Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, December 11, 1994 TAG: 9412140017
SECTION: BUSINESS PAGE: F-1 EDITION: METRO
SOURCE: JOHN LEVIN
DATELINE: LENGTH: Medium
The question is when.
The retailing season culminating at Christmas has become a waiting game between merchants who want to entice shoppers into their stores early and often and consumers who know if they sit it out, the goods will go at discount.
"Consumers are addicted to it, and merchants are wedded to it," said Kenneth Gassman, retail analyst with Davenport & Co. in Richmond.
The estimate of average spending comes from the Conference Board, a New York business research organization, which ordered a poll of 5,000 U.S. households on their holiday spending outlooks. The results show consumer confidence in the economy is up enough to boost average purchasing by 6.2 percent over last year. Altogether, we'll leave $42 billion at the register, or on the credit card.
But to get us there, it takes at least the illusion of a discount. For the past decade, Gassman said, sales and promotions have been scheduled before Christmas. Less than a generation ago, shoppers never expected price breaks until the January clearances.
It began as the nation came out of recession in the early 1980s, Gassman said, when merchants posted discounts to fuel business a couple of weeks prior to Christmas. Despite several attempts to break the annual habit - including one year when merchants stocked so cautiously there appeared to be a shortage of some popular items - consumers never allowed retailers to go back to the old ways.
But the markdowns and promotions going on now were planned, he said. Stores "are achieving the full planned margins, despite the perception" of price slashing, Gassman said. For department stores that's probably better than a 40 percent markup.
"Later in the season, you may see markdowns that were not planned, especially for slow moving merchandise."
At Leggett department stores, those markdowns and margins are calculated and considered every day during the holiday season, said John Montgomery, manager of its region west of Charlottesville and the store at Tanglewood Mall.
"Red sweaters have a lower value on Dec. 26," he said, noting if they aren't moving now, their price is likely to be cut faster and deeper than sweaters of another color.
Montgomery believes the holiday discounting actually dates earlier than 10 years, thanks to competition for department stores by discount merchants and the need to get shoppers started before Thanksgiving to build sales volume at the end of the retailers' fiscal years.
Americans are now so accustomed to buying at discount that "we expect it not to be any different at Christmas," said James R. Brown, associate professor of marketing at Virginia Tech's Pamplin College of Business. "As a society, we're more interested in value. Nobody believes in a manufacturer's suggested retail price. Nobody pays full retail price anymore."
What discounting has done so far this year is create an uneven pattern of shopping. Sales, measured by credit card posting and check clearing agencies, surged in the weekend after Thanksgiving and have slowed considerably since then.
TeleCheck Services Inc., a Houston electronic check authorization service, said the dollar volume of consumer checks posted a 5.7 percent increase on the Friday after Thanksgiving compared with the same day a year ago. But between Nov. 25 and Dec. 4, the increase slowed to 3 percent.
Analysts still are looking for a 5 to 7 percent gain for the season.
But shoppers are waiting, Gassman said.
"The day after Thanksgiving, there was a lot of browsing. In the next two weeks, they're price shopping, reading the ads and the circulars. They're sitting back and waiting for the best deal."
The real shopping won't happen until next Saturday and the two days just before Christmas. By then, Montgomery could be giving away those red sweaters.
by CNB