Local shoppers, merchants face uncertainty

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November 25, 2008

By Greg Stiles

Mail Tribune

The holiday shopping season is likely to have a different feel for merchants and gift buyers alike.

Consumer confidence surveys show Americans feel a lot poorer than in Christmases past, when they were more secure in their jobs and even could tap into home equity credit lines for big-ticket purchases.

Major retailers struggling to keep sales revenue up and shareholders happy have their own issues. For some, such as Linens 'n Things, there will be no such thing as Christmas sales in the future.

With this year's Black Friday — the day after Thanksgiving when retailers traditionally swing from a loss to profit — just days away, uncertainty hangs in the air like a fog. Many retailers began pushing holiday sales in October and some earlier this month, attempting to coax consumers out of their homes and into the stores.

"Retailers are caught in a bind between providing more value, which costs money, and keeping their prices low," says Joan McBee, a Southern Oregon University professor who follows the retail industry. "This season, they will need to get more creative on how they provide value. Their aim is to delight customers at a low cost. We can expect more sales, events and entertainment to bring people in to the stores."

Linens 'n Things at the Rogue Valley Mall is among the 371 outlets that will close their doors in the next few weeks after the No. 2 household good's chain failed to emerge from bankruptcy and began selling off inventory. Circuit City at the Medford Center escaped the ax when the electronics chain shuttered 150 stores, but now must wait to see if electronics buyers in the Rogue Valley have the holiday spirit.

"Circuit City will put up a semblance of normal holiday season activity," says retail expert Eric Chen of St. Joseph College in West Hartford, Conn. "The problem is the blood is already in the water. The big-ticket items — the stereos, boom boxes and flat screens — aren't flying off the shelf.

"I think Circuit City in your market will be in for a rude awakening in January," Chen said. "There are bunches of places consumer electronics shoppers can go to get their fix. The reality is that Wal-Mart is setting the pace."

There is a litany of elements that point to lower sales, McBee says: "Consumer confidence is at a 28-year low. Home prices are down. Retirements funds have decreased and unemployment is up. . . . bah humbug."

Hidden in the economic details, but not unnoticed by consumers, is a big drop in gas prices. A gallon of regular gas currently costs an average of $2.22 in Oregon, down a full $2 from the price in late July.

That's welcome news to retailers in the Rogue Valley Mall, which traditionally draws many Christmas shoppers from more than 100 miles away.

It appears the lowered gas prices have loosened up the purse strings — a little.

"It's hard to say based on one week, but last week was a pretty good week ," said Frank Clifton, JC Penney's Medford store manager. "But the whole year has been so hard to figure with all the uncertainty."

Like many retailers, JC Penney has sent a flurry of coupons through e-mails and regular mail, along with its regular advertising mix.

So far, traditional categories, such as sweaters and sleepwear, are selling well, Clifton says. JC Penney has not cut staffing levels.

"We're focusing on the customer, you've got to get the customer in the store and give them good service," Clifton said. "We know people are being careful about what they spend and this Christmas has a different feel than other times. But I do think the day after Thanksgiving is going to be fantastic."

Veteran jewelry salesman Phil Cam of Pacific Diamond & Precious Metals says shoppers are going to be looking for value more than ever.

"It's always the time of years when people buy fine jewelry for the special someone and it's a big time for engagements," Cam said. "But if you look at the total market place, we're probably looking at less than last year."

Cam and other downtown Medford shop owners are counting on buyers taking the time to do comparison shopping. He said lower rents lead to better prices and more value.

"That's a tremendous advantage for us," Cam said. "We had an opportunity to go into the mall years ago. The rent is eight times what I'm paying downtown, plus a percentage of the gross sales go to the mall. Some people will simply go to the mall and buy, others will shop a littler harder and concentrate on value."

On-line sellers are making their push, based on convenience and price point. But even mail-order giant Harry & David expects significantly lowers sales.

Will the shell-shocked consumers, some who have lost jobs and others wondering if they will have one in a few months, aggressively shop or passively wait for bargains?

"We won't have to wait long to see how this season will pan out," McBee says. "Black Friday is just around the corner and typically sets the tone for the holiday season."

Reach reporter Greg Stiles at 776-4463 or e-mail business@mailtribune.com.

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