Consumers are waiting for deals

By John Cunniff

Associated Press

NEW YORK — Retailers and other business people worried that customers are loath to spend can take a tip from the automotive and housing industries: Give ‘em the store and they’ll beat a path to your door.

This may not be the most profitable way to do business, but it may clean the shelves of inventory and spur consumer confidence, which the surveys suggest is sagging right before the holidays.

But at the very same time, cars and houses, the two costliest items in the household budget, have built higher their already impressive sales figures and seem likely to continue doing so for a while.

Giving strength to these two markets are extreme circumstances, zero interest financing and rebates by carmakers, and low-rate mortgages and flexible financing for home buyers. Add smart consumers to the reasons why.

October sales of existing homes rose 5.5 percent to an annual rate of 5.17 million units, while car sales zoomed 26.4 percent, a remarkable jump in view of an already near-record year at showrooms.

The buyers are out there, as can be attested to by anyone caught in a shopping mall traffic jam, but they are a canny lot who recognize they have the seller in a noose and are coldhearted enough to tighten it.

They are supported by what could be overpublicized surveys claiming consumers are depressed about world events, their own personal financial situations and about warnings of tougher times to come.

But if this is so, at least to the degree claimed, it seems to be contradicted by those car and housing sales. What consumers may be testing is how great a deal they can squeeze from retailers. They lay in wait.

Admittedly, there are consequences in building current sales, since retailers have already gone beyond the conventional steps. Everything, every day, already seems to be on sale these days, and shoppers seek more.

As a result, economists warn of the possibility that even more extreme sales efforts might only be at the expense of profits. Merrill Lynch, for example, reported automakers spent an average of $2,261 per vehicle on incentives in October, an amount that can only cut into profits.

Such efforts might also be at the expense of next year’s sales, as buyers simply act a few months earlier than planned. And incentives to buy new rather than used have already depressed used-car sales, even of late models. You just don’t see beat-up commuter cars in suburban parking lots anymore.

But any negative impact of incentives on next year’s sales may be secondary to spurring people out of their lethargy and letting next year take care of itself. By next year, sellers can theorize, the various depressing statistical evidence of recession might be disappearing.

Moreover, those negative consumer surveys that feed on themselves may show more optimism next year. And, anyway, it might be realized that such surveys are mainly lagging rather than leading indicators.

That is, that they are more reflective of the past and negative news events than forecasters of the future. Giving buyers the store now might be costly, but it could return consumers to their old spending pattern.

Copyright ©2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Talk to us

More in Herald Business Journal

FILE - In this Monday, March 23, 2020, file photo, a worker walks near a mural of a Boeing 777 airplane at the company's manufacturing facility in Everett, Wash., north of Seattle. Beginning in 2024, some 737 planes will be built in Everett, the company announced to workers on Monday. (AP Photo/Ted S. Warren, File)
With 747 out, Boeing to open new 737 Max line at Everett’s Paine Field

Since the last 747 rolled out of the factory, speculation has been rife that Boeing might move some 737 Max production to Everett.

IonQ will open a new quantum computing manufacturing and research center at 3755 Monte Villa Parkway in Bothell. (Photo courtesy of IonQ)
Quantum computing firm IonQ to open Bothell R&D center

IonQ says quantum computing systems are key to addressing climate change, energy and transportation.

Nathanael Engen, founder of Black Forest Mushrooms, sits in the lobby of Think Tank Cowork with his 9-year-old dog, Bruce Wayne, on Friday, Jan. 27, 2023, in downtown Everett, Washington. (Ryan Berry / The Herald)
Growing green mushrooms in downtown Everett

The founder of Black Forest Mushrooms plans to grow gourmet mushrooms locally, reducing their carbon footprint.

Barb Lamoureux, 78, poses for a photo at her office at 1904 Wetmore Ave in Everett, Washington on Monday, Jan. 23, 2023. Lamoureux, who founded Lamoureux Real Estate in 2004, is retiring after 33 years. (Annie Barker / The Herald)
Barb Lamoureux, ‘North Everett’s Real Estate Agent’ retires

A longtime supporter of Housing Hope, Lamoureux helped launch the Windermere Foundation Golf Tournament.

Bothell
AGC Biologics in Bothell to produce new diabetes treatment

The contract drug manufacturer paired with drug developer Provention Bio to bring the new therapy to market.

FILE - The logo for Boeing appears on a screen above a trading post on the floor of the New York Stock Exchange, Tuesday, July 13, 2021. Boeing is reporting a money-losing quarter as both its civilian-airplane division and the defense business are struggling. Boeing said Wednesday, April 27, 2022,  that it lost $1.24 billion in the first quarter and took large write-downs for several programs.  (AP Photo/Richard Drew, file)
Boeing plans to cut about 2,000 finance and HR jobs in 2023

Boeing plans to outsource about a third of the eliminated positions to Tata Consulting Services in Bengaluru, India.

FILE - In this file photo dated Monday, March 11, 2019, rescuers work at the scene of an Ethiopian Airlines plane crash south of Addis Ababa, Ethiopia.  The number of deaths in major air crashes around the globe fell by more than half in 2019 according to a report released Wednesday Jan. 1, 2020, by the aviation consultancy To70, revealing the worst crash for the year was an Ethiopian Airlines Boeing 737 MAX on March 10 that lost 157 lives. (AP Photo/Mulugeta Ayene, FILE)
US board says Boeing Max likely hit a bird before 2019 crash

U.S. accident investigators disagree with Ethiopian authorities over the cause of a 2019 Boeing 737 Max crash.

Store owner Jay Behar, 50, left, and store manager Dan Boston, 60, right, work to help unload a truck of recliners at Behar's Furniture on Monday, Jan. 16, 2023. Behar's Furniture on Broadway in Everett is closing up shop after 60 years in business. The family-owned furniture store opened in 1963, when mid-century model styles were all the rage. Second-generation owner, Jay Behar says it's time to move on. (Annie Barker / The Herald)
Behar’s Furniture in Everett closing after 60 years

“It’s time to move on.” The small family-owned store opened in 1963 and grew to cover an entire city block.

Katy Woods, a Licensed Coach, Branch Manager, and experienced Banker at Coastal Community Bank.
Coastal Community Bank Offers Classes for Businesses

To support local business owners and their teams, Coastal offers complimentary Money… Continue reading

Innovative Salon Products online fulfillment employees, from left, Stephanie Wallem, Bethany Fulcher, Isela Ramirez and Gretchen House, work to get orders put together on Friday, Jan. 6, 2023, at the company’s facility in Monroe, Washington. The company began including pay, benefits and perks to its job listings over a year ago, well ahead of the new statewide mandate to include a pay range on job postings at companies with over 15 employees. (Ryan Berry / The Herald)
New state law requires employers to give pay range in job postings

Washington’s new pay transparency law aims to narrow wage gaps based on race or gender — though some companies may seek loopholes.

Paddywack co-owner Shane Somerville with the 24-hour pet food pantry built by a local Girl Scout troop outside of her store on Tuesday, Dec. 20, 2022 in Mill Creek, Washington. (Olivia Vanni / The Herald)
An out-paw-ring of support: Mill Creek pantry feeds pets, day or night

With help from local Girl Scouts, the Mill Creek pet food store Paddywack is meeting the need for pet supplies in a pinch.

Kelly Cameron is the woodworker behind Clinton-based business Turnco Wood Goods. (David Welton)
Whidbey woodworkers turn local lumber into art

In the “Slab Room” at Madrona Supply Co., customers can find hunks of wood native to the south end of Whidbey Island.