October 29, 2010 (original publish date in the print and online versions of SBJ)
by Kelly Johnson, Sacramento Business Journal
The holiday shopping season isn’t likely to offer any miracles, but local and national retail observers expect revenue to climb a couple percentage points over last year.
And given the economy — and compared to declines the past two years — a couple percentage point gain is a much-welcomed gift.
Weary of several years of frugality, consumers still will be looking for value, but they’re ready to buy some fun gifts that aren’t as practical as those they purchased last year, according to people connected to the retail industry.
Retailers, meanwhile, are cautious and a little hopeful. With lessons learned from a couple years of the challenging economy, most retailers should have been able to reasonably estimate their holiday merchandise needs and won’t likely offer the extreme discounts of 2008.
A few national retailers have announced they will hire more seasonal workers this holiday season, including
Macy’s, Kohl’s and Toys ‘R’ Us.
Macy’s Inc., for example, will hire 65,000 seasonal workers, which the retailer describes as a “slight increase from previous years.” The company has five stores in the Sacramento region.
Retail giant Wal-Mart Stores Inc., however, plans to keep seasonal hiring on par with the past several years, spokesman Ravi Jariwala said.
Meanwhile, more retailers are expected to incorporate social media and mobile strategies into their holiday season marketing plans, as they capitalize on free or less expensive ways to engage consumers.
Consumers will rely a little less heavily on discounters this holiday season, said Jesse Tron, spokesman for the International Council of Shopping Centers. Luxury, which fell off quite a bit last year, is strong again, buoyed by the improving stock market, he said.
“Nobody is expecting miracles. But people are expecting things to be better,” said Garrick Brown, Northern California research director for Terranomics in Sacramento.
The National Retail Federation forecasts that holiday retail sales will increase 2.3 percent to $447.1 billion, which would mark the first increase since 2007, said Kathy Grannis, association spokeswoman.
The International Council of Shopping Centers forecasts a 3 percent to 3.5 percent increase for sales during November and December, Tron said. That would be the largest increase since 2006, when holiday retail sales grew by 4.4 percent.
Neither organization breaks down forecasts by region.
Macy’s anticipates same-store sales in the second half to be up 3 percent to 3.5 percent, spokesman Jim Sluzewski said. Like the trade groups, the department store chain doesn’t offer forecasts for individual parts of the country.
There are a “few indications that consumers are a bit more willing to open up their wallets this season,” Grannis said.
Some people have saved money all year in preparation for holiday shopping and have some breathing room to buy more than just essential items, she said. These consumers are ready to “get back into the fun of gift giving” while still watching their budgets.
Consumers are expected to spend an average of $688.87 on holiday shopping, compared to $681.83 last year, the National Retail Federation said.
“People are still price conscious. They’re looking to save where they can,” Tron said. “We’re not all the way back, but we’re gaining some steam.”
A return to the good days?
Electronic gadgets, including smart phones, will be big, as will clothes and gift cards, retail observers said. Push aside the practical Crock Pots and vacuum cleaners. More consumers are asking for jewelry this year, Grannis said. Gift cards, though, remain the No. 1 requested item for the holidays.
Daniel Farley, vice president and co-owner of Hamilton Jewelers Pavilions in Sacramento, was more optimistic this year when buying his holiday inventory. As of this week, store sales were up 22 percent over the same period last year. While that doesn’t bring the jewelry store back to the “amazing year” of 2007, Hamilton Jewelers Pavilions is getting back to the more normal sales numbers of 2004, he said.
Farley bought more one-of-a-kind, special pieces, whether for the $100,000 buyer or the $1,000 buyer. He bought fine pearls, top quality diamonds and watches by Cartier, Chopard and Panerai, greatly increasing the value of the store inventory for this Christmas and Hanukkah.
“Hopefully, my hunch is correct,” he said.
Farley is encouraged about the holiday season, which comprises almost 40 percent of the store’s annual sales, because people are shopping again. Even a few developers and other real estate professionals have returned to his store after an absence of several years.
Also, women bought new gowns and jewelry for the sold-out, $1,000-a-plate opening of the Crocker Art Museum expansion.
Customers are more careful and deliberate about their purchases at Hamilton Jewelers Pavilions, but the main thing is they’re buying again, Farley said.
Despite the promising results at the upscale jewelry store and the national association’s forecasts of slight increases, much uncertainty and concern remains.
Locally, the largest concern centers around Westfield Galleria at Roseville, which was severely damaged by fire last week. At press time, it was unclear how many millions it will cost to repair the mall and when it will reopen in its entirety. About 35 to 40 stores, including Nordstrom, were expected to open Thursday.
Elsewhere, Jim Kessler, the developer of the Florin Towne Centre, said his gut feeling is that consumer spending will be flat.
“Sacramento will do OK,” he said. “I’m guardedly optimistic in where I see things going.”
A week before Halloween, he said he already had seen notices for Christmas sales and decorations. That indicates to him, he said, that discounts will still be rampant as Christmas gets closer. Merchants, Kessler said, must pay attention this holiday season to strong customer service and not sit on merchandise that isn’t selling. They must get that poor-selling inventory off their books, he said.
At Sunrise Mall, marketing director Vickie Sherman describes herself as “cautiously optimistic.” “Like everyone else, we’re hoping for the best,” she said.
One encouraging sign, she said, is that this year she’s getting more requests from mall tenants to borrow vacant space in which to hold job fairs or training for new hires.
“I have heard a lot more this year about hiring,” she added.
Sherman thinks some new merchandise and events and social media efforts will help boost traffic at Sunrise Mall. Sunrise’s JCPenney now carries the Mango women’s clothing line and has an in-store Sephora shop.
In addition, a recently opened Vans shoe store at the mall is one of three in the nation getting an appearance — on Dec. 11 — of characters from the “Yo Gabba Gabba!” children’s TV show.
Sunrise Mall will continue to use its Summer Sunrise cartoon character to engage with customers on Facebook, and some of the $16,000 in gift card giveaways will be through social media.
Social media and mobile strategies will be big for retailers this holiday season, retail industry and social media professionals said.
More than a fourth of Americans with a smart phone will use it to research or buy their holiday purchases, the National Retail Federation said.
Social media is the “holy grail” that will help retailers’ outreach efforts without increasing their marketing budget, said Thomas Harpointner, chief executive officer of AIS Media, an Atlanta interactive marketing agency. Most retailers, however, are in the early stages of using social networking, and most still aren’t using it effectively, he said. They don’t incorporate a “real call to action” with coupons or discounts. Just having a social media icon on a website isn’t enough.
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