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This holiday season, retailers are ready to throw down. In a race to get first crack at consumers’ wallets, brands are jockeying for market share with earlier store openings, online deals and aggressive promotions to target consumers as the gap between haves and have-nots is growing.
That could mean better deals for smart shoppers across the income spectrum, although experts think that any increase in spending this year will be propelled by affluent Americans.
In the quest for your dollars, merchants began their Black Friday discounts earlier than ever this year. Analysts say Americans are going to spend their holiday dollars on electronics, home goods and athletic apparel. Smartphones, 4k TVs, gaming products and electronics accessories will boost the holiday fortunes of electronics and big-box stores.
“We’re seeing a very interesting dynamic develop this year,” said David Rabkin, senior vice president of consumer products for American Express. “What we’re seeing now is they’re starting earlier... We suspect it’s much more about pulling their spending forward,” he said.
In a recent survey, American Express found that slightly fewer than half of Americans plan to shop on Black Friday, a drop of four percentage points from last year. Some of that could be attributed to earlier-than-ever discounting, which has stolen the thunder from Black Friday. Online shopping has contributed too.
Despite the blurring of the lines around Black Friday, analysts think that people will still drop the drumsticks (on Thursday) and put away the leftovers (on Friday) to take advantage of doorbuster deals.
“I think Wal-Mart was brilliant last year,” said Joseph Feldman, a senior managing director at Telsey Advisory Group, referring to its graduated rollouts and guaranteed availability of doorbuster items. The retail giant is using these tactics again this year.
Not just about profits
Retailers have planned for these loss leaders and baked the cost into their guidance to shareholders, said Marshal Cohen, chief retail analyst at the NPD Group. Black Friday is no longer just about profits. The holiday season has become a time to grab market share and push for volume.
“Given the fact that we have lower gas prices, we have improving employment and improving GDP and a reasonably stable economy... you’d think many retailers are poised to do well."
Overall, analysts say the holidays will be solid, although not spectacular, for the retail sector, despite predictions of a 4.1 percent increase in holiday retail sales by the National Retail Federation.
“Given the fact that we have lower gas prices, we have improving employment and improving GDP and a reasonably stable economy... you’d think many retailers are poised to do well,” said Raymond James retail analyst Budd Bugatch.
The flip side to this is that analysts say retailers are increasingly relying on a shrinking subset of the wealthiest Americans to do the bulk of the spending. “There’s some indicators that there is stagnation at the individual level,” said Ishani Banerji, research director of Georgetown University’s Institute for Consumer Research.
The newest Thomson Reuters/University of Michigan Surveys of Consumers found that consumer confidence is the highest it’s been since July 2007. Even though improved expectations for income gains were at a six-year high, they still only averaged 1.1 percent. Americans at the bottom of the income spectrum expected less than one percentage point increase.
“Wages have not gone up. Many of our respondents said they had less income this year,” Banerji said.