Stores bracing for a red Christmas
When shoppers make their list and check it twice, they'll most likely cross a few items off.
Splurges will be scarce this holiday season as shoppers and retailers take a conservative approach.
Americans will spend an average of $923.36 on holiday gifts, which includes $106.67 on impulse buys for themselves, according to the National Retail Federation. This is up a moderate 3.7 percent from last year, according to the federation's survey. Some retail analysts are skeptical if that figure can be reached.
"Consumers plans for this Christmas are the weakest since the millennium began," said George Rosenbaum, head of consumer research company Leo J. Shapiro and Associates in Chicago.
Rapidly increasing energy costs, higher food and gas prices and a listless housing market have many shoppers tightening the belt on spending.
Breaking down the numbers, the federation's survey showed consumers on average will spend $469 on presents for the family, $90 on friends, $23 on coworkers and $37 on others like teachers and babysitters.
"It's going to be a challenging holiday season for retail," said Anne Brouwer, senior partner at McMillan Doolittle, a Chicago-based retail consultant.
In addition to a weakening economy, there are many other reasons why shoppers will be cautious and retrenching this holiday season, she said.
There is a dearth of the must-have items out there. There is nothing hot and new. Big screen TVs, iPods and cashmere sparked interest in recent years.
Even shopping for toys is a difficult task due to recent recalls. "This is the toy season, but it's gong to be more challenging," Brouwer said.
Retailers actions are also a telling sign of the mood.
When discounters start slashing prices this early, it's a sign of weakness. "The retailer has begun to panic," Rosenbaum said. He said he has never seen Wal-Mart begin its promotions in early November, a move that has some experts saying we are seeing an early Black Friday, the big shopping day the day after Thanksgiving.
"When you see Wal-Mart and Target being cautious, it tells you this is more than a short-term deal," Brouwer said.
Wal-Mart announced earlier this month it cut prices on 15,000 items. The retailer wants to boost U.S. same-store sales, which expanded last year at their slowest pace in 27 years.
"Retailers are determined to move inventory. They'll offer promotions," Rosenbaum said.
Much of a retailer's success is based on sales in November and December, said Woodfield General Manager Marc Strich. He said he is "cautiously optimistic" about the next six weeks.
Meanwhile, the smaller retailer is also attempting to make changes in an effort to gain a piece of the Christmas pie.
Stephanie Zimmerman, owner of Stephanie's Specialties gift shop in Lake Zurich, is prominently displaying merchandise with price tags at the $20 range, including candles, plates and jewelry.
"I'm feeling that people still have to buy presents, but they may be watching their wallet more," she said. "It's challenging."