Fueled by Positive Projections, Retailers are Guardedly Optimistic
Melinda Graulau, left, and Jillian Gould say Black Friday advertisements started appearing three weeks early this year.
It’s called ‘self-gifting.’
That’s a term contrived years ago by those in the retail industry to describe the act of treating yourself to a few niceties during the holiday season while you’re also out shopping for relatives, friends, and co-workers. It’s not exactly a precise measurement when it comes to retail spending, but the level of self-gifting has become a fairly reliable barometer in recent years when it comes to overall consumer confidence and willingness to spend.
And that’s why area retailers are more than pleased with several reports that self-gifting will be up this holiday season, after being understandably down in the wake of the prolonged recession.
“The research from the National Retail Federation reports that the number of shoppers who are going to buy something for themselves is predicted to reach an all-time high in 2012,” said Jillian Gould, senior marketing manager of Eastfield Mall in Springfield, who couldn’t hide her enthusiasm while reporting that projection.
And she’s not alone in that sentiment, because there are several industry predictions from which to extract optimism.
Indeed, roughly six in 10 shoppers (59%) are expected to spend an average of $140 this holiday season on themselves, the highest in the BIGinsight holiday consumer spending survey’s 10-year history, sponsored by the National Retail Federation (NRF), the world’s largest retail trade association. The BIGinsight survey also anticipates that the average holiday shopper will spend $749.51 on gifts, décor, greeting cards, and more, up slightly from the $740.57 they actually spent last year. The NRF defines ‘holiday sales’ as retail industry sales in the months of November and December — 61 days total.
The NRF is forecasting holiday sales will increase 4.1%, to $586.1 billion, from 2011 levels, which were up 5.6% from the mark in 2010. On average, holiday sales have increased 3.5% per year for the last 10 years, which is welcome news to those in the local retail industry who wore out the phrase ‘guardedly optimistic’ when asked to project what the next month and a half will bring.
“I believe it’s going to be stable with moderate increases,” said Melinda Graulau, general manager of the 220,000-square-foot Eastfield Mall, which is 99% leased. “We’ve already seen it this year, and we’ve stabilized from the past few years; we think it’s going to be a great season.”
William Rogalski, general manager of the 1.6 million-square-foot Holyoke Mall, which is 96% leased, agreed. He noted several trends and projections, including recent statistics showing a rise in spending on jewelry, another barometer used in the retail industry.
William Rogalski says the health of the retail economy can be gauged by looking at how discretionary items, like jewelry, are selling.
“To some extent, we all need a phone, a television, a computer, but do we need jewelry?” Rogalski asked rhetorically. “Maybe not, but it’s a great indicator of how people are feeling now about discretionary spending.”
Jody Doele, marketing manager of Thornes Marketplace in Northampton, told BusinessWest that she’s also upbeat about this holiday season.
“Our building, in its entirety, is up over last year,” she noted, “and we hope that trend will continue though the holidays, which represents between 25% and 40% of annual sales, so it’s a big deal.”
And because the massive retail industry contributes $2.5 trillion to the annual GDP, the highly anticipated buying season could be a big deal on every level for the overall economy, especially as the so-called ‘fiscal cliff’ approaches.
For this issue and its focus on the 2012 holiday season, BusinessWest talked with owners and managers of retail establishments across the region to gauge their thoughts on potential consumer spending, what they are doing to increase traffic and sales, and how they are using the Internet — which is both friend and foe when it comes to holiday shopping — to their advantage.
Rogalski, while optimistic about the holiday season already underway in some respects, was one of those people who made liberal use of the adverb guardedly.
“I think it’s going to be a good, solid season — not great, but good based on last year and where we are this year, which is up, through September, about 6%,” he told BusinessWest.
Last year, he went on, Holyoke Mall retailers were up 5%, which was significant after 2010’s flat 1%.
“I’m not really sure if it’s consumer confidence, or if, in ’08 and ’09, going into ’10, people just pulled the reins in so far that they really took some time to spend any money,” Rogalski added. “They just get to a certain point where they either have to do certain things or they want to do certain things, and they finally pull the trigger on discretionary spending.”
Graulau agreed. “People have budgeted,” she said with arms crossed and fists tight. “They’ve held onto their money, but we’re seeing some positive signs of growth, and I think people are finally out and treating themselves.”
She noted that mall signage and some early ads are already promoting Black Friday, the day-after-Thanksgiving phenomenon that is supposed to kick-start the holiday season, and in many ways sets the tone for that stretch.
Aeropostale, a Gen-Y clothing store, is a perfect example, said Graulau. “You have them advertising ‘Black Friday’ in their windows three weeks early, and that’s new from last year.”
Rogalski concurred. “Those are the door busters,” he noted. “It’s been so darned competitive, with the economic conditions, that everybody tries to be first; who can get out of the box first?”
For Damon Cartelli, president and general manager of Fathers & Sons in West Springfield, the holiday push by auto manufacturers has come a bit early (normally it’s right before Thanksgiving) due to late October’s Hurricane Sandy, which hit auto-industry sales hard on the all-important last weekend of the month.
“It was a disruptive four or five days for us, but that’s the first time I’ve seen the incentives start this early.”
Volkswagen has a ‘sign-and-drive’ program, which enables the consumer to lease a car and drive away with no money down. Audi has the ‘season of Audi,’ a similar program, and those are just two examples, Cartelli said, of factory incentives to help with the holiday sales push.
