The numbers are sobering for retailers, which depend on making up to 40 percent of their revenue in the last two months of the year. They suggest shifts in the attitudes of U.S. shoppers that could force stores to reshape their strategies:
SHOPPERS WANT DEALS
Stores slashed prices during the recession to get financially-strapped shoppers in stores and to better compete with the cheaper prices of online retailers like Amazon. But shoppers got used to those deals and now won’t buy without them. The constant discounting has blunted the “wow” factor of sales during the holidays.
For instance, some retailers were offering discounts of 40 percent or more on the day after Thanksgiving known as Black Friday. But Jennifer Ambrosh, 40 was unimpressed with the “deals” she saw on that day. “There’s a lot of hype, but ... the deals aren’t that good,” Ambrosh, an accountant, says.
Overall, the retail federation expects spending in November and December to rise 3.9 percent to $602.1 billion. But to get that growth, analysts say retailers will need to discount heavily, which eats away profits.
There are signs that profits for the quarter that includes the holiday season are being hurt by the discounting. Wal-Mart and American Eagle Outfitters are among 47 retailers that have slashed their outlooks for either the quarter or the year.
Overall, retailers’ earnings growth is expected to be up 2.1 percent, according to research firm Retail Metrics. That would be the worst performance since profit fell 6.7 percent in the second quarter of 2009 when the country was in a recession.
The recession not only taught Americans to expect bargains. It also showed them that they could make do with less. And in the economic recovery, many have maintained that frugality.
So whereas in a better economy, Americans would make both big and small purchases, in this economy they’re being more thoughtful and making choices about what to buy.