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Holiday Sales Stayed Stuck In Neutral

1/08/2009 02:00:00 AM Eastern

A pre-Christmas surge in store traffic and an expected flood of post-holiday bargain hunters may have staunched the bleeding for CE dealers, but it couldn't stop the pain.

CE stores returned to Black Friday mode the weekend before Christmas and Hanukkah, offering deep but rational discounts on select items to draw the National Retail Federation's estimated 44.5 million procrastinators. The final weekend before the holidays typically accounts for about 11.5 percent of seasonal sales, according to market research firm ShopperTrak, with 4.5 percent of all holiday business done on so-called "Super Saturday" alone.

Super Saturday accounted for $8.7 billion in sales in 2007, and ShopperTrak predicted that the day would come in just behind Black Friday as the second-biggest of Holiday 2008.

But even the lure of name-brand 32-inch LCD TVs for less than $500 couldn't overcome consumers' sense of economic insecurity.

"The rapid changes in consumer behavior have created the most difficult economic climate we've ever seen," Best Buy CEO Brad Anderson said in a conference call last month, reiterating the company's outlook from November.

Topping the list of consumer concerns is the specter of unemployment. According to The NPD Group, some 48 percent of consumers were either "very" or "somewhat" concerned about their jobs last month, up from 41 percent in April. "That 7-point increase is big news," said NPD chief industry analyst Marshal Cohen, "and until we see a drop-off in concern, consumers will remain hesitant to spend."

Indeed, 81 percent of consumers surveyed by NPD in December said they planned to spend less money than usual over the holidays.

"Consumers are still reluctant to part with their money," said Jim Ristow, executive director of Home Entertainment Source (HES), the specialty A/V division of the massive Brand Source buying group. While HES members' class of trade tends to be less reliant on fourth-quarter business, and the group as a whole has seen some improvement from the sales bottom of late September, dealers were clearly earning their keep, Ristow said.

"TV is still the strongest category, but it's harder to make the attachment sales," he said. "That's our main focus right now."

Adding to the challenge was significant CE price erosion last season, which forced retailers to work harder just to stay in place. "We're moving a lot of boxes, but with [TV] price points 30 percent below last year, it's almost impossible to see any revenue growth," said Bill Trawick, president and executive director of the NATM Buying Corp.

NATM dealers were counting on the traditional pre-Christmas "bump" to help boost December's numbers, as previously impervious markets like the Northeast joined the California and Florida funk.

"It's tough for all of us," Trawick said of CE retail.

According to America's Research Group, the one exception was Wal-Mart. The firm said Wal-Mart drew 66.2 percent of consumers over the second weekend in December, up from 41.3 percent in 2007, according to its joint 2008 Christmas Survey with UBS. In contrast, Best Buy pulled in 10.4 percent of shoppers, down from 12.9 percent in 2007.

Still, about one-third of consumers said they also planned to visit specialty stores between Dec. 16 and Christmas, a National Retail Federation survey showed.

What did they buy once they got there? CE and video games was most popular gift category (43 percent) America's Research Group said.

In the final indignity of an otherwise dismal holiday season, a major winter storm left much of the Midwest and Northeast under snow and ice on the eve of the pre-Christmas/Hanukah weekend. While last-minute shoppers still thronged the nation's malls according to anecdotal accounts, "The inclement weather may have deterred some consumers from heading out to stores," observed Credit Suisse retail analyst Gary Balter, resulting in potentially higher inventory levels this month — and greater promotions to clear them out.