Our troubled economy

Retailers find if it’s not on sale, it won’t sell

  • Article by: JACKIE CROSBY , Star Tribune
  • Updated: December 4, 2008 - 8:22 PM

Cash-strapped consumers are forgoing the big-ticket items of years past. Retailers find if it's not on sale, it won't sell.

The era of the thrifty consumer has begun, and retailers are finding that no amount of discounting seems to be enough to stir up some shopping fever.

Sales at U.S. chain stores open more than a year fell by a record 2.7 percent in November compared with the same time last year, according to data released Thursday by the International Council of Shopping Centers. It marked the second consecutive monthly sales decline for retailers and the biggest drop since the organization began tracking performance in 1969.

Factoring out Wal-Mart -- one of the few retail bright spots, where sales among stores open more than a year gained 3.4 percent -- the nation's retailers saw sales plummet 7.3 percent, according to RetailMetrics Inc.

This year it's about value, not the big-ticket deals of the past few years, according to Marshal Cohen, chief industry analyst for market research firm NPD Group. "Last year it was about buying a big-screen TV for the family. This year, they're saying, 'I don't need another big-screen TV and I don't necessarily need another family gift. I'm going to go out and get the right gifts at the right price.' It's much more practical, much more thrifty."

For the second time in recent months, the International Council of Shopping Centers on Thursday downgraded its already gloomy forecast for the crucial holiday season, saying that November-December sales likely will be flat or down 1 percent. The organization, which crunches sales numbers from three dozen of the nation's biggest retail chains, first projected a 1.7 percent increase for the holidays, then downgraded it to a 1 percent gain after sales drooped in October.

With consumers shelling out most of their November paychecks for basics such as food and health care, even discounters Target Corp. and Costco struggled mightily: Target sales plunged 10.1 percent -- further than the 6 to 9 percent management had predicted -- and Costco fell 2 percent domestically.

Department stores as a group dropped 13.4 percent, results that RetailMetrics analyst Ken Perkins woefully described as "awful ... instead of downright terrible."

Target getting left behind

Wal-Mart Stores Inc. has outpaced Target for 12 months in a row. Minneapolis-based Target predicted a dismal December, with sales falling in the mid-single-digits to low-double-digits.

Last month, its shoppers weren't even buying holiday items to trim their trees, and sales of Target's home assortments declined more than 20 percent. Sales of toys also were slow, and clothing dropped in the low-double-digits.

But in what could be a more troubling sign, Target and many other retailers are seeing a drop in overall sales, which means that new stores aren't providing the typical bottom-line boost. Target opened about 100 stores this year, but has said it will reduce that pace by about 25 percent in 2009.

Target said its net sales in November fell 6.1 percent, to $5.6 million. It was the second consecutive month without a sales gain. The last time Target posted negative monthly overall sales was in April 2007, but that was bookended by double-digit gains in March and May.

Many of the nation's retailers reported stronger-than-expected sales for the Friday after Thanksgiving, which marks the start of the holiday shopping season. But aggressive markdowns meant that the growth came at the expense of profits. Retailers are finding that, unless it's on sale, it won't sell.

Consumers such as Shellinah Brewer, 30, of Minneapolis, are driving this trend. A mother of four children ages 1 to 14, Brewer is out of work and having trouble finding a job. A class she took to get certified in medical insurance, billing and coding hasn't given her the hiring edge she had hoped for.

"I will be going Christmas shopping, but not until later," she said. "I'm not even putting up a Christmas tree."

Jackie Crosby • 612-673-7335

  • about this series

  • The Star Tribune's coverage of the housing crisis, the credit crunch and their effect on Minnesotans.


Connect with twitterConnect with facebookConnect with Google+Connect with PinterestConnect with PinterestConnect with RssfeedConnect with email newsletters