Holiday shoppers
Don Emmert  /  AFP - Getty Images file
Shoppers check on games displayed at the F.A.O. Schwarz toy store in New York last Decmber. The National Retail Federation is forecasting a 5 percent gain overall in holiday sales over last year.
By
msnbc.com
updated 11/17/2006 2:51:01 PM ET 2006-11-17T19:51:01

Long before decisions were made about who would be hosting Thanksgiving dinner this year, retailers already were listening for the first register rings of the holiday shopping season.  

“For retailers the next holiday season begins the day after Christmas,” says Marshal Cohen, chief industry analyst at The NPD Group, a market research firm in Port Washington, N.Y. “They just have to wait 10 months to put their trees back up.” 

It seems few retailers wait that long anymore.

According to NPD’s research, roughly 80 percent of consumers do not give serious thought to holiday shopping until mid-November. Still, Costco and Wal-Mart had Christmas merchandise out in early September, presumably to capture any stray purchases. Toys 'R' Us released its ‘Hot Toys’ for Christmas list Sept. 26. 

“Retailers would like to recondition consumers to shop earlier and return to the days of paying full price, which may be why they are putting out merchandise hoping it will no longer be around for discounting in December,” says William Cody, managing director of the Baker Retailing Initiative at the Wharton School of the University of Pennsylvania.  But judging by the lackluster October sales numbers the industry reported, consumers are still not buying it. 

Cody thinks there is a more strategic reason behind so-called "Christmas creep," saying the  early onset of holiday merchandising is more about boosting November and December sales than those for September and October, regardless of pricing.

For instance, Macy's North — the division of the Federated Department Stores which includes the former Marshall Field's — traditionally sets up its holiday trim shop in mid-September, according to spokeswoman Jennifer McNamara.  But the retailer’s official tree-lighting kick-off to the holiday season and promotions occurs in the second week of November every year. 

Cody thinks retailers are hoping consumers will see something compelling in September that causes them to return — with full holiday shopping list in hand — in November. The goal is to capture a larger share of the list rather than an early-season purchase.

"Consumers now have a plethora of options where they can go to get similar items," Cody says.  For instance, Target competes with department stores to offer designer-labeled fashion items and home accessories, while warehouse club Costco competes with Best Buy on electronics.  And with Wal-Mart attempting to add hip apparel to its deep-discount reputation, this intensifying battle for consumers across income brackets and retail sectors is seen heading to a new level.

For his part, Cohen sees a seasonal dimension further intensifying the melee: "Everyone is in the game now — from footwear to food stores.  Now they all see Christmas as ‘their’ time to shine.  It ups the ante for all the players."  It also ups the frenzied competition for a share of each holiday dollar as retailers vie to ‘own’ the holiday shopping season by rushing it into their stores ahead of the calendar and each other.

The gift card factor
The advent of the gift card is also beginning to alter retailers' behavior in a different way, observes Cody, since revenue is not recognized until the cards are used, typically after Christmas and into the New Year. 

Post-Christmas is becoming less about clearance, he suggests, and more about promoting newer, more fully priced items to gift card redeemers.

This could mean even more emphasis on selling clearance merchandise before Christmas to make room for fresh merchandise after the holidays. Also merchants want to continue selling while consumers are in the store buying those gift cards. 

A recently released survey commissioned by consulting firm Deloitte & Touche concluded: "As a result of buying gift cards last year, 50 percent of consumers spent less time shopping, ... and 41 percent bought fewer spontaneous items."  That is good for consumers prone to overspending, but yet another problem retailers need to resolve.

Because about 25 percent of holiday sales are for self-use, according to Cohen, featuring more sale and clearance merchandise before Christmas could be a way of enticing gift card purchasers to linger a bit longer at the mall and open their wallets a tad wider.

The November-December selling season is make-or-break time for most retailers.  For the industry overall it represented nearly 20 percent of sales in 2005, according to the National Retail Federation. And that excludes most gift card revenue and any holiday merchandise sold earlier in the year. It also excludes Internet purchases, which are tabulated separately.  Forrester Research estimates online sales could add another $27 billion to the estimated $457.4 billion holiday shopping pie NRF is predicting for 2006.

“For some retailers, especially those in the toy industry, the holiday season can mean 50 percent of their annual revenue,” says Cohen.

His research indicates consumers plan to step up and do their part to make the holidays pleasant though not overly joyous for retailers in 2006.  For its part, NRF is forecasting a 5 percent gain overall in sales over last year.

While there is much hand-wringing among economists and forecasters about how volatile energy prices and lower home values will affect holiday sales, Cohen just doesn’t think consumers are hurting or feeling pinched. 

Deloitte & Touche's survey agrees, as it found 82 percent of consumers feel secure about their jobs and 92 percent see no relationship between what they will spend for Christmas and what their homes are worth.

“I have no idea if my home value is up or down vs. last year. I am not moving, and it really has nothing to do with how much I spend on Christmas,” says Carol Schwab, a registered dietitian in Beaver Dam, Wis.  “I expect to spend about the same as in other years, but I always say that and seem to end up spending more just because the kids are older and the things they want are more expensive.” 

Ultimately, says Cohen, retailers cannot do anything about the calendar or, seemingly, when consumers’ holiday spirit sets in, but they do have pricing power.  Whether it is on price alone, special promotions or discount rewards for loyalty, pricing looks like the weapon of choice for retailers fighting over consumers. 

“Retailers are even more nervous than usual. We have not seen this type of [discounting] activity this early since 2001,” says Cohen.  “We were already seeing discounts at major chains of 50 to 60 percent as of early November.

“Nor are there any ‘must have’ items this year, just plenty of things people ‘want,’” he adds. 

Those ‘wants’ are what keep consumers in the game.  But as the rules of the game change for retailers and the battle to simply maintain, if not expand, holiday market share intensifies, it seems fair to conclude shoppers will come out the winners.

© 2013 msnbc.com Reprints

Discuss:

Discussion comments

,

Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments

Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 4.71%
$30K home equity loan FICO 5.26%
$75K home equity loan FICO 4.70%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 13.42%
13.42%
Cash Back Cards 17.94%
17.94%
Rewards Cards 17.14%
17.14%
Source: Bankrate.com