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Economic Indicators: Grinch May Steal Christmas

10/27/2008 02:00:00 AM Eastern

NEW YORK —A spate of recent reports point to a tough holiday season for retailers in general and CE specialists in particular.

Topping the list was the United States Commerce Department's retail sales estimates for September, which set off one of this month's steep stock market sell-offs. Total retail sales, unadjusted for seasonal variations and holiday and trading-day differences, fell 8.4 percent from August, while sales at electronics and appliance stores dropped 10.8 percent from month to month.

The double-digit decline followed a 2.4 percent increase in sales at CE and majap stores between July and August, the Commerce Department reported.

Another harbinger of a soft holiday season came from Best Buy, which said it may hire 10,000 fewer part-time seasonal workers this year. The chain hired 26,000 extra employees for the 2007 holiday period, but projected this year's extra staffing levels to range from 16,000 to 20,000 workers.

The downturn can also be attributed to a lower turnover rate among full-time employees (47 percent), plus a new corporate policy allowing local managers to determine how many part-time workers each store needs.

Separately, a new study from the National Retail Federation (NRF) indicated that price more than any other factor will influence consumers' buying decisions this holiday season. In a survey conducted after Sept. 29, when the Dow fell 778 points, 40 percent of shoppers said sales or promotions are the most important determinants of where they will shop. Only 13.4 percent said merchandise quality is most important, while helpful customer service was the least-cited factor at 5.2 percent.

Not surprisingly, nearly 70 percent of respondents plan to shop at discount stores while 37 percent plan to visit electronics stores.

“Retailers are going into this holiday season with their eyes wide open, knowing that savings and promotions will be the main incentive for shoppers,” said NRF president/CEO Tracy Mullin. “No one is canceling Christmas because money is tight, but consumers will be sticking to their budgets and looking for good deals when deciding where to spend this holiday season.”

The retail trade association projected a 1.9 percent increase in holiday-related shopping this year, the lowest increase in planned consumer spending since the survey began in 2002.

In its own study, the Consumer Electronics Association (CEA) predicted that total holiday spending would decline 14 percent this year, although fourth-quarter sales of CE products are expected to rise 3.5 percent, with half of that growth in mobile phones (see p. 1).

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