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Experts see a holiday season of deep discounts

With millions of Americans feeling pinched by higher gas prices and worried about soaring home heating bills this winter, retail experts say, stores are planning to lure shoppers with low prices right from the start of this holiday shopping season.
/ Source: a href="" linktype="External" resizable="true" status="true" scrollbars="true">The Washington Post</a

It’s only October, but already this holiday shopping season has a theme: bargains galore.

With millions of Americans feeling pinched by higher gas prices and worried about soaring home heating bills this winter, retail experts say, stores are planning to lure shoppers with low prices right from the start. Major discount retail chains have already seen core customers begin to rein in spending, so merchants are sharpening their Sharpies and getting ready to slash.

“This year, discounts are going to be earlier and deeper,” said Marshal Cohen, vice president of market research firm NPD Group Inc., which is predicting sales gains for retailers of about 4 percent this year — not a great year, but not a terrible one. The big items? Apparel, footwear, skin-care products and computer accessories, Cohen said, admitting it might be a bit boring because there is no must-have item.

“The prices are going to be tempting,” said Candace Corlett, a principal at consulting firm WSL Strategic Retail.

Retailers will push hard to get the holiday going because the end-of-the year burst of shopping is hugely important to the industry, accounting for 25 to 40 percent of most retailers’ sales and much of the year's profit. Because retailers are already planning for aggressive discounting in their holiday sales strategies and have budgeted accordingly, rampant price-cutting is not expected to hurt profitability, according to the National Retail Federation. It is last-minute, unexpected price-cutting that hurts most, experts say.

The NRF weighed in with its forecast yesterday and also predicts a modest holiday selling season, with sales gains of about 5.1 percent. That is perhaps a percentage point or so lower than it would be without the impact of higher energy costs, said NRF spokesman Scott Krugman. Last year, retail sales were up 6.7 percent.

But considering the anxiety over high gas and fuel prices, the trade group's survey shows that shoppers have remarkable resilience when it comes to holiday spending. The typical shopper expects to spend about $738 on holiday gifts this year, the NRF found, most of it on presents for family members, with books, CDs, DVDs and apparel the items most often found on people's gift lists.

Shoppers like Matthew Reimann and Ian Hartman, both waiters in the District, proved the NRF's finding that consumer electronics will be popular once again this year. The 20-something friends were heading into Best Buy at lunchtime yesterday to kick off their Christmas shopping.

“I'll probably buy at least as much as I did last year,” Reimann said. He expects to buy mostly consumer electronics and housewares. Hartman, meanwhile, said he will spend more this year because his brother wants the new Xbox 360 video game system, which is due out Nov. 22. Retailers say he should start shopping early that day.

“Everybody's going to sell out real quick,” said Jim Babb, a spokesman for consumer electronics retailer Circuit City Stores Inc., where early lines are expected for the new Xbox.

Other items the chain has high hopes for are flat-panel televisions, with prices nearly 30 percent lower than they were a year ago. Better digital cameras for consumers who want to trade up are also on the hot list. And MP3 players such as Apple Computer Inc.'s iPod, which were so big with younger consumers last Christmas, are in high demand among older shoppers, Babb said.

The NRF survey shows that consumers are especially interested in holiday decor this year, too, perhaps to outfit all the homes that Americans have been furiously buying and renovating for several years.

That would explain the curiously popular item at Hecht’s that has already surprised company executives: fluorescent-colored, pre-lit Christmas trees. In lime green, pink, lavender, aqua and other colors, these six- and seven-foot fakes are flying out the door, even at prices of more than $200, said company spokeswoman Nancy Chistolini. People have bigger houses and more rooms, so it seems they need more color.

“What we think is behind it is people are no longer doing just one Christmas tree, so if they're putting up another tree, then the colors are fun and it’s not as traditional,” she said.

Chistolini said the chain is seeing strong early sales of decorative martini glasses and anything gold as well. At the more affordable end, Hecht’s has big hopes for the soon-to-arrive hand-held electronic version of the Sudoku number game, a brainteaser published in newspapers that already has a huge following. It will sell for about $20, she said.

Small-ticket items like that are more in keeping with the busted budgets of many Americans who do a lot of driving. These shoppers may be rewarded with low prices, but even so, many will spend less this year.

“I drive 30 miles to work, each way, and I feel it,” said Marlena Pheney of Laurel, an accounting specialist. Pheney is cutting way back on spending this year, buying gifts early and putting things on layaway so she can pay over time.

“Jobs don't give you raises the way they should,” she said.

One aspect of this season, said Corlett of WSL, is that the biggest heating bills will not reach consumers until after the holidays are over. Retailers want to lure shoppers in before that happens, but consumers may be more nervous now, before the bills actually hit.

The media predictions about heating costs are scary, and the unknown factor paralyzes consumers, Corlett said. “That fear is worse than knowing.”