Retailers' Groups Predict a Blue Christmas, But Shop Managers Hope for Green

Chantee Davis, manager of Rave at The Mall at Prince Georges, says she's never seen so few customers in November. (Newsline photo by James K. Sanborn)

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By James K. Sanborn
Maryland Newsline
Monday, Nov. 17, 2008

HYATTSVILLE, Md. - Chantee Davis spent Veterans Day fighting boredom. As the manager of Rave, a women’s clothing store at The Mall at Prince Georges, she had already restocked and tidied up the shelves for customers who might never come. 

Because of the recession, people aren’t shopping, said Davis, as she worked in her empty store. She said she had never seen so few customers in November but was optimistic that sales would recover before Christmas.

Industry analysts don't share her optimism.

The Maryland Retailers Association released a report Monday predicting the starkest holiday season for retailers in 23 years. The report predicted holiday sales this season would see no gain over last season—which is even more pessimistic than predictions nationally.

“These are tough economic times in Maryland, and they are especially tough for retailers and their customers,” said Tom Saquella, MRA president.
 
Plummeting consumer confidence in an economy recently rocked by a mortgage meltdown, plunging stock market values and unemployment rates at a 14-year high all contributed to the forecast.  In Maryland, the problem is compounded by a 20 percent sales tax hike approved by the Legislature last fall, in an attempt to close the state’s budget deficit.

"We think the current weakened economic environment is going to challenge all retailers," said Scott Krugman, vice president of public relations at the National Retail Federation, an industry monitor.

Krugman predicted national sales will grow just 2.2 percent this holiday season.  That’s half the average 10-year growth rate of 4.4 percent and the lowest growth rate since 2002.

Most store managers interviewed acknowledged stalling sales but remained hopeful for a post-Thanksgiving rebound.

“I think this holiday season will be a little slow, but retail is retail – can’t change it,” said Melvin Pearson, manager of Jimmy Johns, an urban apparel store in Hillcrest Heights.  “You just have to ride with it. Things always work out.”

Sales have slumped significantly, he said, but after seven years in retail, he has seen sales wax and wane before. He wouldn’t panic, he said, unless things don’t pick up after Black Friday. The day after Thanksgiving is considered the unofficial start of the Christmas shopping run, which typically gives retailers between 25 percent and 40 percent of their annual sales, according to the National Retail Federation.

For now, Pearson said, the only thing stores can do is run their holiday promotions early.

That’s what large retailers like Kmart are doing.  In addition to running Christmas ads before Halloween, Kmart brought back lay-away to help customers pay for presents over time.  Most retailers dropped the service long ago.

With Black Friday still two weeks off, retailers at The Mall at Prince Georges were already decking their stores with boughs of holly and trying to entice shoppers with unusually early sales.

Nearly every store was peppered red not just with Christmas decorations, but with sale signs reading 10, 20 and even 50 percent off.

“If it’s regular price, people don’t want it -- plain and simple,” said Davis. 

A giant 50 percent off sale sign dominated Rave's storefront.  

Davis said sales are down because people don’t want to buy this year until the big sales are rolled out.  That’s why her store rolled out its major sales several weeks early.

She predicted her store would recover during the rush after Thanksgiving and added that the election of a new U.S. president could rally consumers. “People will be more confident and start buying more,” she said.

President-elect Barak Obama is already proposing an extensive economic stimulus, part of which he says will bolster consumer spending by cutting tax on the middle class.

Consumers can expect to see an abundance of sales and offers this season as retailers up the ante to compete for a shrinking audience.  Forty percent of shoppers surveyed by the National Retail Federation said the most important factors in deciding where they will shop this season are sales and promotions.
 
"In an economic environment like this, all retailers become discount retailers," Krugman said.

Among consumers Maryland Newsline interviewed, optimism was tempered.

Jocelyn Shen of Hyattsville said negative talk about the economy was causing people she knew to panic and clam up on holiday spending.  Although she said she hasn't felt strained and doesn't plan to curtail spending this Christmas, she worries that economic woes could become a self-fulfilling prophecy if consumers continue to fret. 

“I have a job.  I don’t feel the pinch.  It’s all a mental state,” Shen said. 

Shen, a University of Maryland graduate who works at a Bath and Body Works, said she understands the recently unemployed are in a serious bind.  For those like her, however, it's all psychological, she said.

Holiday sale signs like this one already grace many store fronts at The Mall at Prince Georges. (Newsline photo by James K. Sanborn)

"People are letting fear get the best of them," Shen said.  "I don't plan on doing anything different this year."

Maryland retailers could be in for a long, hard dry spell that could extend from the holiday season well into next summer, said Susan Reda, executive editor of the National Retail Federation’s Stores publication, in a recent editorial.  That has left some retail lobby groups standing in line behind Wall Street and Detroit for the next round of bailouts.

National Retail Federation Vice President Rachelle Bernstein asked Congress' Ways and Means Committee in October to include consumer relief measures, especially tax cuts, in a second round of economic stimulus.

"We believe an immediate stimulus that will put money into the pockets of consumers where it can have a ripple effect throughout the economy is needed," she said.

She pled with Congress to help consumers in time for Christmas with another round of rebate checks or some sort of a tax holiday.

Copyright © 2008 University of Maryland Philip Merrill College of Journalism

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