Shoppers look for deals during the Black Friday sale at Nebraska Furniture Mart last week in Kansas City, Kan.Charlie Riedel
The new frugality that has swept over North American consumers is showing up in the malls.
Major U.S. retailers are reporting disappointing November sales results, pointing to a tough holiday season that will require aggressive promotions to lure consumers.
Responding to the thrifty shopper, many large retailers are racing to tout their best deals using Twitter for the first time in a holiday season. Last Friday, Sears Canada Inc. pumped out tweets almost hourly and into the wee hours of Saturday morning in a domestic version of the U.S. Black Friday, the kick-off to holiday shopping. Consumers "retweeted" the promotions, passing them on to friends and acquaintances and creating a digital discount fever.
"There's a whole cultural change that this recession is bringing," said Mark Cohen, a professor at the Columbia Business School in New York and a former chief executive of Sears Canada. "When unemployment abates and the economy recovers, which it inevitably will at some point, this change in behaviour will remain."
The soft sales may reflect a lasting move toward thrift, rather than merely a cyclical shift in attitudes. The transformation is forcing retailers to find new ways to communicate a deluge of deals, coupons and discounts to customers. The changes are also helping to fuel a strong performance at discounters such as TJX Cos. Inc., which owns the Winners chain, and Kohl's Corp., while department stores and teen apparel chains are suffering.
"That is the new frugal reality," said David Rosenberg, chief economist at Gluskin Sheff + Associates Inc. "To ignore that reality is to say we didn't experience a credit collapse of historic proportions."
The latest U.S. retail results bear the stamp of the penny-pinching consumer. Yesterday, major chains reported that November sales at outlets open a year or more - a key industry measure - gained a mere 0.5 per cent, according to Thomson Reuters. That trails its 2.1-per-cent estimate, although it is better than last year's disastrous 7.8-per-cent slide and marks the third consecutive positive showing in a year.
But the November results missed analysts' expectations by a wide margin: 81 per cent of retailers missed targets. Things won't get better for the crucial holiday period: Sales will rise just 0.4 per cent, predicted Jharonne Martis, director of consumer research at Thomson.
"The climate in the malls is one of deep concern on the part of retailers," said Ken Perkins, president of researcher Retail Metrics in Swampscott, Mass. "These results have to set some alarm bells off. ... There will be unplanned promotions which are going to hurt retailers' margins this holiday season."
Increasingly, those promotions are being trumpeted using social media. Sears recently used Twitter to get the word out on a sale of flat panel 32-inch HD televisions for about $500. It sold more than 100 sets in one day. Twitter can be so powerful that it can catch retailers off-guard. Electronics giant Best Buy Canada recently tweeted a $100 promotion for an XBox gaming console that regularly sold for $300. The pitch was slated to last one hour but by accident ran over time, said Robert Pearson, vice-president of e-commerce at Best Buy. As a result, the retailer couldn't keep up with demand and had to turn away some customers.
Some retailers are trying to woo customers with YouTube video product demonstrations. Sears, for example, has posted a YouTube video of a stroller to show that all four wheels swivel, in response to a shopper's query.
Companies can enjoy 6- to 20-per-cent higher sales of products with video promotions, compared with products presented without a video, according to research by BazaarVoice in Austin, Tex.