After a dismal holiday shopping season marked by discounts that failed to lure buyers, struggling retailers face what could be a very unhappy new year -- one filled with thousands of store closings and a shakeout of the weakest players.
That will mean fewer choices for those consumers who still have money to spend.
"Overall, it was a very weak holiday season, and it's going to flow over to the first half of next year," said Jeff Mintz, an analyst with Wedbush Morgan Securities. "Those that survive will be in a better position because the competition will be reduced, but for right now it's a very difficult time to be a retailer."
In the coming months, troubled retailers will take desperate actions to stay afloat, including closing redundant or underperforming locations and filing for bankruptcy protection to restructure business operations. Some big names will join chains such as Mervyn's and Linens 'n Things Inc. by exiting the shrinking market altogether, analysts predict.
Roughly 73,000 stores may close in the first half of next year, according to the International Council of Shopping Centers. As store vacancies rise, a number of small shopping centers could also be at risk, said Michael Niemira, the council's chief economist.
Retailers who don't have plans to close stores are taking other measures to weather the tough times ahead, including delaying store openings, hiring fewer workers and stocking less merchandise.
"We're running our inventories very lean because we're not sure what the consumer behavior is going to be in the first quarter, and we're planning weekly promotions," Disney Store President Jim Fielding said. "Our mantra is to control the controllable. We can't control consumer behavior and we can't control the macroeconomy."
Target Corp. has reduced the number of stores it plans to open in 2009 and is heavily advertising the chain's low prices, spokeswoman Hadley Barrows said.
"Sales continue to be challenging and consumers are really cautious," she said. In the new year, "we're focusing more on the 'pay less' side of our 'expect more pay less' brand promise."
Amid concerns about a huge post-Christmas fallout, retailers still have to fight for customers: In recent years, January has gone from being a clearance month to a revenue-generating month, led by gift card redemption and shoppers picking up items for themselves rather than to give as gifts, said Marshal Cohen, chief industry analyst at market research firm NPD Group.
