Feeling Pinch, Stores Woo Lagging Shoppers. Evaluate Article?

Lackluster sales in this holiday season have retailers scrambling to wring a few last dollars from procrastinators by slashing prices, extending hours and wooing customers more persistently than last year.


The moves show that retailers' strategy during this final weekend before Christmas -- when about 10% of holiday sales are expected to take place -- has become increasingly reliant on the same promotions and marathon hours once unique to the "Black Friday" weekend following Thanksgiving. But the discounts also reveal the pinch stores are in this year as the credit crunch, rising gas prices and winter storms have taken a toll on companies dependent on end-of-year sales.


The tough economy has left aisles more empty this year. Total foot traffic at U.S. retail outlets took an 8.9% dive during the second full week of December, compared with the same period last year, according to an estimate from ShopperTrak RCT Corp., which bases its numbers on a formula that involves an electronic count of shoppers in malls and other retail outlets nationwide.


A bright spot, however, has been online, where aggressive discounting and cut-rate deals on fast shipping have contributed to a surge in spending. From Nov. 1 to Dec. 16, online shoppers spent $23.5 billion, 19% higher than the corresponding days last year, according to comScore Inc., a Reston, Va., market research firm that tracks Web spending and traffic. Videogames, consoles and accessories are the fastest-growing category, more than doubling from the comparable period last year. Furniture, appliances and equipment ranks second, up 63%, while event tickets and consumer electronics are up 29% and 24%, respectively.


Now, a final push is on, both online and in stores. Web retailers continued to hunt for business by cutting shipping charges to seal deals before the pre-Christmas shipping window closes. Shoebuy.com, a Boston-based unit of IAC/InterActive Corp. offered free express shipping until today. Online handbag merchant eBags upgraded purchases made by Wednesday from standard shipping to two-day air-shipping through UPS for no extra cost.


Brick-and-mortar stores, meanwhile, retooled their hours for the weekend, hoping to spark their own shopping flurry. J.C. Penney Co. stores are staying open until midnight tonight and Saturday. Select Macy's Inc. stores on the East Coast will stay open nonstop throughout the weekend -- 107 hours straight for one branch in Queens. And New York-based FAO Schwarz made discounts of 25% to 50% on certain toys. Ed Schmults, the chief executive officer at FAO Schwarz, said that while foot traffic was up, business had not been as booming throughout the season as he hoped.


The National Retail Federation, a trade group, is predicting just 4% in sales growth for 2007, the smallest growth rate in five years. Britt Beemer, chairman of America's Research Group, paints an even grimmer picture: He lowered his forecast of 2% retail sales growth to 1.8%, his lowest forecast in nearly 10 years.


In the apparel category, men's clothing has showed modest single-digit growth through the first 20 days of the shopping season, according to MasterCard Spending Pulse, a unit of MasterCard Advisors, which tracks spending of all types. But women's apparel -- which last year constituted three times the sales of men's -- has been a major disappointment, as shoppers have avoided big purchases. Sales were down 5.7% from the same time last year.


Retailers have responded with a flurry of price cuts, but large inventory remains in some stores. One of Gap Inc.'s Old Navy stores in downtown Chicago on Wednesday had piles of festive sweaters marked down to $20 from $36.50. Women's coats still stuffed the racks, despite being already marked down 50%, and its signature "performance fleece," also half off, was stacked eight shelves high.


The bad tidings for apparel have left some retailers looking for other items to push. At Banana Republic, also owned by Gap, $64 gift sets of its perfumes, body creams and shower creams were marked down 30%. Gold-boxed gift sets of a new line of bath products at Ann Taylor Stores Corp. stores were discounted to $19.50 from $29. At Limited Brands Inc.'s Victoria's Secret, stores were piled with beauty gift sets, many 40% off.


Meanwhile luxury goods are expected to have a good season this year, and retail consultant Frederick Crawford of AlixPartners predicts "pockets of good news" for high-end retail. For brands like Prada and Gucci, he expects to see 5% to 7% growth.


According to retail surveys, electronics sales were down 0.5% in the three-week period between Nov. 18 and Dec. 9 compared to a year ago, according to Stephen Baker, vice president of industry analysis for market watcher NPD Group. He said consumers in recent years have been delaying purchases until closer to Christmas, which may account for the slowdown.


Indeed, Angela Smith has waited until the last week to make her purchases. A 39-year-old bank employee in Dallas, Ms. Smith said she is waiting for prices to drop further as well as trying to spend less. For her three nephews, ages 12, 8 and 7, she plans to buy remote-controlled cars, which Wal-Mart Stores Inc. initially priced at $59 and has since dropped to $49. "I am going to swing by this weekend and see if they are going to take it down one more time," says Ms. Smith, who was shopping for a co-worker's present at her local Wal-Mart midweek.


Home-furnishings retailers, fighting the weak housing market, are being particularly aggressive with their promotions this year. At Williams-Sonoma Inc.'s Pottery Barn store on Chicago's Michigan Avenue, Christmas-tree-shaped candles were discounted 50%, and holiday garlands of fake evergreen branches were 30% off. Wrapped gifts such as silver jewelry boxes, also marked down 30%, were stacked high Wednesday afternoon.


Home-improvement outfits like Lowe's Cos. Inc. and Home Depot Inc. are destined to be hardest hit, says AlixPartners' Mr. Crawford. "Consumers are absolutely showing us that they will be delaying discretionary purchases" like gear to remodel a kitchen, he said.


A boom-bust pattern is typical after Thanksgiving's Black Friday discounts, which encourages a flurry of purchases early but leads to a tapering off in early December, killing shopping momentum. This year the pattern was more pronounced: A double-digit sales surge on Black Friday exceeded retailers' expectations; but come December, throngs of shoppers didn't return.


There was one exception, however: online retail. Web merchants have discounted and promoted heavily this season, say industry analysts. Shipping promotions have been particularly popular. Sixty-eight percent of surveyed Web retailers said they are offering express shipping promotions this year, up from 49% last year, according to Scott Silverman, executive director of Shop.org, an online retail trade group and unit of National Retail Federation.


As the boom continues, these companies are becoming increasingly creative to draw customers. This year Ice.com, a Montreal-based Internet jeweler, has rolled out new videos to promote products and free overnight shipping. It has experimented with new marketing tricks such as buying front-page ads on Microsoft Corp.'s MSN and Yahoo Inc.'s Web sites this week. Ice.com even tried to tap influencers to drive word-of-mouth among blogs, magazine mentions and celebrities.

Feeling Pinch, Stores Woo Lagging Shoppers. Evaluate Article?
Good article. Sounds like they arent doing so hot.