Stores start holiday sales early, but shoppers aren't buying

There is some debate about whether holiday sales will be up down or flat this year, but one thing is for sure: the annual tug of war between stores trying to entice shoppers to buy early and customers holding out for markdowns is underway.

Stores have warned they've cut back inventory and they will be laying out sales early in the season, starting with the traditional Black Friday sales on the day after Thanksgiving. But polls say shoppers will be even tighter with the buck this holiday than last year.

"This game of chicken is going to challenge retailers for eternity," said Ellen Davis, vice president of the National Retail Federation, which forecasts sales will be down one percent this holiday below last year.
Consumers are looking long and hard for value, said Pam Goodfellow, senior analyst at the market research firm BigResearch. The group polled shoppers about their plans and found that while 69 percent plan to spend the same or less on holiday shopping as last year, 22.3 percent haven't decided. The rising unemployment rate is still a wild card in their plans.

"Things just aren't shaping up quite well," said Goodfellow.

So retailers are trying to play it safe this year, said Davis. They will front-load sales to stir up those shoppers early in the season and remind them that there will be less merchandise out there.

Davis said Black Friday is still the official start of the holiday season in stores, but she noted Sears Holdings Inc. (SHLD) Sears and Kmart chains began promoting holiday sales early, Wal-Mart Stores Inc. (WMT) announced its lineup of 100 toys under $10 and Toys "R" Us also launched a Christmas in July event to spur early sales.

"This would be the season to buy early," she said.

Davis singled out apparel and electronics as two areas where sales will be aggressive. According to BigResearch's poll, those are two areas where shoppers have been putting off making purchases in growing numbers. Their poll showed 26.9 percent of shoppers were putting off buying electronics and 30 percent were putting off buying clothes, higher than the 26 percent and 27.9 percent, respectively, that put off those buys in the depths of last September's free fall.

Merchandisers placed their holiday stock orders in March and April, when the economy looked even grimmer than it does today, said Davis. She noted container activity in ports is down to 2002 or 2003's levels, which means stores are bringing in a lot less merchandise.

"It's possible that if holiday sales build momentum and the (economic) uncertainty improves, they may not have enough merchandise," said Davis. "Retailers would rather be in the position of not having enough merchandise than be in the position they were last year of having too much."
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