Consumers May Not Get Christmas Bargains As Retailers Better Prepared

This year may not see aggressive Christmas markdowns, industry watchers say. While in the past, high costs and poor inventory planning gave retailers little choice other than to quickly slash prices as the holiday season approached, that may not be the case this season. Consumer surveys estimate holiday spending will in any case rise about 4% over 2006 -- near the 4.8% average increase for the prior 10 years. Years of retail mergers and low interest rates have left most of the large chains with stronger balance sheets. Many retailers have already taken steps to boost profit margins. Meanwhile, Internet retailers are dangling a generous assortment of offers, including free shipping, Web-only discounts and gift wrap, to motivate impulse buying. Yet not everyone believes the retailers and 'e-tailers will avoid steep price cuts; the housing bust and rising energy prices have curbed consumer spending on home improvement and apparel, creating concerns the coming holiday season will be soft. John D. Morris, a specialty retail analyst at Wachovia Capital Markets, says consumer expectations for bargain holiday shopping had increased 5% from 2006. "The consumer has been trained to wait for the markdown," Mr. Morris says. "It looks to me that the consumer will win out again."

Sources: Wall Street Journal I, II
Commentary: Burdened Consumers Driving the Economy: This Can't Last • Walmart.com: Reinventing Internet Retail
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