The new holiday poll of consumers conducted by Deliotte LLP says 74% intend to buy items on sale and 54% intend to use more coupons. Even though economic experts are claiming that the recession is over, there is still a mentality among shoppers to save, which many think is driven by the 10% rate of unemployment. No matter how well off consumers may be, if the future is uncertain, their purse strings will remain tight. Consumers are placing more emphasis on pricing. Procter & Gamble vows to avoid price wars but is offering a wide price range of products for its new product lines with emphasis on the less expensive products. P&G is repositioning its Cheer detergent as a "value" brand.
One indicator of an increase in discretionary spending, Estee Lauder cos. INc. recently reported better-than-expected results. Still, CEO Fabrizio Freda told analyst its "prudent to remain cautions in our outlook" because of high unemployment and weak consumer sentiment. As a result, Mr. Freda said Estee Lauder's holiday gift sets will offer wider price ranges to give consumers greater choice. Because of modest signs of bookings in coming weeks, some airlines are becoming emboldened to raise some fares. Others have offered fare sales over the holidays, hoping to stimulate further demand. Few airlines expect to increase the number of flights or seats they have on offer later this year and in to 2010.
Mike Duke, Walmart's CEO, told Wall Street analyst last month, "Our consumers are under financial pressure and that impacts the way customers spend and think." This year's Revenue for the nation's largest retailer is expected to grow ony 1-2% which is far less than the projected 5-7%. Walmart recently unveiled a list of 100 toys available at its stores for $10, reduced prices on several more expensive toys and slashed to $10 the prices on 10 highly anticipated books available for pre-order on its web site in November, a move that set off a price war as Amazon.com Inc. and Target Corp. followed suit.
There are some companies--particularly e-commerce and some electronics companies--that are more optimistic. EBay Inc. thinking consumers might be willing to spend more, is launching its first ad campaign in 18 months. Apple Inc. and Amazxon.com Inc. forecast higher fourth-quarter sales, and Amazon said it's beefing up inventories and adding staff for the holiday crush. Many consumer electronic sales appear to have bottomed out and are now climbing.
Other retailers anticipating better times tend to be discounters, such as footwear retailer DSW Inc., which recently said it expects per-share earnings to be nearly twice what it expected earlier this year; and some high-end stores, such as Nordstrom Inc., are being aided by affluent consumers buoyed by recent stock market gains.
Bargain-hunting remains the operative shopping mode, though. Supermarkets usually benefit during downturns as people turn away from restaurants and buy more food to prepare at home. But coupon-clippers are making it tough to boost margins. Kroger Co., the country's No. 2 supermarket chain by revenue, recently downgraded its 2009 earnings-per-share guidance. "Customers are buying more of what they need and less of what they want," Kroger chief operating officer Rodney McMullen told investors.
Restaurants have been offering discounts and promotions for months, in many cases without luring additional customers. Market research firm NPD Group doesn't expect restaurant traffic to grow until the second half of next year.
DineEquity Inc.'s Applebee's chain, which has been experiencing declining same-store sales, is now offering two entrees for $20. Julia Stewart, DineEquity's chairman and chief executive, said in an interview that the promotions will continue even as the economy improves.
"Consumers will literally shop our menu and a competitor's menu," Ms. Stewart said. "If they have $20 to spend, trust me, they will only spend $20."
-- parts of this article were taken from the Wall Street Journal 11-9-09
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