October 2, 2008

Retailers may have tough holiday season, Purdue expert says

Richard Feinberg, a researcher with the Purdue Retail Institute and director of the Center for Customer-Driven Quality, says that a preliminary outlook shows that overall holiday retail sales will be flat or at most 2 percent above last year. Last year, retail sales were up 5 percent over the previous year, the retail institute estimates.

The holiday season could be worse for retailers in Indiana, Feinberg says.

"Indiana has a higher unemployment rate than the national average, and may experience tougher times," Feinberg says. "In areas hit by auto and financial layoffs and job losses, the retail pain may even be greater."

Home heating and gasoline prices, along with less disposable income for things other than necessities, will pressure consumers and prevent them from spending as much during the holidays, Feinberg says.

How should retailers cope? Feinberg says they must be more promotional. He predicts holiday advertising and in-store promotions will start early this month and intensify into December.

Retailers will use e-mail campaigns frequently during the holiday season because they have built up an e-mail database over the past five years, Feinberg says.

"E-mail is cheap and easy and can be changed more frequently than print ads," he says.

Inventories are expected to be tight as retailers try to control costs, and shoppers may have difficulty finding the range of products in the seizes and colors they want, Feinberg says. Feinberg says if consumers can find what they want, they should buy it and not wait, he says.

Feinberg says consumers also will go to the Internet to shop. The institute expects Internet retailers to have a larger increase than stores, but the increase will not be as much as last year. Web shopping will increase close to 10 percent over last year, the preliminary forecast says.

Writer: Greg McClure, (765) 494-9394, gmcclure@purdue.edu

Source: Richard Feinberg, phone, xdj1@purdue.edu

Purdue News Service: (765) 494-2096; purduenews@purdue.edu

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