Bargain hunting will be the main shopping strategy for consumers this holiday season, recent polls indicate, and although many retailers are more optimistic than they were this time last year, they may have to engage in heavy price cutting to grab customers, particularly in Southern California.
A recent Los Angeles Times Poll found that 53% of California residents said they will spend less this holiday season. Of the 1,718 state residents interviewed in October, only 9% expect to spend more, while 36% plan to spend the same and 2% don't plan to give any gifts. The margin of sampling error is plus or minus 3 percentage points.
An ABC News/Money magazine poll found slightly brighter prospects across the country. A nationwide survey of consumers conducted in mid-October found that 38% plan to spend less on Christmas gifts, 14% to spend more and 47% to spend the same.
Retailers hold even higher expectations for the season. A poll released Monday by the accounting firm Deloitte & Touche shows that 62% of the retailers surveyed nationwide expect their sales to increase, and 48% of the merchants in the Southland expect such a boost.
And bargains will be a key sales factor. According to a separate poll of consumers by Deloitte & Touche, 57% of the respondents nationwide said discount stores will be the "store of choice" for holiday shopping. This is a change from last year, when department stores were the leading segment of the industry for holiday shopping.
Also, when Mastercard recently asked 1,002 consumers nationwide which factors would be important in their holiday shopping plans, 52% cited "special discounts" and "in-store promotions"--3% more than the number who gave that answer last year.
"Nationally, the trends and the climate benefit retailers who are value-oriented," said Ira Kalish, a retail economist at the Los Angeles offices of Management Horizons, a division of Price Waterhouse. "But this bargain hunting is particularly strong in Southern California because the economy is so weak."
David Beamon, a Los Angeles forklift driver who participated in the Los Angeles Times Poll, said he is looking for more deals this year.
"Right now, I plan to spend 35% less this season," he said. "I'm worried about my personal (job) situation as well as the economy."
"I'm looking for items on sale--essentials that I planned to buy anyway," said Mary Washburn, a Palo Alto resident who participated in the Times Poll. "My brother-in-law recently lost his job. I think the economy is still weak."
Kalish predicts only a 1% increase for Southern California over last year, which means sales would be essentially flat.
Many retailers with major stakes in the California market are planning heavy sales promotions. One exception is May Department Stores, operator of Robinsons-May stores, which have had strong earnings this year. It has announced no sales initiatives for November or December. May Chairman David C. Farrell said May is "well-positioned going into the fourth quarter."
However, October sales reports contained trends suggesting that Southland retailers will face challenges this holiday season. Los Angeles-based Carter Hawley Hale, operator of the Broadway chain, had a 2.6% decrease in sales at stores open at least a year. Also, Mervyn's, which has 45% of its chain in California, experienced a 10% drop in sales.
Mervyn's parent company, Minneapolis-based Dayton Hudson Corp., is planning more promotions to boost sales at Mervyn's and Target stores, said Kenneth Macke, the company's chairman.
Also, Carter Hawley, which expects to report disappointing earnings this year, plans to increase the level of sales discounting in the final two months.
"We'll be aggressive with promotions," said David Dworkin, Carter Hawley's chief executive.
Some analysts expect many other retailers to cater more to value-minded consumers. Industry analyst Walter Loeb of Loeb Associates in New York said sales will rise about 5% nationally on the strength of heavy promotions.
"Consumers will show up late this holiday season and will be looking for bargains," he said. "Consumers will be careful and retailers will have to be very promotions-oriented."
A Mixed Holiday Outlook
In October, The Los Angeles Times Poll surveyed 1,718 people in California:
Compared to last year, would you say that this holiday season you will spend more, less or about the same on presents for friends and family?
Roughly how much money, in dollars, do you think you personally will spend on holiday gifts this year?
Less than $300: 27%
Don't know: 10%
What Retailers Expect
Deloitte & Touche conducted a nationwide poll in October of 1,059 retailers:
Sales Expectations of Retailers Nationwide:
Decrease: 14.1% Sales Expectations of Retailers in Southern California:
Decrease: 25.4% Sources: Los Angeles Times Poll, Deloitte & Touche