as much as 30%-60% and increasing store hours in an attempt to increase holiday sales. JC Penny and Kohl's are discounting prices as much as 30%-65%, and Macy's is increasing its store hours in the NY area to 24 hours.
Yet according to the America's Research Group 74% of shoppers said that they had completed their shopping, and 53.4% said that they planned to hold out for bigger bargains. Holiday sales are expected to increase only 1.8%, the lowest increase in holiday sales in over 10 years. This Saturday is expected to be the busiest day for retailers.
Although some retailers blamed cold weather, these same retailers last year blamed warm weather. The weather excuse is an old alibi, spin to cover a more basic problem. Weather will only impact sales over the short term, such as during a blizzard, or in a real crisis, as in a hurricane.
Mastercard released that womens sales decreased 5.4%, and men's sales increased by 5.4%. This is interesting, because in traditional economic downturns women will forsake fashion items for home-sewn clothing, and will concentrate instead on men's work clothing. Teen retail shoppers are expected to hold their own, a result of most teens not depending as heavily on credit cards.
The reasons for the downturn appears to be an increase in internet shopping and the present economic downturn.
Internet shopping increased 28% in households over $100,000 and 10% in those with incomes over $50,000. Convenience, lower prices, greater competitive selection, and high fuel costs are some of the reasons for the increase in internet shopping.
The present economic crisis is the real reason sales are low. Shoppers are looking for deep discounts or being forced to cut back on shopping. Consumer debt is at all time highs. The sub-prime mortgage crisis has resulted in banks not issuing loans on mortgage values, and reducing all types of consumer credit. Food and fuel prices are increasing, thus consumers are feeling the pinch in essential items.
I agree with Mr. Chen that the consumer is looking for deeper cuts in price than many retailers are want to make. The economic crisis is just beginning with the housing and mortgage crisis leading the way, the banks and financial institutions are in very difficult situation, housing only the tip of the iceberg. The present derivative meltdown equals over $700 trillion of worthless debt, in a $150 trillion world economy. Consumer credit is at all time highs. We may be seeing the beginning of a major economic downturn, and retail sales, products, policies, and prices will have to be adjusted to accommodate.