Cartelli and his team are also ready, with the classic shiny red convertible on the floor with a big bow on top. While most dealers report a few ‘holiday gift’ sales each year (some of them no doubt falling into the self-gifting category), gift giving in car dealerships is not necessarily a huge part of December sales.
Instead, sales at this time of year have more to do with Uncle Sam, or the IRS, to be more specific, than with Christmas or Hanukkah, said Cartelli, whose dealership sells a number of high-end models, including Porche, Audi, Volvo, and Saab.
“We see people buying year end for tax purposes for their companies and such,” Cartelli said. “And with a luxury vehicle, there’s a bigger writeoff.”
But as retailers know, the impulse of buying is usually curtailed by strict budgets, and offering a longer opportunity for holiday-season spending means ultimately better sales.
“By trying to get the Black Friday advertising and sales out early, it’s letting customers spread their spending over a longer period,” said Gould. This allows shoppers to spend in spurts because they don’t realize how much money they’re actually spending if it’s spread over several weeks.
Decking the Halls
One local tradition that beats Black Friday by a week is Northampton’s annual Bag Day, which takes place the Saturday before Thanksgiving with participating retailers throughout the downtown area offering deep discounts and other enticements.
According to Doele, it’s the single biggest sales day for many of her tenants, and an opportunity to draw shoppers away from the big-box stores and the Internet and into downtown Northampton. Last year, Thornes Marketplace LLC, which owns and manages the five-story, 55,000-square-foot downtown Northampton shopping landmark and its 25 retail and service tenants, spent a significant amount of money decorating the building in a way that was never done before, including holiday performers at specific times to highlight the shopping experience.
“We have to be ready by that day per request of our tenants,” she said, adding that the event and its timing are critical because the big-box stores start the holiday season early, and they have a big advantage when it comes to pricing.
Indeed, Doele said, while the big-box stores may drop prices 30%, 40%, and even 50%, a 5% to 20% drop is about all a small retail shop owner can handle, which makes the pageantry of the annual Bag Day, with it’s 20% discount, all the more important to fight the deep discounts online and at the malls.
But the big boxes are not the only challenge facing retailers. At Atkins Farms Country Market in Amherst, that landmark store has been battling more than two years of major construction work just outside its door, as well as its own 2,300-square-foot addition.
Pauline Lannon, president of the popular market, which will be celebrating its 50th year in the retail business this December (and 130 years as an apple grower), said it’s a bit hard to determine how this year will fair.
“We’re not up to last year’s numbers, but I’m surprised they are as good as they are with what we look like out front,” Lannon explained to BusinessWest, referring to the road work. “We have such loyal customers, and they feel like they’ve helped build the business with us, and they have.”
The popular farmers market offers fresh produce, meats, bakery items, dry goods, local wine and beer, and a floral department, but is known for its themed holiday gift baskets, such as the “Flavors of Atkins Farms,” “Made in Massachusetts,” or “Taste of New England,” with local ingredients. Gift baskets are a key item that represent 7% of sales in the month of December, four times more than in November, and, when floral wreaths are added, equals a total of 14% of all December sales.
Meanwhile, the Internet remains both an opportunity and a challenge.
In addition to the overall sales predictions for 2012, the NRF’s website, www.shop.org, released its 2012 online holiday sales forecast, expecting sales to grow 12% over last holiday season to as much as $96 billion, with many sales coming on the Internet world’s equivalent to Black Friday — so-called Cyber Monday, which comes after Thanksgiving weekend.
This phenomenon helps those who have the proficiency to sell online and market themselves effectively through that medium, and hurts those who rely on traditional foot traffic.
Lannon, with just under 7,000 Facebook fans, and Doele said that their businesses have benefited from a marketing standpoint by using e-mail blasts, their websites, and Facebook to promote events and sales, like many other retailers.
“Where it’s been difficult for some of our tenants, though, is when some people will come into our stores, try out goods and materials, then go look at their phone and see if they can get it cheaper online and then go buy it online,” said Doele.
She calls these people ‘test drivers,’ those who are kicking the tires with no real intent of buying in the store. But the converse to that, Doele went on, is the loyalty of the Northampton community that is committed to buying locally, and the Thornes Marketplace retailers who take great pride in their ability to support this movement.
“The Internet has obviously impacted the bricks-and-mortar retail, which is why there’s a federal-level movement for legislation to be passed so that we can level the playing field and make it fair for all businesses,” Graulau said, referring to sales taxes on Internet sales. “A lot of the reason people shop online is because they don’t have to pay taxes.”
Graulau said the International Council of Shopping Centers (ICSC) is in the process of a big push at state levels as well, so that, one by one, states are starting to pass new legislation for Internet taxation.
Still, many retailers have begun to embrace the Internet, Graulau continued. “If I go in a store and I like something but they don’t have my size, they’ll say, ‘hey, let’s go online, and we’ll order it for you.’”
Doele noted that many retailers in Thornes and downtown Northampton have unique, locally made items not easily found on the Web (handmade jewelry, chocolates, soaps), which adds to the cachet of shopping on Main Street.
As always when the calendar turns to November, there are a number of ‘ifs’ attached to the holiday shopping season.
And this year is no different. If consumers have sufficient confidence, if retailers offer the right incentives, if shoppers are properly motivated, and if there are enough people in a self-gifting mood — then this season will likely live up to the somewhat rosy projections put forth by the NRF and other groups.
Time will obviously tell, but for now there is guarded optimism and a sense that this season will be a gift to area retailers who want and need one.
Elizabeth Taras can be reached at [email protected]