U.S. retail store traffic fell 24 percent last weekend from a year earlier as deepened discounts failed to entice consumers to spend during what may be the worst holiday-shopping season in four decades. Retail sales declined 5.3 percent Dec. 19 through Dec. 21 because of inclement weather and a slowing U.S. economy.
Many retail stores have offered discounts of as much as 70 percent to lure shoppers seeking bargains, and retailers’ profit margins may suffer as a result.
Traffic decreased 6.5 percent for the week through Dec. 20 from a year earlier. U.S. customer traffic on Dec. 20, also known as “Super Saturday,” fell 17 percent from the corresponding day a year earlier, Dec. 22, 2007.
Same-store sales in November and December may drop as much as 2 percent, the International Council of Shopping Centers said yesterday, more than the previously projected 1 percent decline. That would make it the worst Christmas sales season in at least 40 years.
From Yahoo! Finance: Holiday season magnifies shoppers' frugality
Over the past year, shoppers have drastically changed their spending habits in ways not seen since the 1970s, switching to store brands and discounters like Wal-Mart. During the holiday shopping season, they cut back on their spending, took advantage of big discounts and bought practical gifts.
One of the big worries for stores is what to do with the mounds of items they still have to sell. If 75 percent off before Dec. 25 didn't make people splurge, will even bigger deals afterward do the trick? Another problem is that shoppers shunned gift cards this season. That means they are less likely to return to the stores after the holiday. The new consumer mantra for this coming year is: If I don't need it, I won't buy it.
The retail industry could be looking at its biggest contraction in 35 years, according to Burt P. Flickinger, III, managing director of consulting firm Strategic Resource Group. He estimates that 160,000 stores will have closed in 2008 and predicts that an additional 200,000 will shutter next year. In March and April of 2009, Flickinger expects 2,000 to 3,000 malls to shutter.
A full picture of the holiday season will not be known until Jan. 8, when major retailers report their sales figures.
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