Nervous shoppers scaling down yule plans

Associated Press

NEW YORK — Last Christmas, Janet Allsworth splurged "frivolously" on an electronic game console and DVD discs for her family. This year, the mother of two from New Milford, Conn., is cutting her budget in half and focusing on practical items like jackets and sweaters.

She’s even clipping coupons.

"Things are so uncertain. I am spending $50 more on gas for each car because of the high gas prices, and it’s trickling down into food and clothing," Allsworth said. "I don’t even go out to eat as much."

She seemed to typify the attitude of many shoppers, which is bad news for retailers who don’t want consumers acting like Grinches for the holiday season.

Facing an overall drop in consumer spending, retailers of all sorts are starting heavy promotions early and are focusing more tightly on what they expect to be their hottest items.

Bloomingdale’s is pitching cashmere sweaters and status handbags from Chanel and Louis Vuitton. Wal-Mart Stores, the world’s largest retailer, is getting romantic for the budget-conscious this holiday, marketing 60-cent scented candles and $99 engagement rings.

"Christmas will be decent, but not spectacular," said Kurt Barnard, publisher of Barnard’s Retail Trend Report, based in Upper Montclair, N.J. "You won’t see the binge buying you saw last year."

Analysts expect about a 3 to 4 percent sales increase at stores this holiday, compared with 6 percent last year. Even online sales are slowing, with sales projections in December of $11.6 billion, up from last year’s $7 billion, according to Jupiter Research. While it is a respectable increase, it isn’t close to the doubling or tripling of sales that occurred in previous seasons.

After ringing up total sales of $186 billion on such items as DVD players and pashmina shawls last Christmas, retailers are less bullish this year. Rising fuel prices and the stock market’s volatility helped make consumers much more cautious about spending on nonessentials. Earlier this month, the Conference Board, a New York-based research group, reported that the consumer confidence index fell sharply during October.

The slowdown appears to be broadening, affecting sales of everything from leather jackets to DVD players, and has prompted a number of companies to reduce their sales expectations for the season. They include Wal-Mart, usually one of the industry’s best performers, Home Depot Inc., Best Buy Inc., and jewelry retailer Zale Corp.

The shakeout of the online retailing sector may also have a sobering effect on spending online, with analysts predicting that some consumers may worry about ordering a gift from a start-up that could soon go bust. Online holiday traffic started to rise one week later this season, picking up the week of Nov. 12, according to Nielson Ratings/Bizrate.com.

Not everyone is convinced the season won’t be merry.

The Conference Board believes holiday spending will match last year’s 7 percent gain. And a survey conducted by Deloitte &amp Touche with the National Retail Federation, predicted holiday sales would increase anywhere from 5.5 percent to 6.5 percent in November and December, reaching sales of $196 billion to $198 billion for the season. The survey foresees holiday spending, when measured per household, dropping a bit from $849 to $836.

At the same time, The International Mass Retail Federation estimates a 2 to 3 percent increase.

While the day after Thanksgiving starts the shopping spree, it no longer is the busiest shopping day of the year. It was the eighth busiest last year, when about 49 percent of Americans did their buying in the last 12 days before Christmas, according to the International Council of Shopping Centers. About 8.5 percent bought gifts over the Thanksgiving weekend.

The good news for stores is that there will be five shopping weekends between Thanksgiving and Christmas, since the holiday falls on a Monday. That’s not great for online companies, whose customers need to order gifts by December 12, two days earlier than last year, in order to take advantage of standard delivery.